EoCene Ltd 20-F for FY2025
EoCene Ltd. (EOCN)
About this 20-F
EoCene Ltd filed this 20-F on March 31, 2026, covering the fiscal year ended December 31, 2025 (FY2025).
Headline figures
Fiscal year ended December 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $10.31M
- compared with a net loss of $7.52M a year earlier
- Diluted EPS
- $2.39
- down 70.4% from $8.08 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
OR
For
the fiscal year ended
OR
Date of event requiring this shell company report ________________
For the transition period from _______________________________ to _______________________________
Commission
File No.
(Exact name of Registrant as specified in its charter)
N/A
(Translation of the Registrant’s name into English)
State
of
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
President and Chief Executive Officer
E-mail:
Tel:
Fax: +972.3.693.8447
(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.
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Securities registered or to be registered pursuant to Section 12(g) of the Act.
N/A
(Title of each class)
Securities registered or to be registered pursuant to Section 15(d) of the Act.
N/A
(Title of each class)
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 (December 31, 2025): ordinary shares are outstanding
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
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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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
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 definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Emerging
growth company |
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 Securities 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.
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included in the filing reflect the correction of an error to previously issued financial statements.
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 §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
International Financial Reporting Standards as issued by the International Accounting Standards Board |
Other |
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
TABLE OF CONTENTS
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ABOUT THIS ANNUAL REPORT
All references to “we,” “us,” “our,” “the Company” and “our Company”, in this Annual Report on Form 20-F, or our annual report, are to Galmed Pharmaceuticals Ltd. and its subsidiaries, unless the context otherwise requires. All references to Aramchol mean Aramchol acid or Aramchol meglumine (salt), unless the context otherwise requires. All references to “shares” or “ordinary shares” are to our ordinary shares, NIS 1.80 nominal par value per share. All references to “Israel” are to the State of Israel. “U.S. GAAP” means the generally accepted accounting principles of the United States. Unless otherwise stated, all of our financial information presented in this annual report has been prepared in accordance with U.S. GAAP. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding. Unless otherwise indicated, or the context otherwise requires, references in this annual report to financial and operational data for a particular year refer to the fiscal year of our company ended December 31 of that year.
Our reporting currency and financial currency is the U.S. dollar. In this annual report, “NIS” means New Israeli Shekel, and “$,” “US$” and “U.S. dollars” mean United States dollars.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements about our expectations, beliefs or intentions regarding, among other things, our product development efforts, business, financial condition, results of operations, strategies or prospects. In addition, from time to time, we or our representatives have made or may make forward-looking statements, orally or in writing. Forward-looking statements can be identified by the use of forward-looking words such as “believe,” “expect,” “intend,” “plan,” “may,” “should,” “anticipate,” “could,” “might,” “seek,” “target,” “will,” “project,” “forecast,” “continue” or their negatives or variations of these words or other comparable words or by the fact that these statements do not relate strictly to historical matters. These forward-looking statements may be included in, among other things, various filings made by us with the U.S. Securities and Exchange Commission, or the SEC, press releases or oral statements made by or with the approval of one of our authorized executive officers. Forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements, including, but not limited to, the factors summarized below:
| ● | our ability to pursue, evaluate and complete any strategic alternative that yields value for our shareholders; | |
| ● | the development and approval of the use of Aramchol or any other product candidate for indications outside of non-alcoholic steatohepatitis, or NASH, also known as metabolic dysfunction-associated steatohepatitis, or MASH, and fibrosis or in combination therapy; | |
| ● | our history of recurring losses and negative cash flows from operating activities, significant future commitments and the uncertainty regarding the adequacy of our liquidity to pursue our complete business objectives, and substantial doubt regarding our ability to continue as a going concern; | |
| ● | the timing and cost of any pre-clinical or clinical trials of Aramchol or any other product candidate we develop; | |
| ● | completion and receiving favorable results of any pre-clinical or clinical trial; | |
| ● | regulatory action with respect to Aramchol or any other product candidate by the U.S. Food and Drug Administration, or the FDA, or the European Medicines Authority, or EMA, including but not limited to acceptance of an application for marketing authorization, review and approval of such application, and, if approved, the scope of the approved indication and labeling; | |
| ● | the commercial launch and future sales of Aramchol and any future product candidates; |
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| ● | our ability to comply with all applicable post-market regulatory requirements for Aramchol, or any other product candidate in the countries in which we seek to market the product; | |
| ● | our ability to achieve favorable pricing for Aramchol, or any other product candidate; | |
| ● | third-party payor reimbursement for Aramchol, or any other product candidate; | |
| ● | our estimates regarding anticipated capital requirements and our needs for additional financing; | |
| ● | market adoption of Aramchol or any other product candidate by physicians and patients; | |
| ● | the timing, cost or other aspects of the commercial launch of Aramchol or any other product candidate; | |
| ● | our ability to obtain and maintain adequate protection of our intellectual property; | |
| ● | the possibility that we may face third-party claims of intellectual property infringement; | |
| ● | our ability to manufacture our product candidates in commercial quantities, at an adequate quality or at an acceptable cost; | |
| ● | our ability to establish adequate sales, marketing and distribution channels; | |
| ● | intense competition in our industry, with competitors having substantially greater financial, technological, research and development, regulatory and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do; | |
| ● | our expectations regarding licensing, acquisitions and strategic operations; | |
| ● | current or future unfavorable economic and market conditions and adverse developments with respect to financial institutions and associated liquidity risk; | |
| ● | our ability to maintain the listing of our ordinary shares on The Nasdaq Capital Market; | |
| ● | security, political and economic instability in the Middle East that could harm our business, including due to the current security situation in Israel; and | |
| ● | those factors referred to in “Item 3.D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial Review and Prospects”, as well as in this annual report on Form 20-F generally. |
We believe these forward-looking statements are reasonable; however, these statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this annual report in greater detail under the heading “Risk Factors” and elsewhere in this annual report. Given these uncertainties, you should not rely upon forward-looking statements as predictions of future events.
All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date hereof and are expressly qualified in their entirety by the cautionary statements included in this annual report. We undertake no obligations to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. In evaluating forward-looking statements, you should consider these risks and uncertainties.
EXPLANATORY NOTE
Market data and certain industry data and forecasts used throughout this annual report were obtained from internal company surveys, market research, consultant surveys commissioned by the Company, publicly available information, reports of governmental agencies and industry publications and surveys. Industry surveys, publications, consultant surveys commissioned by the Company and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. However, this information may prove to be inaccurate because of the method by which some of the data for the estimates is obtained or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. As a result, the market and industry data and forecasts included or incorporated by reference in this annual report, and estimates and beliefs based on that data, may not be reliable. We have relied on certain data from third-party sources, including internal surveys, industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry. However, we have not ascertained the underlying economic assumptions relied upon therein. Forecasts are particularly likely to be inaccurate, especially over long periods of time. In addition, we do not necessarily know what assumptions regarding general economic growth were used in preparing the forecasts we cite. Statements as to our market position are based to the best of our knowledge on the most currently available data. While we are not aware of any misstatements regarding the industry data presented in this annual report, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this annual report.
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PART I
ITEM 1. Identity of Directors, Senior Management and Advisers.
Not applicable.
ITEM 2. Offer Statistics and Expected Timetable.
Not applicable.
ITEM 3. Key Information.
A. [Reserved.]
B. Capitalization and Indebtedness.
Not applicable.
C. Reasons for the Offer and Use of Proceeds.
Not applicable.
D. Risk Factors.
Summary of Risk Factors
An investment in our ordinary shares is subject to a number of risks. The following summarizes some, but not all, of these risks. Please carefully consider all of the information discussed in “Item 3. Key Information—D. Risk Factors” in this annual report for a more thorough description of these and other risks.
Risks Related to Our Financial Position and Capital Requirements
| ● | We are a biopharmaceutical company with a history of operating losses. We expect to incur significant additional losses in the future and may never be profitable. |
| ● | We have not yet commercialized any products and we may never be able to do so, and even if we do, the products may not gain market acceptance. |
| ● | We will need substantial, additional capital in the future. If additional capital is not available, we will have to delay, reduce or cease operations. |
| ● | Management has concluded that there is substantial doubt about our ability to continue as a going concern, and the report of our independent registered public accounting firm contains an explanatory paragraph as to our ability to continue as a going concern, which could prevent us from obtaining new financing on reasonable terms or at all. |
| ● | We are unable to estimate our long-term capital requirements due to uncertainties associated with the development and commercialization of Aramchol or any other product candidate. If we fail to obtain necessary funds for our operations, we will be unable to develop and commercialize Aramchol or any other product candidate. |
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Risks Related to Our Business, Industry and Regulatory Requirements
| ● | Our activities to evaluate and pursue potential strategic alternatives may not be successful. |
| ● | We depend largely on the success of our lead product candidate, Aramchol, and we may not obtain regulatory approval of Aramchol. |
| ● | Our activities to identify and, evaluate new indications and product candidates and expand our product portfolio may not be successful. |
| ● | 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 are advancing the development of Aramchol in combination with other therapies, which exposes us to additional risks. |
| ● | We may be forced to abandon development of Aramchol or any other product candidate which would have a material adverse effect on our business and may force us to cease operations. |
| ● | We have historically developed Aramchol for the treatment of NASH, and there is significant uncertainty regarding the regulatory approval process. In addition, during 2022, we discontinued our open label part of the ARMOR Study and we do not currently expect to initiate the second part of the ARMOR Study. |
| ● | We manage our business through a small number of senior executive officers. We depend on them even more than similarly- situated companies. |
Risks Related to Our Reliance on Third Parties
| ● | We have no manufacturing capacity and anticipate reliance on third-party manufacturers for Aramchol or any other product candidate. | |
| ● | 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 potential future product candidates. | |
| ● | We depend on third parties to conduct our clinical trials. |
Risks Related to Our Intellectual Property
| ● | The failure to obtain or maintain patents, licensing agreements and other intellectual property rights that are sufficiently broad and protective could impact our ability to compete effectively. | |
| ● | We may infringe 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, Aramchol or any other product candidate. |
Risks Related to Ownership of Our Ordinary Shares
| ● | Our business, operating results and growth rates may be adversely affected by current or future unfavorable economic and market conditions and adverse developments with respect to financial institutions and associated liquidity risk. |
| ● | The market price of our ordinary shares is volatile and you may sustain a complete loss of your investment. | |
| ● | If we fail to comply with the continued listing requirements of the Nasdaq Stock Market LLC, our ordinary shares could be delisted, which could adversely affect the liquidity and market price of our ordinary shares and our ability to raise additional capital. | |
| ● | Our U.S. shareholders may suffer adverse tax consequences due to our classification as a passive foreign investment company. |
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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, such as the current war and security situation therein | |
| ● | Provisions of Israeli law and our articles of association, or Articles, 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. | |
| ● | Your rights, liabilities and responsibilities as a shareholder will be governed by Israeli law and differ in some material respects from those under U.S. law. |
RISK FACTORS
An investment in our ordinary shares involves a high degree of risk. Prior to making a decision about investing in our ordinary shares, you should carefully consider the risks, uncertainties and assumptions set forth below. Additional risks and uncertainties not presently known to us, or that we currently see as immaterial, may also harm our business. If any of these risks occur, our business, financial condition and operating results could be harmed, the trading price of our ordinary shares could decline and you could lose part or all of your investment.
Risks Related to Our Financial Position and Capital Requirements
We are a biopharmaceutical company with a history of operating losses. We expect to incur significant additional losses in the future and may never be profitable.
We are a biopharmaceutical company with an operating history limited to pre-clinical and clinical drug development and no approved products. We are currently seeking to advance the development of Aramchol for oncological indications outside of NASH and fibrosis. In addition, as part of our growth strategy, we are actively pursuing opportunities to expand and diversify our product pipeline specifically targeting cardiometabolic indications and other innovative product candidates that align with our core expertise in drug development. During 2022, we discontinued the open-label part of the ARMOR Study having reached its objectives and at various times since have conducted a strategic review process. Following the discontinuation of our open label part of the ARMOR Study, we do not currently expect to initiate the second part of the ARMOR Study. In addition, we have limited operating experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the pharmaceutical industry. We have funded our research and development programs and operations to date primarily through proceeds from private placements and public offerings. We currently have no products approved for marketing in the United States or any other jurisdiction and have not generated any revenue from product sales to date, although we have historically generated revenue from our licensing agreement with Samil Pharm. Co., Ltd., or Samil. We have incurred operating losses in each year since the inception of our predecessor in 2000. Our loss attributable to holders of our ordinary shares for the years ended December 31, 2024, and 2025 was approximately $7.5 million and $10.3 million, respectively. As of December 31, 2025, we had an accumulated deficit of $210.8 million. Substantially all of our operating losses resulted from costs incurred in connection with our development program and from general and administrative costs associated with our operations.
Our ability to become profitable depends upon our ability to generate revenue in excess of our expenses. To date, we have not generated any significant revenue, excluding the licensing revenue we recorded in connection with that certain Samil Agreement (as defined below), as our lead product candidate, Aramchol and has not been approved by the FDA, nor has any other product candidate. We do not know when, or if, we will generate any revenue from sales of Aramchol and/or any other product candidate. We do not expect to generate revenue other than subsequent royalties and/or milestones that can be earned in connection with the Samil Agreement or other potential license agreements, unless and until we, or an ultimate third-party licensor or acquirer, obtain regulatory and marketing approval of, and commercialize, Aramchol or any other product candidate. We expect to continue to incur significant research and development and general and administrative expenses related to our operations. We expect to continue to incur losses before we can consummate any strategic alternatives, which may be significant.
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Based on our current operating plan, we expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:
| ● | commence any clinical trials for Aramchol and or any other product candidate and initiate additional research and development programs; | |
| ● | seek regulatory approvals for Aramchol or any other product candidate; | |
| ● | seek to in-license additional products or technologies to develop; | |
| ● | expand our operational, financial and management systems and personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company; | |
| ● | hire additional management and other personnel; | |
| ● | move towards commercialization of Aramchol or any other product candidate; and | |
| ● | explore and review a range of potential strategic alternatives for our company. |
We may out-license Aramchol or any other product candidate including through a territorial license, a worldwide license, or a license for a particular indication, before it is approved by any applicable regulatory agency, commercialized and/or generates revenue, depending on a number of factors, including, but not limited to, our ability to:
| ● | demonstrate a compelling and/or novel, pre-clinical, unique mechanism of action of Aramchol or any other product candidate; | |
| ● | obtain adequate clinical results from and progress from the clinical development of Aramchol or any other product candidate; | |
| ● | develop and obtain regulatory approvals in the countries and for the uses we intend to pursue for Aramchol or any other product candidate; | |
| ● | contract for the manufacture of commercial quantities of Aramchol or any other product candidate by a current good manufacturing practice, or cGMP, compliant manufacturing facility at acceptable cost levels if marketing approval is received; and | |
| ● | establish external, and potentially in the future, internal, sales and marketing capabilities to effectively market and sell Aramchol or any other product candidate in the United States and other countries. |
Even if Aramchol or any other product candidate is approved for commercial sale, it may not gain market acceptance or achieve commercial success. In addition, we anticipate incurring significant costs associated with seeking regulatory approval and 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 expect our research and development expenses to significantly increase if we were to re-initiate our ARMOR Study or initiate any other pre-clinical or clinical trials. In addition, if we obtain marketing approval for Aramchol or any other product candidate and opt to commercialize it ourselves, we will likely initially incur significant expenses associated with outsourcing sales, marketing and manufacturing functions to third parties, as well as continued research and development expenses. Furthermore, we expect to incur additional costs associated with operating as a public company. 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 pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if at all.
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Our limited operating history makes it difficult to evaluate our business and prospects.
Our operating history is limited to pre-clinical and clinical development and our operations to date have been limited primarily to research and development, raising capital and recruiting scientific and management personnel and third-party partners. Therefore, it may be 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 and/or commercialize our product candidates, obtain regulatory approvals or achieve market acceptance or favorable pricing for our product candidates.
We have not yet commercialized any products and we may never be able to do so, and even if we do, the products may not gain market acceptance.
We have not yet commercialized any products and we may never be able to do so. During 2022, we discontinued the open-label part of the ARMOR Study having reached its objectives and at various times since have conducted a strategic review process. Following the discontinuation of our open label part of the ARMOR Study, we do not currently expect to initiate the second part of the ARMOR Study. We are currently seeking to advance the development of Aramchol for oncological indications outside of NASH and fibrosis. In addition, as part of our growth strategy, we are actively pursuing opportunities to expand and diversify our product pipeline specifically targeting cardiometabolic indications and other innovative product candidates that align with our core expertise in drug development. We do not know when or if we will complete development of Aramchol or any other product candidate, obtain regulatory approval, 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 at favorable reimbursement rates. The degree of market acceptance for these products will depend on a number of factors, including:
| ● | the timing and scope of regulatory approvals in the countries we intend to pursue with respect to the commercialization of Aramchol or any other product candidate, including the indications for which they are approved; | |
| ● | the competitive environment; | |
| ● | the ability for Aramchol or any other product candidate to be manufactured, whether by us or third parties, in compliance with applicable regulatory requirements, including cGMP; | |
| ● | our ability to effectively promote Aramchol or any other product candidate, whether directly or using third parties, consistent with the approved indications and labeling in the countries in which we intend to pursue approval; | |
| ● | the acceptance by the medical community of the safety and clinical efficacy of Aramchol or any other product candidate and their potential advantages over other therapeutic products; |
| ● | the development of a non-invasive method for diagnosing NASH as an alternative to the current gold standard of liver biopsy, which we view as a rate-limiting factor to complete market uptake because of its expense and its risks and discomfort to patients; | |
| ● | the adequacy and success of distribution, sales and marketing efforts, including through strategic agreements with pharmaceutical and biotechnology companies; and | |
| ● | the pricing and reimbursement policies of government and third-party payors, such as insurance companies, health maintenance organizations and other plan administrators. |
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Physicians, patients, third-party payors or the medical community in general may be unwilling to accept, utilize or recommend, and in the case of third-party payors, reimburse 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.
As of December 31, 2025, we had a net working capital of $15.8 million, cash and cash equivalents of $4.0 million, restricted cash of $0.1 million, short term deposits of $7.1 million and marketable debt securities of $7.0 million. Based on our current operating plan, we currently estimate that our cash position will support our current operations as currently conducted for more than 12 months from the date of issuance of this annual report. We will need to raise substantial, additional capital to fund our operations and develop Aramchol for, and beyond its current development stage, and ultimately commercialize it, if we opt to do so ourselves. In addition, we may expand our current research and development focus and clinical operations beyond our current focus, which we expect will also require additional capital. Our future capital requirements will depend on many factors including:
| ● | the outcome of an evaluation of potential strategic alternatives: | |
| ● | the progress and costs of our pre-clinical studies, clinical trials and other research and development activities; | |
| ● | the regulatory pathway of Aramchol or any other product candidate; | |
| ● | the scope, prioritization and number of our clinical trials and other collaboration, research and development programs; | |
| ● | the amount of revenues and contributions we receive under future licensing, development and commercialization arrangements with respect to Aramchol or any other product candidate; | |
| ● | the costs of the development and expansion of our operational infrastructure; | |
| ● | the costs and timing of obtaining regulatory approval for Aramchol or any other product candidate; | |
| ● | the ability of us, or our collaborators, to achieve development milestones, marketing approval and other events or developments under our potential future licensing agreements; |
| ● | the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; | |
| ● | the costs and timing of securing manufacturing arrangements for clinical or commercial production; |
| ● | the costs of contracting with third parties to provide sales and marketing capabilities for us; | |
| ● | the costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or platforms; | |
| ● | the magnitude of our general and administrative expenses; |
| ● | any cost that we may incur under future in- and out-licensing arrangements relating to Aramchol or any other product candidate; | |
| ● | market conditions; | |
| ● | our ability to maintain the listing of our ordinary shares on The Nasdaq Capital Market; and | |
| ● | the security situation in Israel, which may exacerbate the magnitude of the factors discussed above. |
| 10 |
Under General Instruction I.B.5 to Form F-3, or the Baby Shelf Rule, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form F-3 is limited to one-third of the aggregate market value of the ordinary shares held by non-affiliates of the Company. As of March 25, 2026, our public float was approximately $3.8 million, based on 6,396,838 ordinary shares held by non-affiliates and a price of $0.6 per share, which was the last reported sale price of our ordinary shares on the Nasdaq Capital Market on March 25, 2026. We therefore are limited by the Baby Shelf Rule as of the filing of this annual report, until such time as our public float exceeds $75 million. If we are required to file a new registration statement on another form, we may incur additional costs and be subject to delays due to review by the SEC Staff.
Changing circumstances may cause us to consume capital significantly faster than we currently anticipate, such as losing our Small and Medium Enterprise status at the EMA, which entitles us to significant fee reductions. Because there are numerous risks and uncertainties associated with the development and commercialization of Aramchol or any other product candidate, we are unable to estimate the amount of increased capital outlays and operating expenditures associated with our anticipated clinical trials. We have no committed external sources of funds. Additional financing may not be available when we need it or may not be available on terms that are favorable to us and additional financing may cause significant dilution to our existing shareholders. 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 Aramchol or any other product candidate.
Management has concluded that there is substantial doubt about our ability to continue as a going concern, and the report of our independent registered public accounting firm contains an explanatory paragraph as to our ability to continue as a going concern, which could prevent us from obtaining new financing on reasonable terms or at all.
Because we have had recurring losses and negative cash flows from operating activities, substantial doubt exists regarding our ability to remain as a going concern at the same level at which we are currently performing. Accordingly, the report of Brightman Almagor Zohar & Co., a firm in the Deloitte Global Network, our independent registered public accounting firm, with respect to our financial statements for the year ended December 31, 2025, includes an explanatory paragraph as to our potential inability to continue as a going concern. The doubts regarding our potential ability to continue as a going concern may adversely affect our ability to obtain new financing on reasonable terms or at all.
Raising additional capital may be costly or difficult to obtain and will dilute current shareholders’ ownership interests, potentially substantially.
Any debt, equity or structured financing that we may need or desire 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 if we do not generate sufficient revenues from operations needed to stay in business.
We may incur substantial costs in pursuing future capital 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 capital structure, financial condition and results of operations.
In addition, our authorized share capital consists of 900,000,000 ordinary shares, par value NIS 1.80 per share. As of March 25, 2026, we had 6,599,654 ordinary shares issued and outstanding. As of March 25, 2026, we also had warrants to purchase 173,333 ordinary shares outstanding, options to purchase 45,605 ordinary shares outstanding, of which 20,392 are currently vested and 432,430 un-vested restricted share units, or RSUs, outstanding. Our board of directors may issue, or reserve for issuance, an additional 332,406 ordinary shares, which might dilute your holdings substantially.
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To the extent that ordinary shares are issued or options and warrants are exercised, holders of our ordinary shares will experience dilution. Any additional capital raised through the sale of equity or equity-linked securities, will dilute our current shareholders’ ownership in us, potentially substantially, and could also result in a decrease in the market price of our ordinary shares. The terms and conditions of those 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 Aramchol or any other product candidate. If we fail to obtain necessary funds for our operations, we will be unable to develop and commercialize Aramchol or any other product candidate.
Our long-term capital requirements are expected to depend on many potential factors, including, among others:
| ● | the outcome of an evaluation of potential strategic alternatives; | |
| ● | the number of product candidates in development; | |
| ● | the size, duration and scope of existing and future clinical trials and pre-clinical studies; | |
| ● | the regulatory pathway for the approval of Aramchol or any other product candidate; |
| ● | the results of our clinical trials, which are unpredictable in product candidate development; | |
| ● | our ability to successfully commercialize Aramchol or any other product candidate, including securing commercialization and out-licensing agreements with third parties and favorable pricing and market share; | |
| ● | the progress, success and cost of our clinical trials and research and development programs, including those associated with milestones and royalties; | |
| ● | the costs, timing and outcome of regulatory review and obtaining regulatory approval of Aramchol or any other product candidate and addressing regulatory and other issues that may arise post-approval; | |
| ● | the breadth of the labeling, assuming that Aramchol or any other product candidate are approved for commercialization by a relevant regulatory authority, which may not occur; | |
| ● | our need, or decision, to acquire or in-license complementary technologies or new platform technologies or product candidates; | |
| ● | the costs of enforcing our issued patents and defending intellectual property-related claims; | |
| ● | the costs of investigating patents that might block us from developing potential product candidates; | |
| ● | the costs of recruiting and retaining qualified personnel; | |
| ● | the costs associated with contracting with third parties to manufacture the product and to perform other necessary services; | |
| ● | our revenue, if any; and | |
| ● | our consumption of available resources more rapidly than currently anticipated, resulting in the need for additional funding sooner than anticipated. |
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If we are unable to obtain the funds necessary for our operations, we will be unable to develop and commercialize Aramchol or any other product candidate which would materially and adversely affect our business, liquidity and results of operations.
Risks Related to Our Business, Industry and Regulatory Requirements
Our activities to evaluate and pursue potential strategic alternatives may not be successful.
From time to time, we may acquire additional businesses, products or product candidates. Integrating any newly acquired business, product or product candidate could be expensive and time-consuming. We may not be able to integrate any acquired business, product or product candidate successfully. If we do acquire any additional business, products, or product candidates, our future financial performance will depend, in part, on our ability to manage any future growth effectively and our ability to integrate any such acquired businesses, products or product candidates.
Any strategic transaction may require us to incur non-recurring or other charges, may increase our near- and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial results. For example, these transactions may entail numerous operational and financial risks, including:
| ● | exposure to unknown liabilities; | |
| ● | incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions; | |
| ● | higher than anticipated acquisition and/or integration costs; | |
| ● | write downs of assets or goodwill or impairment charges; | |
| ● | increased amortization expenses; | |
| ● | difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel; | |
| ● | impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and | |
| ● | the inability to retain our key employees or our other service providers or those of any acquired businesses. |
Accordingly, there can be no assurance that we will undertake or successfully complete any strategic transactions of the nature described above and any transactions that we do complete may be subject to the foregoing or other risks and could have a material adverse effect on our business, financial condition and prospects.
We are substantially dependent on our remaining employees to facilitate the consummation of a strategic transaction. We could lose such key employees.
Our ability to successfully complete a strategic transaction depends in large part on our ability to retain certain personnel. Despite our efforts to retain these employees, one or more may terminate their employment on short notice. The loss of the services of any of these employees could potentially harm our ability to evaluate and pursue strategic alternatives, as well as fulfill our reporting obligations as a public company.
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We depend largely on the success of our lead product candidate, Aramchol, and we may not obtain regulatory approval of Aramchol.
We have invested almost all of our efforts and financial resources in the research and development (clinical and pre-clinical) of our lead product candidate, Aramchol. As a result, our business is largely dependent on our ability to complete the development of, obtain regulatory approval for and successfully commercialize Aramchol in a timely manner. The process to develop, obtain regulatory approval for and commercialize Aramchol is long, complex, costly and uncertain as to its outcome and we do not currently expect to initiate the second part of the ARMOR Study.
The research, development, testing, clinical trials, manufacturing, labeling, approval, sale, marketing and distribution of drugs are subject to extensive regulation by the FDA and other regulatory agencies in other countries. These regulations differ from jurisdiction to jurisdiction. We have not received marketing approval for Aramchol in any jurisdiction. We are not permitted to market Aramchol, or any other product candidate, in the United States until we receive approval of a New Drug Application, or NDA, from the FDA, or in any foreign countries until we receive the requisite approval from the respective regulatory agencies in such countries. The results of clinical trials may be unsatisfactory, and even if we believe those clinical trials to be successful, the FDA, or other regulatory authorities, may not grant marketing authorization should we be in a position to request it.
Our activities to identify and evaluate new indications and product candidates and expand our product portfolio may not be successful.
We are currently seeking to advance the development of Aramchol for oncological indications outside of NASH and fibrosis. In addition, as part of our growth strategy, we are actively pursuing opportunities to expand and diversify our product pipeline specifically targeting cardiometabolic indications and other innovative product candidates that align with our core expertise in drug development. However, there can be no assurance that our research efforts or our screening system will accurately or consistently select among various indications and product candidates those that have the highest likelihood to achieve, and that ultimately achieve, commercial success.
Any product candidate or technologies we in-license or acquire will likely require additional development efforts prior to commercial sale, including extensive pre-clinical or clinical testing, or both, and approval by the FDA 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 product 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 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.
In addition, at various times in the past we have conducted a strategic review process. If we conduct any further strategic review process, any strategic transaction may require us to incur non-recurring or other charges, may increase our near- and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial results. For example, these transactions may entail numerous operational and financial risks, including:
| ● | exposure to unknown liabilities; | |
| ● | incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions; | |
| ● | higher than anticipated acquisition and/or integration costs; | |
| ● | write downs of assets or goodwill or impairment charges; | |
| ● | increased amortization expenses; | |
| ● | difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel; |
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| ● | impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and | |
| ● | the inability to retain our key employees or our other service providers or those of any acquired businesses. |
For example, in June 2023, we announced the closing of a strategic investment in OnKai, Inc., or OnKai, (see “Item 7. Major Shareholders and Related Party Transactions— Related Party Transactions—Onkai.”). On December 29, 2025, OnKai filed a certificate of dissolution with the Secretary of State of the State of Delaware for winding up its affairs and dissolving as an entity. As of December 31, 2025, we determined that our investment and related balances in OnKai, including a long-term loan, were not recoverable and recorded a full write-off of such amounts, resulting in an aggregate loss of approximately $2.5 million.
Accordingly, there can be no assurance that we will undertake or successfully complete any strategic transactions of the nature described above and any transactions that we do complete may be subject to the foregoing or other risks and could have a material adverse effect on our business, financial condition and prospects.
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 complete or commence the clinical trials that would support our submission of an NDA to the FDA, a Marketing Authorization Application or MAA, to the EMA or MHRA 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. Obtaining approval of an NDA, MAA, or any similar submission to other regulatory authorities is never guaranteed. The fact that the FDA, EMA, MHRA or other regulatory authorities generally require a company to conduct human clinical trials is no assurance or guarantee that the trials will be successful. On the contrary, most candidate drugs that begin clinical trials do not prove to be successful and do not result in the filing of an NDA, MAA or similar filing. Drug candidates that successfully complete one phase of clinical trials 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. In addition, the design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. Regulatory authorities, such as the FDA, may decline to permit a clinical trial to proceed or may suspend a clinical trial that it has previously permitted to proceed. 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, delay or repeat clinical trials. The commencement and completion of clinical trials may be delayed by several factors, including:
| ● | difficulties obtaining regulatory authorization to commence a clinical trial or complying with regulatory requirements for clinical trials or with the conditions imposed by a regulatory authority regarding the scope, duration or conduct of a clinical trial; | |
| ● | delays in reaching or failing to reach agreement on acceptable terms with prospective contract research organizations, or CROs, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; | |
| ● | failure of our third-party contractors, such as CROs and contract manufacturing organizations, or our investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner; | |
| ● | insufficient or inadequate supply or quality of a product candidate or other materials necessary to conduct our clinical trials; | |
| ● | difficulties in obtaining institutional review board, or IRB, approval to conduct a clinical trial at a prospective site; |
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| ● | the FDA, EMA, MHRA, or other regulatory authorities may require changes to any of our trial designs, our pre-clinical strategy, or our manufacturing plans; | |
| ● | challenges in recruiting and enrolling patients to participate in clinical trials for a variety of reasons, including size and nature of patient population, proximity of patients to clinical sites, eligibility and exclusion criteria for the trial, nature of trial protocol, the availability of approved effective treatments for the relevant disease and competition from other clinical trial programs for similar indications; | |
| ● | challenges in identifying or recruiting sufficient study sites or investigators for clinical trials; | |
| ● | limitations on employee resources that would otherwise be focused on the conduct of our business including because of military reserve duty call-ups in the future that impact our employees and the impact of the security situation in Israel on the productivity of our employees and external partners; | |
| ● | delays in necessary interactions with vendors, local regulators, and other important agencies and contractors due to limitations in employee resources; | |
| ● | difficulties in maintaining contact with subjects who withdraw from the trial, resulting in incomplete data; | |
| ● | the FDA, EMA, MHRA, or other regulatory authorities may impose a clinical hold; | |
| ● | impacts from prolonged remote work arrangements, such as increased cybersecurity risks and strains on our business continuity plans; and | |
| ● | lack of adequate funding to initiate or continue our clinical trials. |
Even if we re-initiate the Phase 3 ARMOR Study, the ARMOR Study may still be terminated as a result of, but not limited to, safety signals, lack of efficacy, uncertainties with regard to the regulatory pathway for the approval of NASH drugs, or commercial considerations based on the cost-benefit of continuing to run the study. In addition, any clinical trial that we conduct may be suspended or terminated by us, the FDA or other regulatory authorities, the principal investigator at a site, the IRBs at the sites where such boards are overseeing a trial or the data safety monitoring board, or the DSMB, that is overseeing the clinical trial at issue, or other regulatory authorities due to a number of factors, including:
| ● | irregularities in conducting a clinical trial, including by way of example, failure to conduct the clinical trial in accordance with regulatory requirements, in particular good clinical practice requirements, or GCP, or the FDA-authorized clinical protocols; | |
| ● | negative findings upon inspection of the clinical trial operations or trial sites by the FDA, EMA, MHRA or other regulatory authorities; | |
| ● | safety issues or lack of clinical drug activity or effectiveness; and | |
| ● | lack of adequate funding to continue the clinical trials. |
Historically, we experienced material delays in both the ARMOR Study largely related to significantly slower than expected recruitment and the ARREST Study largely related to significantly slower than expected recruitment and the length of time required to obtain regulatory authorizations to proceed with clinical trials. We may experience delays in any or all of our clinical trials that we conduct and there can be no assurance that we will not experience such risks in the future as we progress with our planned clinical trials.
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Furthermore, positive results in previous clinical studies of our product candidates may not be predictive of similar results in future clinical trials. Also, interim results, if at all, during a clinical trial do not necessarily predict final results. 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- and mid-stage development. Accordingly, the results from the completed pre-clinical studies and clinical trials for our product candidates may not be predictive of the results we may obtain in later stage trials. Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and/or pre-clinical trials, or to even terminate the development program entirely. Many companies that believed their product candidates performed satisfactorily in pre-clinical and clinical studies have nonetheless failed to obtain FDA or EMA, or other regulatory agency, approval for their products.
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 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 impact our ability to develop products and generate revenue.
We are advancing the development of Aramchol in combination with other therapies, which exposes us to additional risks.
We are advancing the development of Aramchol in combination with investigational therapies. We will not be able to market and sell Aramchol or any product candidate we develop in combination with an unapproved therapy for a combination indication if that unapproved therapy does not ultimately obtain marketing approval either alone or in combination with our product candidate. In addition, unapproved therapies face the same risks described with respect to Aramchol or any other product candidate currently in development and clinical trials, including the potential for serious adverse effects, delay in their clinical trials and lack of FDA, EMA or MHRA approval. If the FDA, EMA, MHRA or comparable foreign regulatory authorities do not approve these other drugs or revoke their approval of, or if safety, efficacy, quality, manufacturing or supply issues arise with the product candidates we choose to evaluate in combination with our product candidate we develop, we may be unable to obtain approval of or market such combination therapy.
We may be forced to abandon development of Aramchol or any other product candidate which would have a material adverse effect on our business and may force us to cease operations.
Upon the completion of any clinical or pre-clinical trial and/or tests, the results might not support the desired indications for use. Further, success in earlier 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 or pre-clinical testing. In addition, the design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial or variability in interpretation of results may not become apparent until the clinical trial is well advanced. The clinical trial process may fail to demonstrate that Aramchol or any other product candidate is sufficiently safe and/or effective for the indications we seek to receive FDA or other regulatory approval. Any such failure may cause us to abandon Aramchol or any other product candidate and may delay development of other potential product candidates. Any delay in, or termination or suspension of, our clinical trials may delay the requisite filings with the FDA, EMA, MHRA, or other regulatory agencies and, ultimately, our ability to commercialize Aramchol or any other product candidate and generate product revenues. If the results of any study, including in any interim readout, are not sufficiently compelling, then the completion of development of our product candidates may be significantly delayed or abandoned which would have material adverse effect on our business, liquidity, operating results and financial condition and may force us to cease operations.
We have historically developed Aramchol for the treatment of NASH and there is significant uncertainty regarding the regulatory approval process. In addition, during 2022, we discontinued our open label part of the ARMOR Study and we do not currently expect to initiate the second part of the ARMOR Study.
Pharmaceutical products generally are subject to rigorous nonclinical testing and clinical studies and other approval procedures mandated by the FDA and foreign regulatory authorities. We have historically developed Aramchol for the treatment of NASH.
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In September 2019, we initiated the ARMOR Study and during 2022 we discontinued the open-label part of the ARMOR Study having reached its objectives. Following the discontinuation of our open label part of the ARMOR Study, we do not currently expect to initiate the second part of the ARMOR Study.
Although the FDA has issued guidelines for the development of drugs for the treatment of NASH, our current assessment is that despite considerable efforts from the scientific community and regulatory agencies, significant uncertainties remain unresolved with regards to the conduct of NASH Phase 3 registrational studies. These risks include dependence on biopsies as the primary surrogate endpoint which are subjective in nature and prone to sampling errors and inadequacy; high screen failure rates which pose a burden to patients, investigators, and study budget; lack of validated biomarkers and the heterogenous population included under the NASH diagnosis. Moreover, pathology plays a role in NASH clinical trials with histology being the current reference method to determine inclusion in trials and change in disease activity and fibrosis stage. Manual histological review is complex, subjective, and prone to inter- and intra-reader variability and error. Existing pathology scoring systems and practices show only moderate to fair reproducibility, limiting their utility for clinical research and practice.
In addition, the FDA has indicated that the results of the ARMOR Study must demonstrate study findings that demonstrate findings of a high level of efficacy for a single Phase 3 study to support approval of an NDA. Therefore, even if the ARMOR Study meets all of its statistical goals and protocol endpoints, the FDA may not view the results as sufficient to support an NDA.
We expect that the path for regulatory approval for NASH drugs to continue to evolve in the near term as we and other companies in late-stage development of NASH drugs refine our regulatory approval strategies and interact with the FDA and other regulatory authorities. In particular, FDA expectations about interpretation of liver biopsy data may evolve especially as more information is published about the inherent variability in interpretation of liver biopsy data. Certain of our competitors have experienced regulatory setbacks for NASH therapies following communications from the FDA. See also “Item 4. Information on the Company—Competition.” Even after we receive and incorporate guidance from the FDA or other regulatory authorities, they could disagree that we have satisfied their requirements, which may require us to complete additional preclinical studies or clinical trials or impose stricter approval conditions than we currently expect. Furthermore, as the path for regulatory approval for NASH drugs evolves, it may impact our ARMOR Study in ways that could significantly increase the development costs and call into question the future viability of continuing to conduct the ARMOR Study. Additionally, we are considering more robust changes to our development program for NASH. Changes may include focusing on higher risk patients (F3), evaluating patients with compensated cirrhosis (F4) as well as changes to study design such as two smaller studies instead of one pivotal study and the addition of a combination arm.
Any additional delays in the completion of the ARMOR Study or any additional preclinical studies or clinical trials would require us to expend substantial additional resources and could significantly extend the timeline for clinical development prior to market approval. As a result of the foregoing, the research and development, preclinical studies and clinical testing of Aramchol and any other product candidate is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the development process. If we experience delays in the completion of, or if we terminate, any of our clinical trials, this would have a material adverse effect on our business, liquidity, operating results and financial condition and may force us to cease operations.
The lack of a reliable non-invasive method for the diagnosis of NASH and fibrosis is likely to present a major challenge to Aramchol’s market penetration in the NASH market, if ever commercialized for this indication.
Liver biopsy is the standard approach for the diagnosis of inflammation and fibrosis associated with NASH. However, the procedure-related morbidity and, in rare cases, mortality, sample errors, costs, patient discomfort and thus lack of patient interest in undergoing the procedure limit its use. As such, only patients with a high risk of NASH, which includes patients with metabolic syndrome and an indication of Non-Alcoholic Fatty Liver Disease, or NAFLD, are generally sent for liver biopsy. Because NASH tends to be asymptomatic until the disease progresses, many individuals with NASH remain undiagnosed until the disease has reached its late stages, if at all. The lack of a reliable non-invasive method for the diagnosis of NASH and fibrosis is likely to present a major challenge to Aramchol’s market penetration, as many practitioners and patients may not be aware that a patient suffers from NASH and requires treatment. As such, use of Aramchol might not be as wide-spread as our actual target market and this may limit the commercial potential of Aramchol.
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A further challenge to Aramchol’s market penetration is that currently a liver biopsy is the standard approach for measuring improvement in NASH patients. Because it would be impractical to subject all patients that take Aramchol, when and if it is approved, to regular and repeated liver biopsies, it will be difficult to demonstrate Aramchol’s effectiveness to practitioners and patients unless and until a reliable non-invasive method for the diagnosis and monitoring of NASH becomes available, as to which there can be no assurance.
The process of obtaining regulatory approvals is expensive, often takes many years, and can vary substantially based upon the type, complexity, and novelty of the products involved, as well as the target indications. Approval policies or regulations may change and the regulatory agencies have substantial discretion in the approval process for products, including the ability to delay, limit or deny approval of a product candidate for many reasons. While other companies in the industry are currently working on advancing non-invasive diagnostic approaches, none of these has been clinically validated, and the timetable for commercial validation, if at all, is uncertain. Moreover, such diagnostics may also be subject to regulation by FDA, EMA, MHRA or other regulatory authorities as medical devices and may require premarket clearance or approval. See also “Item 3. Key Information—Risk Factors —Risk Factors—Risks Related to Our Business, Industry and Regulatory Requirements — We have historically developed Aramchol for the treatment of NASH, an indication for which there are no approved products, and there is significant uncertainty regarding the regulatory approval process. In addition, during 2022, we discontinued our open label part of the ARMOR Study and we do not currently expect to initiate the second part of the ARMOR Study.”
Obtaining approval of an NDA, or other regulatory approval, even after clinical trials that are believed to be successful, is an uncertain process.
Even if we complete clinical trials and believe that the clinical data confirms that Aramchol or any other product candidate is sufficiently safe and effective for its intended use or uses, obtaining approval of an NDA, or other regulatory approval, is an extensive, lengthy, expensive and uncertain process, and the FDA and other regulatory agencies may delay, limit or deny approval of such product candidate for many reasons, including, without limitation, the fact that:
| ● | we may not be able to demonstrate to the satisfaction of the applicable regulatory agencies that the product candidate is safe and effective for treatment of the targeted indication in patients; | |
| ● | the results of clinical trials may not meet the level of statistical significance or clinical significance required by the applicable regulatory agencies for approval; | |
| ● | the applicable regulatory agencies may disagree with the number, design, size, conduct or implementation of our clinical trials; | |
| ● | the applicable regulatory agencies may not find the data from pre-clinical studies and clinical trials sufficient to demonstrate the clinical and other benefits outweigh its safety risks; | |
| ● | the applicable regulatory agencies may disagree with our interpretation of data from pre-clinical studies or clinical trials; | |
| ● | the applicable regulatory agencies may not accept data generated at our clinical trial sites; | |
| ● | the data collected from pre-clinical studies and clinical trials may not be sufficient to support the submission of an NDA or similar regulatory application; | |
| ● | the applicable regulatory agencies may not schedule an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of our application or may recommend that the applicable regulatory agencies require, as a condition of approval, additional pre-clinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions; |
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| ● | the applicable regulatory agencies may require development of a risk evaluation and mitigation strategy, or REMS, as a condition of approval; | |
| ● | the applicable regulatory agencies may require simultaneous approval for both adults and children, which would delay required approvals, or we may have successful clinical trial results for adults, but not children, or vice versa; | |
| ● | the applicable regulatory agencies may change their approval policies or adopt new regulations that may impede consideration or approval of our NDA, or similar regulatory application; | |
| ● | the applicable regulatory agencies may identify deficiencies in the manufacturing processes or facilities of third-party manufacturers, or suppliers of active pharmaceutical ingredients, or APIs, with which we enter into agreements for clinical and commercial supplies; and | |
| ● | the applicable regulatory agencies may require post-marketing approval studies, such as Phase 4 clinical trials, in connection with Aramchol or any other product candidate. |
Before we can submit an NDA to the FDA or a similar approval application to other regulatory authorities, as applicable, we (or our commercialization partner, as the case may be) must conduct one or more clinical trials that will be substantially broader than our prior completed trials. We will also need to agree on a protocol with the FDA or any other regulatory authorities for any clinical trial(s) before commencing any such trial. Clinical trials frequently produce unsatisfactory results even though prior clinical trials were successful. Therefore, the results of any prior trial or any future clinical trials that we may conduct may or may not be successful. The applicable regulatory agencies may suspend all clinical trials or require that we conduct additional clinical, pre-clinical, manufacturing, validation or drug product quality studies and submit data from these additional studies before considering or reconsidering the NDA 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 would not receive approval for Aramchol or any other product candidate and may be forced to cease operations.
Even if we obtain regulatory approval for Aramchol or any other product candidate, the approval might contain significant limitations related to the indications for use for which the drug is approved, use restrictions including, without limitation, for certain labeled populations, age groups, warnings, precautions or contraindications, or may be subject to significant post-marketing studies or risk mitigation requirements. If we are unable to successfully commercialize Aramchol or any other product candidate, we may be forced to cease operations.
Our product candidates may produce undesirable side effects or have other properties that could delay or prevent its regulatory approval or result in significant negative consequences following marketing approval, if any, which could substantially increase commercialization costs or even force us to cease operations.
Undesirable side effects caused by Aramchol or any other product candidate could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or applicable foreign regulatory authorities. To date, we have completed seven clinical trials of Aramchol, and additionally one proof of concept study in patient with gallstones, and a Phase 2a, investigator initiated clinical trial were completed. Although we have not seen any evidence of reactions causing a safety concern in our completed clinical trials, the FDA may ask for additional data regarding any adverse events seen in our trials. Results of our future trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event, our trials could be suspended or terminated and the FDA or applicable foreign regulatory authorities could order us to cease further development of or deny approval for Aramchol or any other product candidate for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete future trials or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.
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Additionally, the FDA, EMA, MHRA, and other regulatory authorities require that we report certain information about adverse medical events if our products may have caused or contributed to those adverse events. The timing of our obligation to report would be triggered by the date on which we become aware of the adverse event as well as the nature of the event. We may fail to report adverse events that we become aware of within the prescribed timeframe. We may also fail to become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our products. If we fail to comply with our reporting obligations, the FDA, EMA, MHRA, or other regulatory authorities could take action against us or our product candidates including criminal prosecution, the imposition of civil monetary penalties or seizure of our products.
Even if Aramchol or any other product candidate receives marketing approval, we or others may later identify undesirable side effects caused by the product. In such an event, regulatory authorities may:
| ● | suspend or withdraw their approval of the product; | |
| ● | require the addition of labeling statements, such as warnings, so-called “black box warnings,” contraindications or restrictions on the product’s intended use; | |
| ● | require us to issue specific communications to healthcare professionals, such as “Dear Doctor” letters; | |
| ● | issue negative publicity regarding the affected product, including safety communications; | |
| ● | impose a risk evaluation and mitigation strategy (REMS), in the case of FDA, or similar risk management strategies in the case of foreign regulators; |
In addition to these potentially significant negative consequences, we could be required to change the way the product is administered, conduct additional pre-clinical studies or clinical trials or restrict or cease the distribution or use of the product, and/or be sued and held liable for harm caused to patients. The foregoing or other 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.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, patient willingness to undergo a liver biopsy (in the case of NASH), competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages and disadvantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating, and actual or threatened public health emergencies and outbreaks of disease. Potential patients for Aramchol or any other product candidate may not be adequately diagnosed or identified with the diseases which we are targeting or may not meet the entry criteria for our studies.
We may not be able to initiate or continue clinical trials if we are unable to locate a sufficient number of eligible patients to participate in the clinical trials required by the FDA or other foreign regulatory agencies. In addition, the process of finding and diagnosing patients may prove costly. To date, we have already experienced significant delays in our clinical trials largely related to significantly slower than expected recruitment and the length of time required to obtain regulatory authorizations to proceed with clinical trials. Our inability to enroll a sufficient number of patients for any of our clinical trials could result in further significant delays, additional expenses, or may require us to abandon one or more clinical trials.
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Even if Aramchol or any other product candidate that we develop, receives marketing approval, we will continue to face extensive regulatory oversight and requirements, and any such product may still face future regulatory risks or new requirements.
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 negatively 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 studies. Any adverse effects observed after the approval and marketing of a product candidate could result in limitations on the use of the approved product, withdrawal of FDA approval of the previously approved product, or voluntary withdrawal from the marketplace of the approved product. Absence of long-term safety data may also limit the approved uses of Aramchol or any other product candidate, if any. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP requirements and other regulations. If we, our product candidates, or the manufacturing facilities fail to comply with the regulatory requirements of the FDA, 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 the following:
| ● | suspension or imposition of restrictions on operations, including costly new manufacturing requirements; | |
| ● | refusal to approve pending applications or supplements to applications; | |
| ● | suspension of any clinical trials; | |
| ● | suspension or withdrawal of marketing approval; | |
| ● | an injunction or imposition of civil or criminal penalties or monetary fines; | |
| ● | seizure or detainment of products, exclusion products from federal health care programs, or request that we initiate a product recall; |
| ● | banning or restriction of imports and exports; | |
| ● | issuance of warning letters or untitled letters; | |
| ● | suspension or imposition of restrictions on operations, including costly new manufacturing requirements; or | |
| ● | refusal to approve pending applications or supplements to applications. |
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 us. If we experience significant delays in testing or receiving approvals or sign-offs to conduct clinical trials, Aramchol or any other product candidate development costs will increase and our ability to out-license our product candidates may be impeded.
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If we obtain approval to commercialize any product candidate outside of the United States or out-license a product candidate to additional territories outside the United States, a variety of risks associated with international operations could materially adversely affect our business.
If any product candidate is approved for commercialization outside the United States or we out-license a product candidate to additional territories outside the United States, we will likely enter into agreements with third parties to commercialize a product candidate outside the United States. We expect that we will be subject to additional risks related to entering into or maintaining international business relationships, including, without limitation:
| ● | different regulatory requirements for drug approvals in foreign countries; | |
| ● | differing U.S. and foreign drug import and export rules; | |
| ● | reduced protection for intellectual property rights in foreign countries; | |
| ● | unexpected changes in tariffs, trade barriers and regulatory requirements; | |
| ● | different reimbursement systems; | |
| ● | economic weakness, including inflation, or political instability in particular foreign economies and markets; | |
| ● | compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; | |
| ● | foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; | |
| ● | workforce uncertainty in countries where labor unrest is more common than in the United States; | |
| ● | production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; | |
| ● | potential liability resulting from development work conducted by these distributors; |
| ● | business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters, emergence of a pandemic, or other widespread health emergencies (or concerns over the possibility of such an emergency); and | |
| ● | risks associated with clinical co-development agreements in other jurisdictions prior to or post-regulatory approval. |
A failure to timely and effectively address the additional risks related to entering into or maintaining international business relationships could have a material adverse effect on our business, liquidity, operating results and financial condition.
If we receive marketing approval for a product candidate, sales will be limited unless the product achieves broad market acceptance.
The commercial success of a product candidate for which we obtain marketing approval from the FDA, EMA, MHRA 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 healthcare payors. The degree of market acceptance of any approved product will depend on a number of factors, including, without limitation:
| ● | demonstration of clinical safety and efficacy compared to other products; | |
| ● | ability of physicians to accurately make a diagnosis in its early stages; | |
| ● | the relative convenience and ease of administration; |
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| ● | the prevalence and severity of any adverse side effects; | |
| ● | limitations, warnings or contraindications contained in the product’s approved labeling; | |
| ● | distribution and use restrictions imposed by the FDA, or other regulatory agencies, or agreed to by us as part of a mandatory or voluntary REMS; | |
| ● | availability of alternative treatments, including, any competitive products already approved or expected to be commercially launched in the near future; | |
| ● | pricing and cost effectiveness; | |
| ● | the effectiveness of our, or any future collaborators’, sales and marketing strategies; | |
| ● | adverse publicity about our product candidates or favorable publicity about competitor products; | |
| ● | convenience and ease of administration of our products; | |
| ● | potential product liability claims; | |
| ● | our ability to obtain sufficient third-party coverage or reimbursement; and | |
| ● | the willingness of patients to pay for drugs out of pocket in the absence of third-party coverage. |
If a product candidate is approved, but does not achieve an adequate level of acceptance by physicians, healthcare 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.
The FDA and other regulatory agencies may 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 FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are inconsistent with the FDA-approved indications and other conditions or restrictions contained in the approved labeling, including the prescribing information, for the product. Any labeling approved by the FDA, EMA, MHRA or other regulatory authorities for a product candidate necessarily limits its use for certain conditions in certain patient populations. Also, regulatory authorities may impose further requirements or restrictions on the distribution or use of Aramchol or any other product candidate 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 a product candidate, physicians may nevertheless prescribe the product candidate to their patients in a manner that is inconsistent with the approved labeling, which is commonly known as “off label” use. If we are found to have promoted any product candidate for such “off label” uses, we may become subject to significant liability under a variety of statutory theories typically alleged by U.S. regulatory authorities. The U.S. federal government has levied large civil and criminal fines against companies for alleged improper promotion, has enjoined several companies from engaging in off-label promotion, and has requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.
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Our business and operations may be materially adversely affected in the event of computer system failures or security or breaches due to cyber-attacks or cyber intrusions, including ransomware, phishing attacks and other malicious intrusions.
In recent years, cybersecurity threats have become a greater risk and focus for companies. In particular, ransomware attacks, where a hacker locks and threatens to delete or disclose the victim’s data unless a ransom is paid, have become a major risk. We and those of our CROs and other third parties on which we rely are at risk of cyber-attacks or cyber intrusions via the Internet, computer viruses, break-ins, malware, ransomware, phishing attacks, hacking, denial-of-service attacks or other attacks and similar disruptions from the unauthorized use of, or access to, computer systems (including from internal and external sources). These types of incidents continue to be prevalent and pervasive across industries, including in our industry. In addition, we expect information security risks to continue to increase due to the proliferation of new technologies and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including foreign state actors.
Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks, cyber intrusions, natural disasters, fire, terrorism, war, and telecommunication and electrical failures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs and inflict reputational harm upon us that may result in decreased market value and erode public trust. For example, the loss of clinical trial data from planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets or inappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees, access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could be delayed.
We may be subject to extensive environmental, health and safety, and other laws and regulations in multiple jurisdictions.
Our business involves the controlled use, through our service providers, of hazardous materials, various biological compounds and chemicals, and as such, 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, noise emissions, 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 noncompliance 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 coverage of and reimbursement, rebates and other payments as a result of healthcare reform, which could adversely affect third-party coverage of Aramchol or any other product candidate and how much or under what circumstances healthcare providers will prescribe or administer Aramchol or any other product candidate.
In the United States and other countries, sales of Aramchol or any other product candidate will depend in part upon coverage of the product and the availability of reimbursement from third party payors, including governmental authorities, managed care organizations and other private health insurers. Third-party payors are increasingly challenging the price and examining the coverage of products based on cost effectiveness of the medical products and services.
Increasing expenditures for healthcare have been the subject of considerable public attention in 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 U.S. healthcare system have been introduced or proposed in the U.S. Congress, or 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.
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In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the Modernization Act, changed the way Medicare covers and pays for most pharmaceutical products in a number of ways. Medicare is the single largest third-party payment program and is administered by the Centers for Medicare & Medicaid Services, or the CMS. Medicare traditionally covered prescription drugs administered by physicians. The Modernization Act introduced a new reimbursement methodology based on average sales prices for many of these drugs. The Modernization Act also established a new competitive acquisition program for the purchase of Part B drugs. This program, when fully implemented, will likely reduce the prices of these drugs. While the Medicare provisions of the Modernization Act 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.
Most notably, the Modernization Act also expanded coverage through a new Part D to include ordinary self-administered outpatient drugs. Medicare part D though operates through private insurers, and these insurers negotiate prices with pharmacies and with manufacturers. Intense negotiations can result in reduced revenues to manufacturers.
Increasing expenditures for healthcare have been the subject of considerable public attention in 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 U.S. healthcare system have been introduced or proposed in U.S. 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 March 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010, or 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’ Medicaid 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, or the 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 a launch date and current quarter 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. The Affordable Care Act appears likely to continue to put pressure on pharmaceutical pricing, especially under the Medicare and Medicaid programs, and may also increase our regulatory burdens and operating costs.
There have been changes and modifications to certain aspects of the Affordable Care Act, and we expect such changes and modifications to continue. In 2017, the U.S. Congress enacted the Tax Cuts and Jobs Act (or the “2017 Tax Act”), which eliminated the tax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. The Bipartisan Budget Act of 2018,( or the “BBA”), among other things, amended the Affordable Care Act to close the coverage gap in most Medicare drug plans. In July 2018, CMS, published a final rule permitting further collections and payments to and from certain Affordable Care Act qualified health plans and health insurance issuers under the Affordable Care Act risk adjustment program in response to the outcome of federal district court litigation, regarding the method CMS uses to determine this risk adjustment. Changes and modifications to the Affordable Care Act are likely to continue, with unpredictable and uncertain results. There have been judicial and congressional challenges to the Affordable Care Act. If successful in the challenges, many if not all of the provisions of the PPACA may no longer apply to prescription drugs. While we are unable to predict what changes may ultimately be enacted, to the extent that future changes affect how any future products are paid for and reimbursed by government and private payers our business could be adversely impacted. On December 14, 2018, a federal district court in Texas ruled that the PPACA is unconstitutional as a result of the Tax Cuts and Jobs Act, the federal income tax reform legislation previously passed by Congress and signed by President Trump on December 22, 2017, that eliminated the individual mandate portion of the PPACA. The case, Texas, et al, v. United States of America, et al., (N.D. Texas), is an outlier, and the ruling has been stayed by the ruling judge, but in 2019, the Fifth Circuit Court of Appeals subsequently upheld the lower court decision which was then appealed to the United States Supreme Court. The U.S. Supreme Court declined to hear the appeal on an expedited basis and so no decision is expected until sometime in 2021 before the end of the next Supreme Court’s current term in early 2021. We are not able to state with any certainty what will be the impact of this court decision on our business pending further court action and possible appeals. In November 2020, Joseph Biden was elected President and, in January 2021, the Democratic Party obtained control of the Senate. As a result of these electoral developments, it is unlikely that continued legislative efforts will be pursued to repeal PPACA. Instead, it is possible that executive and regulatory initiatives, as well as legislation will be pursued to enhance or reform PPACA. We are not able to state with certainty what the impact of potential legislation will be on our business.
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In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. In 2011, the U.S. Congress enacted the Budget Control Act of 2011, or the Budget Control Act, which included provisions intended to reduce the federal deficit. The Budget Control Act resulted in the imposition of 2% reductions in Medicare payments to providers beginning in 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2031 absent additional congressional action. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Further, on August 16, 2022, Congress enacted the Inflation Reduction Act allowing CMS to negotiate directly with drug manufacturers to lower the price of some of the costliest drugs under the Medicare program, as well as requiring drug manufacturers to provide Medicare with a rebate if the price of drugs increases faster than the rate of inflation. If we ever obtain regulatory approval and commercialization of Aramchol or any other product candidate, these 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 Aramchol or any other product candidate may be. Further, the Deficit Reduction Act of 2010, directed CMS to contract a vendor to determine “retail survey prices for covered outpatient drugs that represent a nationwide average of consumer purchase prices for such drugs, net of all discounts and rebates (to the extent any information with respect to such discounts and rebates is available).” This survey information can be used to determine the National Average Drug Acquisition Cost, NADAC. Some states have indicated that they will reimburse based on the NADAC and this can result in further reductions in the prices paid for various outpatient drugs.
Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for commercial products. There have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reviewing the relationship between pricing and manufacturer patient programs, reducing the cost of drugs under Medicare, and reforming government program reimbursement methodologies for drugs. On September 24, 2020, the FDA released a final rule providing guidance for states to build and submit importation plans for drugs from Canada. The Inflation Reduction Act of 2022 contains significant reforms affecting the pricing of drugs and biologics paid by Medicare. The new requirements establish a timeline for certain drugs to negotiate with the federal government a “maximum fair price” for certain selected drugs. In 2025, HHS began implementation of “Most Favored Nation” drug pricing by setting the Medicare price of single-source brand drugs without generic or biosimilar competition to the lowest price available in wealthy countries (i.e., with a per capita GDP of at least 60% of that in the United States). Some states, such as California and Florida, have also taken steps to consider and enact laws or regulations that are intended to increase the visibility of the pricing of pharmaceutical products with the goal of reducing the prices at which pharmaceutical products are sold. We cannot predict what the full effect of state and federal legislative activities may be on our business in the future.
On November 20, 2020, the HHS Office of Inspector General finalized further modifications to the federal Anti-Kickback Statute. Under the final rules, the HHS Office of Inspector General added safe harbor protections under the Anti-Kickback Statute for certain coordinated care and value-based arrangements among clinicians, providers, and others, yet removed safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. CMS issued a final rule, effective on July 9, 2019, that requires direct-to-consumer advertisements of prescription drugs and biological products, for which payment is available through or under Medicare or Medicaid, to include in the advertisement the Wholesale Acquisition Cost, or list price, of that drug or biological product if it is equal to or greater than $35 for a monthly supply or usual course of treatment. Prescription drugs and biological products that are in violation of these requirements will be included on a public list. On September 9, 2025, the FDA began requiring pharmaceutical advertisements to include full safety warnings during direct-to-consumer advertisements, instead of footnoting such information. Additionally, the FDA expanded its oversight on social media promotional activities, including influencer partnerships, algorithm-driven targeted advertising, and AI-generated health content, to ensure compliance with the FDA’s advertisement requirements. The FDA has indicated it will begin enforcement actions for any advertisement violations. Any adopted health reform measure could reduce the ultimate demand for our products, if approved, or put pressure on our product pricing.
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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, Aramchol or any other product candidate, 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 Aramchol or any other product candidate. 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 any other product sales.
It will be difficult for us to profitably sell any product candidate if reimbursement for the product is limited by government authorities and third-party payor policies.
In addition to any healthcare reform measures that may affect reimbursement, the market acceptance and sales of any product candidate will depend on the reimbursement policies of government authorities and third-party payors. It will be difficult for us to profitably sell a product candidate if reimbursement for the product is limited by government authorities or 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 U.S. healthcare industry and 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 coverage or reimbursement will be available for any product candidate and, if coverage and reimbursement are available, of the extent of coverage and the level of reimbursement. Reimbursement may affect 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. 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:
| ● | a covered benefit under its health plan; | |
| ● | safe, effective and medically necessary; | |
| ● | appropriate for the specific patient; | |
| ● | cost-effective; and | |
| ● | neither experimental nor investigational. |
Third party payors may deny coverage and reimbursement status altogether of a given drug product, or cover the product but establish prices at levels that are too low to enable us to realize an appropriate return on our investment in product development. Because the coverage and reimbursement policies may change frequently, in some cases on short notice, even when there is favorable coverage and reimbursement, future changes may occur that adversely impact the favorable status. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States.
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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 a product candidate 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 any product candidates. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, any product candidates. If reimbursement is not available, or is available only to limited levels, we may not be able to commercialize any product candidates, profitably, or at all, even if approved. In addition, if physicians, government agencies and other third-party payors do not accept the use or efficacy of any product candidates, we will not be able to generate significant revenue, if any.
Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.
In some countries, particularly the countries of the EU, the pricing of prescription pharmaceuticals 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 Aramchol or any other 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.
If we or any of our independent contractors, consultants, collaborators, manufacturers, or service providers fail to comply with healthcare and data privacy laws and regulations, we or they could be subject to enforcement actions, which could result in penalties and affect our ability to develop, market and sell Aramchol or any other product candidate and may harm our reputation.
We are or may in the future be subject to federal, state, and foreign healthcare and data privacy laws and regulations pertaining to, among other things, fraud and abuse of patients’ rights. These laws and regulations include:
| ● | The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully soliciting, offering, receiving, or paying any remuneration, directly or indirectly, in cash or in kind, to induce or reward purchasing, ordering or arranging for or recommending the purchase or order of any item or service for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid. Liability may be established without a person or entity having actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it. This statute has been interpreted to apply broadly to arrangements between pharmaceutical manufacturers on the one hand and prescribers, patients, purchasers and formulary managers on the other. In addition, the Affordable Care Act amended the Social Security Act to provide that the U.S. government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act. A conviction for violation of the Anti-kickback Statute requires mandatory exclusion from participation in federal health care programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and those activities may be subject to scrutiny or penalty if they do not qualify for an exemption or safe harbor. |
| ● | The federal False Claims Act, or FCA, prohibits, among other things, knowingly presenting, or causing to be presented claims for payment of government funds that are false or fraudulent, or knowingly making, using or causing to be made or used a false record or statement material to such a false or fraudulent claim, or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government. This statute also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery. The FCA prohibits anyone from knowingly presenting, conspiring to present, making a false statement in order to present, or causing to be presented, for payment to federal programs (including Medicare and Medicaid) claims for items or services, including drugs, that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. This law also prohibits anyone from knowingly underpaying an obligation owed to a federal program. Increasingly, U.S. federal agencies are requiring nonmonetary remedial measures, such as corporate integrity agreements in FCA settlements. FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties assessed on a per false claim or statement basis. Government enforcement agencies and private whistleblowers have investigated pharmaceutical companies for or asserted liability under the FCA for a variety of alleged promotional and marketing activities, such as providing free product to customers with the expectation that the customers would bill federal programs for the product; providing consulting fees and other benefits to physicians to induce them to prescribe products; engaging in promotion for “off-label” uses; and submitting inflated best price information to the Medicaid Rebate Program. |
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| ● | The federal False Statements Statute prohibits knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry, in connection with the delivery of or payment for healthcare benefits, items, or services. |
| ● | The federal Civil Monetary Penalties Law authorizes the imposition of substantial civil monetary penalties against an entity, such as a pharmaceutical manufacturer, that engages in activities including, among others (1) knowingly presenting, or causing to be presented, a claim for services not provided as claimed or that is otherwise false or fraudulent in any way; (2) arranging for or contracting with an individual or entity that is excluded from participation in federal healthcare programs to provide items or services reimbursable by a federal healthcare program; (3) violations of the federal Anti-Kickback Statute; (4) failing to report and return a known overpayment or (5) offering or transferring remuneration to a federal health care beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier. |
| ● | The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of, or payment for, healthcare benefits, items or services; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. |
| ● | HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), which imposes requirements on certain types of people and entities relating to the privacy, security, and transmission of individually identifiable health information, requires notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information. Additionally, various states have laws similar to HIPAA. |
| ● | The federal Physician Payment Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, to report annually to the Centers for Medicare & Medicaid Services (CMS) information related to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members, which is published in a searchable form on an annual basis. Covered manufacturers will also be required to report on payments and other transfers of value to physician assistants, nurse practitioners or clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, and certified nurse-midwives during the previous year. |
| ● | State laws comparable to each of the above federal laws, such as, for example, anti-kickback and false claims laws that may be broader in scope and also apply to commercial insurers and other non-federal. |
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| ● | Payors requirements for mandatory corporate regulatory compliance programs, and laws relating to patient data privacy and security. Other state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state and foreign laws govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. | |
| ● | In the European Union, the General Data Protection Regulation, or GDPR,—Regulation EU 2016/679—was adopted in May 2016 and became applicable on May 25, 2018, or GDPR. The GDPR, as amended on May 4, 2016, further harmonizes data protection requirements across the European Union member states and Norway, Iceland and Liechtenstein by establishing new and expanded operational requirements for entities that collect, process or use personal data generated in the European Economic Area (the 27 member states of the EU and Norway, Iceland and Liechtenstein), including consent requirements for disclosing the way personal information will be used, information retention requirements, and notification requirements in the event of a data breach. | |
| ● | In the United Kingdom, following the UK’s exit from the European Union on 31 December 2020, the GDPR continues to form part of the law in the UK with some amendments (UK GDPR). There is a risk of divergence in the future, which may increase our overall data protection compliance costs. Certain data privacy legislation restricts the cross-border transfer of personal data and some countries introduced data localization into their laws. Specifically, regulations and laws such as the GDPR and other European and UK data protection laws generally restrict the transfer of personal data to third countries, unless the transfer is to a country deemed to provide adequate protection or the parties to the transfer have implemented specific safeguards to protect the transferred personal data and regularize the transfer in question. At the same time, European case law and guidance have imposed additional onerous requirements in relation to data transfers. Other jurisdictions such as Israel impose their own requirements to transfer personal data internationally, and regulators continue to propose new rules and guidance on the topic. We expect the existing legal complexity and uncertainty regarding international personal data transfers to continue in Europe and globally. As the regulatory guidance and enforcement landscape in relation to data transfers continue to develop, we could incur additional costs, face complaints and/or become subject to regulatory investigations or fines; we may have to stop using certain tools and vendors and make other operational changes; and we may have to implement alternative data transfer mechanisms under data protection law and/or take additional compliance and operational measures and/or it could otherwise affect the manner in which we provide our services, and could adversely affect our business, operations and financial condition. | |
| ● | In the U.S., both federal and state laws and regulations govern the collection, use, maintenance and other processing of personal data, and the advertising industry has been subject to review by the Federal Trade Commission (the “FTC”), U.S. Congress, and individual states. For example, at the U.S. federal level, we are subject to the rules and regulations promulgated under the authority of the FTC, which regulates unfair or deceptive acts or practices, including with respect to data protection, data privacy and cybersecurity, and has taken an increasingly active approach to enforcing such regulations against companies that handle personal data that is considered by the FTC a sensitive data for advertising purposes, including location data brokers and companies that process health-related data. These enforcement actions by the FTC signal an increased regulatory scrutiny of advertising practices that involve such data processing activities, which could adversely impact our ads business. Moreover, the U.S. Congress has recently considered and is currently considering various proposals for more comprehensive data privacy and cybersecurity legislation, to which we may be subject if passed. In addition, the U.S. Department of Justice issued rules restricting the transfer of certain personal data to countries of concerns, i.e., China, Russia, Iran, North Korea, Cuba and Venezuela, which could limit our ability to share such data and subject us to liability in case of noncompliance. Additionally, at the U.S. state level, we are subject to, among other things to state privacy laws which provides data privacy rights for residents of the states in question and operational requirements for covered companies. |
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| ● | The California Consumer Privacy Act of 2018, or CCPA, effective as of January 1, 2020, as amended by the California Privacy Rights Act, or the CPRA, which entered into substantial effect on January 1, 2023 (referred to as CCPA), gives California residents expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches, that is expected to increase data breach litigation. The CCPA imposes new operational requirements for companies, including new data privacy rights for consumers, increasing regulation on online advertising, creating a new California Privacy Protection Agency (CPPA) to enforce the law, regulating the sale or sharing of personal information, and adding greater transparency standards for privacy policies. Lack of compliance with the CCPA and its requirements could result in enforcement actions, litigation, fines and penalties. California consumers also have a private right of action under the CCPA for certain data breaches and can recover civil damages or actual damages, whichever is greater. In addition, over a dozen other states have passed or are considering similar legislation, which has created and will continue to create additional compliance obligations and risks. In California, certain practices related to tracking technologies, chatbots, cookies or session recording have triggered CIPA-based claims (i.e. based on California’s Invasion of Privacy Act).
Additional U.S. states have implemented, or are in the process of implementing, similar new laws or regulations (for example, the Virginia Consumer Data Protection Act (VCDPA) effective as of January 1, 2023, the Colorado Privacy Act (CPA) effective as of July 1, 2023, Connecticut Data Privacy Act (CDPA) effective as of July 1, 2023, Utah Consumer Privacy Act (UCPA) effective as of December 31, 2023, the Texas Data Privacy and Security Act (TDPSA) effective as of July 1, 2024, the Oregon Consumer Privacy Law (OCPA) effective as of July 1, 2024, the Florida Digital Bill of Rights (FDBR) effective as of July 1, 2024 and the Montana Consumer Data Privacy Act (MTCDPA) effective as of October 1, 2024) that impose new privacy rights and obligations. Additionally, Washington State has enacted the My Health My Data Act, which enhances the privacy and security of consumer health data not covered by HIPAA. This law grants consumers rights over their health data, requires explicit consent for data collection and sharing, and mandates reasonable security measures. It applies to entities doing business in Washington or targeting Washington residents. More generally, some observers have noted that the CCPA, together with the VCDPA, the CPA, the CDPA, the UCPA, the TDPSA, the OCPA, the FDBR and MTCDPA could mark the represent a trend toward more stringent United States federal privacy legislation, which could increase our potential liability and adversely affect our business. | |
| ● | In addition, we are subject to the Israeli Privacy Protection Law, 1981 (“PPL”), and its regulations, including, but not limited to, the Israeli Privacy Protection Regulations (Data Security), 2017 (“Security Regulations”), as well as the guidelines of the Israeli Privacy Protection Authority (“PPA”). These impose obligations regarding the processing, maintenance, transfer, disclosure, access, and security of personal data. Moreover, the Privacy Protection Regulations (Provisions Regarding Information Transferred to Israel from the European Economic Area), 2023 (“EU Regulations”), may, in certain cases, provide additional rights to data subjects from the EEA whose personal data is stored in databases located in Israel, or whose personal data is stored together with such data.
Additionally, the Privacy Protection Regulations (Transfer of Data to Databases Outside the State Borders), 5761-2001 (the “Cross-Border Transfer Regulations”), restrict and impose conditions on the transfer of personal information from databases in Israel to locations outside Israel. These regulations may require us to implement additional contractual, technical, and organizational measures to enable such transfers and maintain compliance, which could increase our costs.
Significant changes to the PPL or Security Regulations may necessitate adjustments to our data protection and security practices. |
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In this context, material amendments to the PPL were approved by the Israeli Parliament in August 2024 and became effective on August 14, 2025 (“Amendment 13”). Following Amendment 13, the PPL expands the PPA’s authority to investigate, including without suspicion of a breach of the PPL, and if it identifies irregularities in our compliance, it may require the company to take remedial actions, which could increase our costs, and/or impose monetary sanctions that are considerably higher than those previously available under the PPL and its regulations. Additionally, Amendment 13 introduces new obligations for parties processing personal data. we conduct ongoing compliance assessments and work to implement the measures required to address applicable requirements, including as they evolve over time which may require us to modify our data practices and policies, appoint mandatory positions, and consequently incur substantial costs to align our privacy and data protection practices in Israel.
Furthermore, our use of AI tools in connection with the processing of personal information is subject to the PPL and may present unique privacy and data security challenges. We conduct ongoing compliance assessments and apply legal, technical, and operational controls designed to help ensure that our use of AI remains compliant with applicable laws and regulatory expectations.
Failure to comply with the PPL, its regulations, and PPA guidelines (including in connection with our AI-based systems) may expose us to administrative fines (which, in some cases, may reach millions of NIS), civil claims (including class actions), and, in certain cases, criminal liability. .
The rapid advancements in artificial intelligence (“AI”) present both opportunities and challenges for our industry. There is a risk that the evolving AI landscape could reduce the demand for some of our simple service offerings within the writing, translation, and graphic and design verticals. At the same time, our recent initiatives to provide services that support AI technology could create additional demand for new services that were not previously on our marketplace. As we continue to invest in and expand our AI related services, we are fully aware of the complexities and the competitive nature of this area. We are also attentive to the evolving regulatory environment surrounding AI. Our ability to successfully adapt and incorporate AI technologies and related services into our product offerings in a timely, effective, and compliant manner is critical. Failure to do so may result in a competitive disadvantage, potentially reducing the demand for our services and adversely affecting our business performance. There are significant risks involved in utilizing AI and no assurances can be provided that our use will enhance our solutions or services or produce the intended results. For example, AI algorithms may be flawed, insufficient, of poor quality, reflect unwanted forms of bias or contain other errors or inadequacies, any of which may not be easily detectable; AI has been known to produce false or “hallucinatory” inferences or outputs. AI can also present ethical issues and may subject us to new or heightened legal, regulatory, ethical or other challenges and inappropriate or controversial data practices by developers and end-users, or other factors adversely affecting public opinion of AI, could impair the acceptance of AI technologies. If the AI tools that we create or use, are or are alleged to be deficient, inaccurate, biased or controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational harm, or other adverse impacts on our business and financial results. If we do not have sufficient rights to use the data or other material or content on which the AI tools we use rely, or to use the output of such AI tools, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, data protection, data privacy or other rights, or contracts to which we are a party.
The technologies underlying AI and its uses are subject to a variety of laws and regulations, including those related to intellectual property, data protection, data privacy, cybersecurity, consumer protection, competition and equal opportunity, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations. The AI legal and regulatory landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws and regulations governing the use of AI. Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws and regulations may have on our business. |
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In the United States, and internationally, AI is the subject of evolving review by various governmental and regulatory agencies, including the SEC and the FTC, and changes in laws and regulations governing the use of AI may adversely affect the ability of our business to use or rely on AI and our ability to provide and to improve our solutions and services, may require additional compliance measures and changes to our operations and processes, and may result in increased compliance costs and potential increases in civil claims against us. Many federal, state and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations governing the use of such technologies. For example, in March 2024, Utah enacted the Artificial Intelligence Policy Act, which imposes certain disclosure obligations and consumer protection responsibilities on companies that use generative AI. In May 17, 2024, Colorado enacted the Colorado AI Act. The Colorado AI Act creates duties for developers and for those that deploy AI. There is a specific focus on bias and discrimination. The Act will go into effect on February 1, 2026. In September 2024, California enacted the California AI Transparency Act, which imposes transparency obligations on companies that develop or substantially modify AI models as well as the California Transparency in Frontier Artificial Intelligence Act in September 2025 requiring developers of certain AI models to implement specified safety measures and make defined disclosures. In June 2020 Texas enacted the Texas Responsible Artificial Intelligence Governance Act which establishes a comprehensive legal framework for AI development, deployment, and oversight. Further, the Trump administration has rescinded an executive order relating to the safe and secure development of artificial intelligence technologies that was previously implemented by the Biden administration. The Trump administration then issued a new executive order that, among other things, requires certain agencies to develop and submit to the president action plans to “sustain and enhance America’s global AI dominance,” and to specifically review and, if possible, rescind rulemaking taken pursuant to the rescinded Biden executive order. Thus, the Trump administration may continue to rescind other existing federal orders and/or administrative policies relating to artificial intelligence, or may implement new executive orders and/or other rule making relating to artificial intelligence in the future. Any such changes at the federal level could require us to expend significant resources to modify our products, services, or operations to ensure compliance or remain competitive. Artificial intelligence legislation has also been introduced in the U.S. Senate, as well as at the state level. Such additional regulations may impact our ability to develop, use and commercialize artificial intelligence and machine learning technologies in the future.
The European Union’s Artificial Intelligence Act (the “EU AI Act”) was published in the EU Official Journal on July 12, 2024, and is the first comprehensive horizontal legal framework for the regulation of AI across the EU. The EU AI Act entered into force on August 1, 2024, and the provisions on Prohibited Activities and article 4 on AI Literacy will take effect on 2 February 2025, and most of the other obligations are expected to take gradual effect by 2026, including requirements around transparency, conformity assessments and monitoring, risk assessments, human oversight, security, accuracy, general purpose artificial intelligence and foundation models. The EU AI ACT will apply to six categories of entities: providers, deployers, importers, distributors, product manufacturers and authorized representatives. Examples of fines for noncompliance include administrative fines ranging from the higher of €35,000,000 or up to 7 percent of a company’s total worldwide annual turnover for non-compliance with prohibited AI practices, or the higher of €7,500,000 or up to 1 percent of a company’s total worldwide annual turnover for the supply of incorrect, incomplete, or misleading information to notified bodies and national competent authorities. The European Commission’s Digital Omnibus Proposal, published in November 2025, includes proposed amendments to certain EU laws and regulations, including (among others) the EU AI Act. However, the proposal remains at an early stage of the EU legislative process. Once applicable, the EU AI Act will have a material impact on the way artificial intelligence is regulated in the EU, including requirements around transparency, conformity assessments and monitoring, risk assessments, human oversight, security, accuracy and general purpose artificial intelligence. Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, require technical changes, development and implementations, which could adversely affect our business, financial condition and results of operations. |
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The EU Data Act, adopted on November 27, 2023, establishes rules for data sharing and reuse in the European Union, with most obligations effective from September 2025. It aims to enhance the EU’s data economy by improving data accessibility and usability, fostering innovation, and ensuring equitable value distribution among data economy participants. The EU Data Act empowers users of connected products—whether owned, leased, or rented—with greater control over the data they generate, while maintaining incentives for investments in data technologies. It also sets general conditions for data sharing between businesses and imposes measures to boost fairness and competition in the European cloud market. Additionally, the EU Data Act safeguards companies from unfair contractual terms related to data sharing imposed by dominant market players. Compliance may require us to implement new data management protocols, technological development and changes and review contractual practices, potentially increasing operational costs.
If our operations are found to be in violation of any such health care laws and regulations, we may be subject to penalties, including significant administrative, civil and criminal penalties, monetary damages, disgorgement, imprisonment, the curtailment or restructuring of our operations, loss of eligibility to obtain approvals from the FDA, EMA, MHRA or other regulatory authorities, or exclusion from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, any of which could adversely our financial results. Any action against us for an alleged or suspected violation could cause us to incur significant legal expenses and could divert our management’s attention from the operation of our business, even if our defense is successful. In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms of money, time and resources.
Our employees, principal investigators, consultants, commercial partners or vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards.
We are also exposed to the risk of employees, independent contractors, principal investigators, consultants, commercial partners or vendors engaging in fraud or other misconduct. Misconduct by employees, independent contractors, principal investigators, consultants, commercial partners and vendors could include intentional failures to comply with EU or UK regulations, to provide accurate information to the EMA, MHRA or EU Member States authorities or to comply with manufacturing or quality standards we have or will have established. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices such as promotion of products by medical practitioners. The EU Member States in which we operate have different statutory provisions regulating the cooperation of pharmaceutical companies with healthcare professionals. In addition to these statutory provisions, codes of conduct issued by business associations or other non-statutory standards may be applicable to our activities. Both statutory provisions and non-statutory codes or standards restrict payments or other benefits provided to healthcare professionals, and in case of non-compliance, may result in severe sanctions such as bans, administrative fines, criminal fines or even imprisonment. The advertising of medicinal products for human use in the EU is regulated by Title VIII of European Directive 2001/83/EC, as amended. These provisions have been implemented into the law of the EU member States. Such laws inter alia restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct could also involve the improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and serious and irreparable harm to our reputation.
This could also apply with respect to data privacy. In the EU (at that time including the United Kingdom), the EU Directive 95/46/EEC was replaced by the GDPR on May 25, 2018. The GDPR, as amended on May 4, 2016, as an EU regulation does not have to be implemented into Member States’ national law, but applies directly in all Member States since May 25, 2018. It applies to companies with an establishment in the European Economic Area (EEA) and to certain other companies not in the EEA that offer or provide goods or services to individuals located in the EEA or monitor individuals located in the EEA. The GDPR implements more stringent operational requirements for controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, increased requirements pertaining to health data and pseudonymized (i.e., key-coded) data, increased cyber security requirements, mandatory data breach notification requirements and higher standards for controllers to demonstrate that they have obtained a valid legal basis for certain data processing activities. The GDPR provides that EU Member States may continue to make their own further laws and regulations in relation to the processing of genetic, biometric or health data, which could result in continued or new differences between Member States, limit our ability to use and share personal data or could cause our costs to increase, and harm our business and financial condition. The GDPR continues to form part of law in the United Kingdom with some amendments following the United Kingdom’s exit from the European Union on 31 December 2020 (UK GDPR) although there is a risk of divergence in the future which may increase our overall data protection compliance cost. We are also subject to evolving and strict rules on the transfer of personal data out of the European Union and United Kingdom to the United States. Further prospective revision of the Directive on privacy and electronic communications (Directive 2002/58/EC, as amended), or ePrivacy Directive, and equivalent United Kingdom Legislation may affect our marketing communications.
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We have implemented procedures to ensure compliance with the GDPR and UK GDPR and its requirements. Our actual or alleged failure to comply with this regulation, or to protect personal data, could result in enforcement actions and significant penalties against us, which could result in negative publicity, increase our operating costs, subject us to claims or other remedies and have a material adverse effect on our business, financial condition, and results of operations. It is not always possible to identify and deter misconduct by employees or other parties. The precautions we take to detect and prevent such activity may not protect us from legal or regulatory action resulting from a failure to comply with applicable laws or regulations. Misconduct by our employees, principal investigators, consultants, commercial partners or vendors could result in significant financial penalties, criminal sanctions, civil law claims and/or negative media coverage, and thus have a material adverse effect on our business, including through the imposition of significant fines or other sanctions, and our reputation. In particular, failure to comply with EU laws, including failure under the GDPR, UK GDPR and other laws relating to the security of personal data may result in fines up to €20,000,000 or up to 4% of the total worldwide annual turnover of the preceding financial year, if greater, and other administrative penalties including criminal liability, which may be onerous and adversely affect our business, financial condition, results of operations and prospects. Failure to comply with the GDPR, UK GDPR and related laws may also give risk to increase risk of private actions, including a new form of class action that is available under the GDPR and UK GDPR.
If we or our manufacturers fail to comply with manufacturing regulations, our financial results and financial condition could be adversely affected.
Before an NDA is approved, and before we begin the commercial manufacture of any product candidate, contract manufacturers must register with the FDA, MHRA or other regulatory authorities, and undergo regulatory inspection of their manufacturing facilities, processes and quality systems. In addition, pharmaceutical manufacturing facilities are subject to periodic inspection by the FDA and other regulatory authorities 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 meet local, federal, or international regulatory requirements either at the outset or on an ongoing basis, in a cost-effective manner, if at all.
We do not intend to engage in the manufacture of Aramchol or any other product candidate other than for pre-clinical and clinical studies, but we 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’s or foreign regulators’ requirements necessary to continue manufacturing Aramchol or any other product candidate. Drug manufacturers are subject to ongoing periodic unannounced inspections by the FDA and corresponding foreign regulators to ensure continuing compliance with applicable requirements. Any failure to comply with FDA or foreign regulatory requirements could adversely affect our clinical research activities and our ability to develop and market Aramchol or any other product candidate.
If a third-party manufacturer with whom we contract is unable to comply with manufacturing requirements, we may be subject to fines, unanticipated compliance expenses, recall or seizure of Aramchol or any other product candidate, total or partial suspension of production and/or enforcement actions, including injunctions, and criminal or civil prosecution. These possible sanctions could adversely affect our financial results and financial condition.
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Our market is subject to intense competition. If we are unable to compete effectively, Aramchol or any other product candidate that we develop may be rendered suboptimal, noncompetitive or obsolete.
There are a number of products in development for our target indications, many of which are being developed by pharmaceutical companies that are far larger than us, with significantly greater resources and more experience than us in all aspects of drug development and commercialization. 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 Aramchol or other 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 any Aramchol or any other product candidate. Key competitive factors affecting the commercial success of Aramchol or any other product candidate that we 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 FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful than us in obtaining FDA 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 and may render the product candidates that we develop suboptimal, obsolete or non-competitive 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 we are targeting could render Aramchol or any other product candidate that we develop, non-competitive 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 in the NASH field currently include companies with marketed products and/or advanced clinical programs. Our main competitors of Aramchol include, but are not limited to Novo Nordisk Inc., Madrigal Pharmaceuticals Inc., and Viking Therapeutics among others. Our main competitors include Novo Nordisk with respect to Wegovy, which has typically been known for treating weight loss and diabetes and has recently been approved for NASH; and Madrigal Pharmaceuticals’s Rezdiffra (resmetirom) for the treatment of NASH with moderate to advanced liver fibrosis. See also “Item 4. Information on the Company—Competition.” Moreover, several additional companies have reported the commencement of research projects and proof-of-concept trials related to our target indications, including those mentioned in the preceding sentence.
We operate in a competitive sector. Several companies are working on technologies, therapeutic targets or drug or biomarker candidates that aim to treat or diagnose the same diseases or identify the same patient population as our product candidates. While we believe that our drug candidates and diagnostic solutions, combined with our expertise and know-how, provide us with competitive advantages, we face potential competition from various sources, including pharmaceutical and biotechnology companies, as well as from academic institutions, governmental agencies and public and private research institutions. We anticipate that we will face intense and increasing competition as new drugs and therapies enter the market and advanced technologies become available. In some indications, off-label use of non-approved drugs can also be considered as competition.
We face potential product and other liability exposure, and, if claims are brought against us, we may incur substantial liability.
Our product candidates could cause adverse events. These adverse events may not be observed in clinical trials, but may nonetheless occur in the future. If any of these adverse events occur, they may render Aramchol or any other product candidate 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 events caused by Aramchol or any other product candidate, could lead to product liability claims. Product liability claims might be brought against us by consumers, healthcare providers or others coming into contact with Aramchol or any other product candidate. 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, among other things:
| ● | decreased demand for our product candidate for which we obtain marketing approval; |
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| ● | impairment of our business reputation and exposure to adverse publicity; | |
| ● | increased warnings on product labels or other regulatory actions; | |
| ● | withdrawal of clinical trial participants; | |
| ● | costs of related litigation; |
| ● | distraction of management’s attention from our primary business; | |
| ● | substantial monetary awards to patients or other claimants; | |
| ● | loss of revenue; and | |
| ● | the inability to successfully commercialize any product candidates, for which we obtain marketing approval. |
If we are unable to obtain adequate insurance with respect to our clinical trials against and from any losses or claims from third parties, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss or damage. We may not be able to obtain insurance policies on terms affordable to us that would adequately cover loss or claims by third parties. To the extent our business suffers any losses or claims by third parties, which are not covered, or adequately covered, by insurance, our financial condition may be materially adversely affected.
If product liability lawsuits are successfully brought against us, our insurance may be inadequate.
We have obtained insurance coverage for our clinical trials in accordance with market standards and in compliance with applicable Israeli law. 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 product candidate, 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 any product candidate, 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 any product candidate’s programs.
We manage our business through a small number of senior executive officers. We depend on them even more than similarly- situated companies.
Because of the specialized scientific and managerial nature of our business, we rely heavily on our ability to recruit, attract, retain, manage and motivate qualified senior executive officers with adequate operational, scientific and technical experience. The loss of the services of our senior executive officers, including our President, Chief Executive Officer, 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. 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.
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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. Additionally, 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 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.
Failure to build our finance infrastructure and improve our accounting systems and controls could impair our ability to comply with the financial reporting and internal control requirements for publicly traded companies.
As a public company, we operate in an increasingly challenging regulatory environment which requires us to comply with the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the related rules and regulations of the SEC and securities exchanges, expanded disclosures, accelerated reporting requirements and more complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud.
We are subject to the requirements of the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act requires companies subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its subsidiaries’ internal control over financial reporting. To comply with this statute, we must document and test our internal control procedures and our management and issue a report concerning our internal control over financial reporting. In addition, as long as we do not become an accelerated or large accelerated filer, we are exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. Under this exemption, our auditor will not be required to attest to and report on our management’s assessment of our internal control over financial reporting until the date we are no longer a non-accelerated filer. We have an ongoing program to perform the system and process evaluation and testing necessary to continue to comply with these requirements. During the course of our review and testing, 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 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 stock to fall.
To build our finance infrastructure, we may need to improve our accounting systems, disclosure policies, procedures and controls. If we are unsuccessful in building an appropriate accounting infrastructure, we may not be able to prepare and disclose, in a timely manner, our financial statements and other required disclosures, or comply with existing or new reporting requirements. Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from the Nasdaq Capital Market or other adverse consequences that would materially harm our business. If we cannot provide reliable financial reports or prevent fraud, our business and results of operations could be harmed and investors could lose confidence in our reported financial information.
We may need to significantly increase the size of our organization, and we may experience difficulties in managing growth.
We may experience 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 result in an increase in the level of responsibility for management personnel. 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, among other things:
| ● | manage our clinical trials and the regulatory process effectively; |
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| ● | develop our administrative, accounting and management information systems and controls; | |
| ● | hire and train additional qualified personnel; and | |
| ● | integrate current and additional management, administrative, financial and sales and marketing personnel. |
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 Aramchol or any other product candidate.
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.
Scrutiny of sustainability and environmental, social, and governance, or ESG, initiatives could increase our costs or otherwise adversely impact our business.
Public companies have recently faced scrutiny related to ESG practices and disclosures from certain investors, capital providers, shareholder advocacy groups, other market participants and other stakeholder groups. Such scrutiny may result in increased costs, enhanced compliance or disclosure obligations, or other adverse impacts on our business, financial condition or results of operations. If our ESG practices and reporting do not meet investor or other stakeholder expectations, we may be subject to investor or regulator engagement regarding such matters. Our failure to comply with any applicable ESG rules or regulations could lead to penalties and adversely impact our reputation, access to capital and employee retention. Such ESG matters may also impact our third-party contract manufacturers and other third parties on which we rely, which may augment or cause additional impacts on our business, financial condition, or results of operations.
Risks Related to Our Reliance on Third Parties
We have no manufacturing capacity and anticipate reliance on third-party manufacturers for Aramchol any other product candidates.
We do not currently operate manufacturing facilities for the production of Aramchol or its API. We still have not, and may never, develop facilities for the manufacture of product candidates or products for clinical trials or commercial purposes. We rely on third-party manufacturers to produce bulk drug products required for our clinical trials. Our contract manufacturers have not completed commercial development and validation processes of the Aramchol API and we have experienced delays in the development of the Aramchol meglumine formulation. Drug product manufacturing processes may experience further difficulties and delays in production.
Additionally, if our contract manufacturers and their facilities, as applicable, are not approved by the FDA, or other applicable regulatory authorities, our commercial supply of the drug substance will be significantly delayed and may result in significant additional costs. We purchase finished Aramchol from a third-party under a clinical supply agreement. If we will be required to change the finished product manufacturer, we may encounter significant delay and likely significant additional cost.
A failure by our contract manufacturer to achieve and maintain high manufacturing standards, in accordance with applicable good manufacturing practices and other applicable regulatory requirements 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 often encounter difficulties involving production yields, quality control and quality assurance, as well as shortages of qualified personnel.
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Our existing manufacturers and any future contract manufacturers 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 a third-party manufacturer in a timely manner and the production of our product candidates would be interrupted, resulting in delays and additional costs.
We intend to rely primarily on third parties to market and sell Aramchol or any other product candidate.
We have no sales or distribution capabilities. To the extent we rely on third parties to commercialize Aramchol or any other product candidate, if marketing approval is obtained, we may receive less revenue than if we commercialize them 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 Aramchol or any other product candidate, 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 and, as such, we will be unable to market our product candidates directly 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 product candidates 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 potential other product candidates.
We intend to seek collaboration arrangements with pharmaceutical or biotechnology companies for the continued development and commercialization of our current and potential other product candidates. We will face, to the extent that we decide to enter into 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. 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 will 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 if neither of the parties has final decision making authority. Moreover, collaborations with pharmaceutical or biotechnology companies and other third parties are often terminated or allowed to expire by the other party. Any lack of effort or ability by our collaborators or any such disagreement, 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 rely on third parties, such as contract research organizations, 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 Aramchol or any other product candidate could be harmed, our costs could increase and our ability to obtain regulatory approval and commence product sales could be delayed.
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Risks Related to Our Intellectual Property
The failure to obtain or maintain patents, licensing agreements and other intellectual property rights that are sufficiently broad and protective could impact our ability to compete effectively.
To compete effectively, we must 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. We cannot predict the scope and extent of patent protection for Aramchol or any other product candidate because the patent positions of pharmaceutical products are complex and uncertain. 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, but are not limited to, the following:
| ● | while the patents we own have been issued, pending patent applications we have filed may not result in issued patents or may take longer than we expect to result in issued patents; | |
| ● | we may be subject to interference, reexamination, inter pares review, or post-grant review proceedings in the U.S.; | |
| ● | we may be subject to opposition proceedings in certain foreign countries; | |
| ● | any patents that are issued may not provide meaningful protection for any significant period of time, if at all; | |
| ● | any issued patents may not be broad or strong enough to prevent competition from other products including identical or similar products; | |
| ● | we may not be able to develop additional proprietary technologies that are patentable; | |
| ● | there may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim; | |
| ● | there may be other patents or pending patent applications existing in the patent landscape that will affect our freedom to operate for our product candidates; | |
| ● | other companies may challenge and invalidate patents licensed or issued to us or our customers; | |
| ● | a court could determine that a competitor’s technology or product does not infringe our patents; | |
| ● | other companies may independently develop similar or alternative technologies, or duplicate our technologies; | |
| ● | other companies may design around technologies we have licensed or developed; |
| ● | if we are not awarded patents or if issued patents expire or are declared invalid or not infringed, there may be no protections against competitors making generic equivalents; | |
| ● | enforcement of patents is complex, uncertain and expensive, and our patents may be found invalid or enforceable; | |
| ● | our patents could irretrievably lapse due to failure to pay fees or otherwise comply with regulations, or could be subject to compulsory licensing; and | |
| ● | if we encounter delays in our development or clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced. |
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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. 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.
We transitioned from Aramchol free acid to Aramchol meglumine (salt) in our double-blind, placebo-controlled histology-based registrational part of the ARMOR Study and are continuing this transition in other clinical trials of Aramchol. As part of our research and development studies, we have confirmed that several Aramchol salts have improved solubility as compared to the existing form of Aramchol free acid. We have pending patent applications and have been granted patents directed to composition of matter of Aramchol meglumine as well as a wide range of other salts.
There can be no assurance that the U.S. Patent and Trademark Office, or the USPTO, or any other foreign equivalent will issue any additional patents based on the patent applications that we submitted to protect our Aramchol salts or nor, should the USPTO or foreign equivalent issue any patents to us with respect to the Aramchol salts or that we will be provided with adequate protection against potentially competitive products. Furthermore, if foreign equivalent issues us one or more patents for the Aramchol salts or with respect to already issued patents for the Aramchol salts or there can be no assurance that the issued patents will be of any commercial value, or that private parties or competitors will not successfully challenge these patents or circumvent these patents in the United States or their counterparts abroad. In the absence of adequate patent protection, our business may be adversely affected by competitors who develop comparable technology or products and our commercial prospects may be materially adversely affected.
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.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from the PCT application. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired, we may be open to competition from competitive products, including generics or biosimilars. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
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We may not be able to enforce our intellectual property rights throughout the world. This risk is exacerbated for us because we expect Aramchol or Aramchol meglumine will be manufactured and used in a number of foreign 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 Aramchol will be manufactured and used in a number of foreign 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 the Company has applied for, intends to apply for, or has been issued patents have patent protection laws similar to those of the United States, some of them do not. For example, the Company expects to do business in South America, Eurasia, China and Indochina in the future and the countries in these regions may not provide the same or similar protection as that provided in the United States.
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.
We may rely on third party patents.
We may not have rights under some patents or patent applications related to products we may commercialize in the future. Third parties may own or control these patents and patent applications in the United States and abroad. Therefore, in some cases, to manufacture, sell or import some of our future products, we or our collaborators may choose to seek, or be required to seek, licenses under third party patents issued in the United States and abroad or under patents that might be issued from United States and foreign patent applications. In instances in which we must obtain a license for third party patents, we may be required to pay license fees or royalties or both to the licensor. If licenses are not available to us on acceptable terms, we or our collaborators may not be able to develop, manufacture, sell or import these products.
We may be unable to protect the intellectual property rights of third parties from whom we 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 may be licensed from third parties, including universities and strategic partners. Such third parties may determine not to or fail to protect the intellectual property rights that we license from them and we may be unable to defend such intellectual property rights on our own 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.
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If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to our business.
We may be party to license agreements with third parties and may need to obtain additional licenses from others to advance our research and development activities or allow the commercialization product candidates we may identify and pursue. License agreements may impose various development, diligence, commercialization, and other obligations on us. For example, we may be required to use commercially reasonable efforts to engage in various development and commercialization activities with respect to licensed products, and satisfy specified milestone and royalty payment obligations. In spite of our efforts, our licensors might conclude that we have materially breached our obligations under such license agreements and might therefore terminate the license agreements, thereby removing or limiting our ability to develop and commercialize products and technology covered by these license agreements. If these in-licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, competitors or other third parties would have the freedom to seek regulatory approval of, and to market, products identical to ours and we may be required to cease our development and commercialization of product candidates that we may identify. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects. Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including:
| ● | the scope of rights granted under the license agreement and other interpretation-related issues; | |
| ● | the extent to which our product candidates, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; | |
| ● | the sublicensing of patent and other rights under our collaborative development relationships; | |
| ● | our diligence obligations under the license agreement and what activities satisfy those diligence obligations; | |
| ● | the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and | |
| ● | the priority of invention of patented technology. In addition, the agreements under which we currently or in the future license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial conditions, results of operations, and prospects. |
We may infringe 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, Aramchol or any other product candidate.
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 product candidate infringes. 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 product candidates 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 candidates infringes.
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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 any of our product candidates or their use, the holders of any of these patents may be able to block our ability to commercialize any such product candidate 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 product candidates or lead to prohibition of the manufacture or sale of products by us.
We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.
Competitors may infringe our patents or other intellectual property. Although we are not currently involved in any litigation, if we were to initiate legal proceedings against a third party to enforce a patent covering our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, written description or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability is unpredictable.
Interference or derivation proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms or at all, or if a non-exclusive license is offered and our competitors gain access to the same technology. Our defense of litigation or interference or derivation proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring our product candidates to market.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our ordinary shares.
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 product candidates 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 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 cause additional material adverse effects upon our competitive business position.
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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 the unauthorized disclosure or use of our technical knowledge or other trade secrets by those former employees. 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. In addition, employees may be entitled to seek compensation for their inventions irrespective of their agreements with us, which could require us to incur costs or expend management time and, in some cases, could impact our future profitability.
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.
In addition, under the Israeli Patent Law, 5727-1967, or the Patent Law, inventions conceived by an employee in the course and as a result of or arising from his or her employment with a company are regarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. The Patent Law further provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee, or the Committee, a body constituted under the Patent Law, shall determine whether the employee is entitled to remuneration for his or her inventions. Case law clarifies that the right to receive consideration for “service inventions” can be waived by the employee and that in certain circumstances, such waiver does not necessarily have to be explicit. The Committee will examine, on a case-by-case basis, the general contractual framework between the parties, using interpretation rules of the general Israeli contract laws. Further, the Committee has not yet determined one specific formula for calculating this remuneration, but rather uses the criteria specified in the Patent Law. Although we generally enter into assignment-of-invention agreements with our employees pursuant to which such individuals assign to us all rights to any inventions created in the scope of their employment or engagement with us, we may nevertheless face claims demanding remuneration in consideration for assigned inventions, notwithstanding the assignment and waiver provisions included in our agreements. As a consequence of such claims, we could be required to incur legal costs and expend management time in responding to or defending against such claims, which are generally assessed in light of the explicit waivers executed by our employees and could result in legal costs and the diversion of management resources, which could negatively affect our business.
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. 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.
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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 other product candidates, technologies or other matters.
In addition, our patents and patent applications could face challenges. 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.
Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect Aramchol or any other product candidate.
As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both technological and legal complexity. Therefore, obtaining and enforcing pharmaceutical patents is costly, time-consuming, and inherently uncertain. In particular, the United States has recently enacted, and is currently implementing, wide-ranging patent reform legislation. The United States Supreme Court has 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 to increasing uncertainty regarding 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.
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 noncompliance 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 Ownership of Our Ordinary Shares
Our business, operating results and growth rates may be adversely affected by current or future unfavorable economic and market conditions and adverse developments with respect to financial institutions and associated liquidity risk.
Our business depends on the economic health of the global economies. 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, our business, operating results and financial condition may be materially adversely affected.
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In addition, increases in inflation raise our costs for commodities, labor, materials and services and other costs required to grow and operate our business, and failure to secure these on reasonable terms may adversely impact our financial condition. Additionally, increases in inflation, geopolitical developments and global supply chain disruptions, have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment, which may make it more difficult, costly or dilutive for us to secure additional financing. A failure to adequately respond to these risks could have a material adverse impact on our financial condition, results of operations or cash flows.
There can be no assurance that future credit and financial market instability and a deterioration in confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, liquidity shortages, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions, it may cause short-term liquidity risk and also make any necessary debt or equity financing more difficult, more costly, more onerous with respect to financial and operating covenants and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to alter our operating plans. In addition, there is a risk that one or more of our service providers, financial institutions, manufacturers, suppliers and other partners may be adversely affected by the foregoing risks, which could directly affect our ability to attain our operating goals on schedule and on budget.
The market price of our ordinary shares is volatile and you may sustain a complete loss of your investment.
Since our initial public offering, the trading price of our ordinary shares has been volatile and is likely to continue to be volatile. In addition, the trading volume is and has been volatile and oftentimes relatively illiquid. 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 and trading volume of our ordinary shares:
| ● | the outcome of an evaluation of potential strategic alternatives; | |
| ● | inability to obtain the approvals necessary to commence further clinical trials; | |
| ● | unsatisfactory or inconclusive results of clinical trials; | |
| ● | delays or termination of any clinical trials; | |
| ● | adverse events in any clinical trials; | |
| ● | announcements of regulatory approval or the failure to obtain it, or specific label indications or patient populations for its use, or changes or delays in the regulatory review process; | |
| ● | announcements of therapeutic innovations or new products by us or our competitors; | |
| ● | adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities; | |
| ● | changes or developments in laws or regulations applicable to our product candidates; | |
| ● | any adverse changes to our relationship with manufacturers or suppliers; | |
| ● | any product liability actions or intellectual property infringement actions in which we may become involved; | |
| ● | announcements concerning our competitors or the pharmaceutical industry in general; | |
| ● | achievement of expected product sales and profitability or our failure to meet expectations; |
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| ● | our commencement of, or involvement in, litigation; | |
| ● | any major changes in our board of directors, management or other key personnel; | |
| ● | legislation in the United States, Europe and other foreign countries relating to the sale or pricing of pharmaceuticals; | |
| ● | announcements by us of significant strategic partnerships, out-licensing, in-licensing, joint ventures, acquisitions or capital commitments; | |
| ● | expiration or terminations of licenses, research contracts or other collaboration agreements; | |
| ● | public concern as to the safety of drugs we, our licensees or others develop; | |
| ● | success of research and development projects; | |
| ● | variations in our and our competitors’ results of operations; | |
| ● | changes in earnings estimates, cash flow guidance, or recommendations by securities analysts; | |
| ● | developments by our licensees, if any; | |
| ● | future issuances of ordinary shares or other securities; and | |
| ● | natural disasters and political and economic instability, including wars, terrorism, political unrest, results of certain elections and votes, emergence of a pandemic, or other widespread health emergencies (or concerns over the possibility of such an emergency), boycotts, adoption or expansion of government trade restrictions, and other business restrictions. |
These factors and any corresponding price fluctuations may materially and adversely affect the market price and trading volume of our ordinary shares and 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 our Company and that of small companies. 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. Following periods of market volatility or a material decrease in the value of our ordinary shares, shareholders may institute securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and attention of management from our business, even if we are successful. Future sales of our ordinary shares could also reduce the market price of such stock. Any adverse determination in litigation could also subject us to significant liabilities.
Moreover, the liquidity of our ordinary shares has been limited, not only in terms of the number of shares that can be bought and sold at a given price, but by delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of us, if any. These factors may result in lower prices for our ordinary shares than might otherwise be obtained and could also result in a larger spread between the bid and ask prices for our ordinary shares. 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 are 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 stock 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.
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If we fail to comply with the continued listing requirements of the Nasdaq Stock Market LLC, our ordinary shares could be delisted, which could adversely affect the liquidity and market price of our ordinary shares and our ability to raise additional capital.
Our ordinary shares are listed on the Nasdaq Capital Market. To maintain our listing, we are required to satisfy certain continued listing requirements, including, among other things, minimum bid price, minimum market value of publicly held shares, minimum shareholders’ equity (or other financial metrics), corporate governance requirements, and timely filing of periodic reports with the SEC.
There can be no assurance that we will be able to comply with Nasdaq’s continued listing standards in the future, and in the past, we have been deficient in meeting certain of Nasdaq’s continued listing standards including the minimum bid price requirement. If we fail to satisfy any of Nasdaq’s continued listing requirements, we may receive a deficiency notice from Nasdaq and, depending on the nature of the deficiency, may be afforded a limited period of time to regain compliance. However, certain deficiencies may not be subject to a cure period or may result in immediate delisting. If we do not regain compliance within any applicable cure period, or if Nasdaq determines that we are not eligible for a compliance period, Nasdaq may determine to delist our ordinary shares.
On January 26, 2026, Nasdaq filed a rule proposal with the SEC that would permit the immediate suspension and delisting of a company listed on the Nasdaq Capital Market if its market value of listed securities remains below $5 million for 30 consecutive business days. As of the date of this Annual Report, our market value of listed securities is below $5 million and if this rule were to go into effect and we are unable to increase our market value of listed securities above $5 million, we would become subject to immediate suspension and delisting.
If we do not meet Nasdaq’s continued listing requirements, our ordinary shares could be delisted. A delisting of our ordinary shares from Nasdaq could materially reduce the liquidity of our ordinary shares and result in a corresponding material reduction in the price of our ordinary shares. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer business development opportunities and strategic alternatives. There can be no assurance that our ordinary shares, if delisted from the Nasdaq Capital Market in the future, would be listed on a national securities exchange, a national quotation service, the Over-The-Counter Markets or the pink sheets. Delisting from the Nasdaq Capital Market, or even the issuance of a notice of potential delisting, would also result in negative publicity, make it more difficult for us to raise additional capital, adversely affect the market liquidity of our ordinary shares, reduce security analysts’ coverage of us and diminish investor, supplier and employee confidence. Additionally, the threat of delisting or the delisting of our ordinary shares from the Nasdaq Capital Market could reduce the number of investors willing to hold or acquire our ordinary shares, thereby further restricting our ability to obtain equity financing, and it could reduce our ability to retain, attract and motivate our directors, officers and employees. In addition, as a consequence of any such delisting, our share price could be negatively affected and our shareholders would likely find it more difficult to sell, or to obtain accurate quotations as to the prices of, our ordinary shares. Accordingly, any failure to maintain compliance with Nasdaq’s continued listing requirements could have a material adverse effect on our business, financial condition, results of operations and the value of our ordinary shares.
Sales of a substantial number of our ordinary shares in the public market could cause our share price to fall.
Sales of a substantial number of our ordinary shares in the public market, or the perception that these sales might occur, could depress the market price of our ordinary shares and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our ordinary shares. Sales of shares by our existing shareholders would likely result in the supply of our ordinary shares far exceeding the demand for our ordinary shares and could have a material adverse effect on the trading price of our ordinary shares.
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Raising additional capital would cause dilution to our existing shareholders, and may restrict our operations or require us to relinquish rights.
We will need to raise additional capital and may seek additional capital through a combination of private and public equity offerings, “at-the-market” issuances, equity line transactions, equity-linked and structured transactions, debt (straight, convertible, or otherwise) financings, collaborations and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring 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. Depending upon market liquidity at the time, additional sales of shares registered at any given time could cause the trading price of our ordinary shares to decline.
Our U.S. shareholders may suffer adverse tax consequences due to our expected classification as a passive foreign investment company.
Generally, if for any taxable year 75% or more of our gross income is passive income, or at least 50% of the average value of our assets is attributable to assets that 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. Based upon our review of our financial data, we believe that we were a PFIC for our 2025 taxable year and expect to be a PFIC for the 2026 taxable year. Because PFIC status is determined annually and is based on our income, assets and activities for the entire taxable year, it is not possible to determine with certainty whether we will be characterized as a PFIC for the 2026 taxable year until after the close of the year, and there can be no assurance that we will not be classified as a PFIC in any future 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 below) owns ordinary shares, such U.S. Holder could face adverse U.S. federal income tax consequences. For example, such U.S. Holder could be subject to additional taxes and interest charges upon certain distributions by us and any gain recognized on a sale, exchange or other disposition of our shares, whether or not we continue to be characterized as a PFIC. Certain adverse consequences of PFIC status can be mitigated if a U.S. Holder makes a “mark-to-market” election or an election to treat us as a qualified electing fund, or QEF. Upon request, we expect to provide the information necessary for U.S. Holders to make “qualified electing fund elections” if we are classified as a PFIC. There is no assurance, however, that we will have timely knowledge of our status as a PFIC, or that the information that we provide will be adequate to allow U.S. Holders to make a QEF election Each investor is urged to consult its tax advisor with respect to the application of the PFIC rules. See also “Item 10. Additional Information—E. Taxation— Certain Material U.S. Federal Income Tax Considerations.”
If the securities analysts that currently cover our stock, or will do so in the future, 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 is 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 provide favorable coverage. If any of the analysts who do cover, or may cover us in the future, 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 cover us 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 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, 5759-1999, or the Companies Law, imposes certain restrictions on our ability to declare and pay dividends. See “Item 8. Financial Information—Consolidated Financial Statements and Other Financial Information—Dividend Policy” for additional information.
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The requirements associated with being a public company require significant company resources and management attention.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act, the listing requirements of the Nasdaq Capital Market, on which our ordinary shares are traded, and other applicable securities rules and regulations. The Exchange Act requires that we file periodic reports with respect to our business and financial condition and maintain effective disclosure controls and procedures and internal control over financial reporting. In addition, subsequent rules implemented by the SEC and the Nasdaq Capital Market may also impose various additional requirements on public companies. As a result, we incurred and will continue to incur additional legal, accounting and other expenses that we did not incur as a privately-held company, particularly since, as of December 31, 2020, we are no longer considered an “emerging growth company” as defined in the JOBS Act. Further, the need to establish the corporate infrastructure demanded of a public company may divert management’s attention from implementing our development plans. We have made and will continue to make changes to our corporate governance standards, compensation policy, disclosure controls and financial reporting and accounting systems to meet our reporting obligations and applicable law. The measures we take, however, may not be sufficient to satisfy our obligations as a public company, which could subject us to delisting of our ordinary shares, fines, sanctions and other regulatory action and potentially civil litigation.
As a “foreign private issuer,” we are permitted to and currently do 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, and currently do, follow certain home country corporate governance practices instead of those otherwise required under the Listing Rules of the Nasdaq Capital Market, or the Nasdaq Listing Rules, for domestic U.S. issuers. For instance, we currently follow home country practice in Israel with regard to, among other things, director nomination procedure and approval of compensation of officers. In addition, we may 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 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. See “Item 16G. Corporate Governance.”
In addition, as a “foreign private issuer,” we are exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements and certain individual executive compensation information. Section 8103 of the National Defense Authorization Act for Fiscal Year 2026, named the “Holding Foreign Insiders Accountable Act”, which was signed into law on December 18, 2025, will require directors and officers of foreign private issuers to make insider reports under Section 16(a) of the Exchange Act, effective March 18, 2026. Our principal shareholders continue to remain exempt from the reporting under Section 16(a) of the Exchange Act and our directors, officers and principal shareholders continue to remain exempt from the short-swing profit recovery provisions contained in Section 16(b) of the Exchange Act. Furthermore, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Additionally, as a “foreign private issuer,” we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies reduce the frequency and scope of information and protections to which you are entitled as an investor.
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If our ordinary shares become a “penny stock,” it may be more difficult for investors to sell their ordinary shares, and the market price of our ordinary shares may be adversely affected.
Our ordinary shares could become a “penny stock” if, among other things, the share price is below $5.00 per share, we are not listed on a national securities exchange or we have not met certain net tangible asset or average revenue requirements. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement to the purchase. Broker-dealers must also provide customers that hold penny stock in their accounts with such broker-dealer a monthly statement containing price and market information relating to the penny stock. If a penny stock is sold to an investor in violation of the penny stock rules, the investor may be able to cancel its purchase and get its money back.
If applicable, the penny stock rules may make it difficult for investors to sell their ordinary shares. Because of the rules and restrictions applicable to a penny stock, there is less trading in penny stocks and the market price of our ordinary shares may be adversely affected. Also, many brokers choose not to participate in penny stock transactions. Accordingly, investors may not always be able to resell their ordinary shares publicly at times and prices that they feel are appropriate and the market price of our ordinary shares may be adversely affected.
Inflation could adversely affect our business and results of operations.
During 2023, 2024 and 2025, the economy in the United States and global markets encountered increases in the level of inflation. The impact geopolitical developments, such as the Russia-Ukraine conflict and the security situation in Israel, and global supply chain disruptions had and continue to increase uncertainty in the outlook of near-term and long-term economic activity, including whether inflation will continue and how long, and at what rate. Increases in inflation raise our costs for commodities, labor, materials and services and other costs required to grow and operate our business, and failure to secure these on reasonable terms may adversely impact our financial condition. Additionally, increases in inflation, along with the uncertainties surrounding geopolitical developments and global supply chain disruptions, have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment, which may make it more difficult, costly or dilutive for us to secure additional financing. A failure to adequately respond to these risks could have a material adverse impact on our financial condition, results of operations or cash flows.
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 office is located in Ramat Gan, Israel. In addition, certain of our key employees, officers and directors are residents of Israel. Accordingly, political, economic and military conditions in the Middle East may affect our business directly. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries and terrorist organizations active in the region, including Iran, Hamas (an Islamist militia and political group in the Gaza Strip), Hezbollah (an Islamist militia and political group in Lebanon) and the Houthis (an Islamist militia and political group in Yemen).
Israel was engaged in a war with Hamas, a terrorist organization based in the Gaza Strip on Israel’s southern border, from October 7, 2023 until October 2025, when a U.S.-brokered ceasefire took effect. Israeli forces remain deployed in parts of the Gaza Strip, and the situation remains volatile. Similarly, Israel was engaged in a military conflict with Hezbollah, a terrorist organization based in Lebanon on Israel’s northern border, which ended with a ceasefire in November 2024. In addition, in March 2026, hostilities resumed along Israel’s northern border with Lebanon, when Hezbollah resumed its attacks as part of a broader regional escalation. In response, Israel resumed military operations against Hezbollah in southern Lebanon. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, the Houthi movement in Yemen and various rebel militia groups in Syria and Iraq. Iran itself directly entered the conflict, launching ballistic missile attacks against Israel in April 2024 and October 2024. In addition, in response to ongoing Iranian aggression and support of proxy attacks against Israel, on June 13, 2025, Israel conducted a series of preemptive defensive air strikes in Iran targeting Iran’s nuclear program and military commanders. While a ceasefire was reached in June 2025 following 12 days of hostilities, on February 28, 2026, the United States and Israel launched coordinated military strikes against Iran, including attacks on strategic military infrastructure and leadership targets, with the stated aim of degrading Iran’s capacity to conduct or support hostile operations against them. In response, Iran has fired missiles and drones toward population centers and military installations in Israel, Europe and neighboring countries in the Gulf region, and also launched counter-strikes against U.S. forces and allied bases throughout the Gulf region. Iran is also restricting passage through the Strait of Hormuz, which is disrupting global supply chains, including for oil and gas, and is impact global economies. These situations may potentially escalate in the future to more violent events which may affect Israel and us. Continued military escalation, retaliatory actions, or broader regional involvement may adversely affect economic conditions, disrupt markets, and create uncertainty that could negatively impact our business, financial condition and results of operations.
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In connection with prolonged conflict, several hundred thousand Israeli military reservists were drafted to perform military service. Although many of these reservists have since been released, they may be called up for additional reserve duty, depending on developments in the war in Gaza and along Israel’s other borders. While none of our employees in Israel have been called to active military duty, we rely on service providers located in Israel and have entered into certain agreements with Israeli counterparties. The absence of our employees or service providers due to their military service in the future may materially and adversely affect our ability to conduct our operations. The conflict also led to a downgrade in Israel’s credit rating by rating agencies such as the downgrade by Moody’s of Israel’s credit rating from A1 to Baa1, as well as the downgrade of its outlook rating from “stable” to “negative,” while S&P Global lowered Israel’s long-term credit rating from A+ to A and downgraded its short-term credit rating from A-1+ to A-1, with a “negative” outlook on the long-term rating.
Since the war broke out on October 7, 2023, our operations have not been adversely affected by this situation, However, the intensity and duration of the security situation in Israel have been difficult to predict and the economic implications for our business and operations and on Israel’s economy in general have also been difficult to predict. If the war extends for a long period of time or expands to other fronts, our operations may be harmed.
Our insurance policies do not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of certain direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that such government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business.
The global perception of Israel and Israeli companies, influenced by actions by international judicial bodies, may lead to increased sanctions and other negative measures against Israel, as well as Israeli companies and academic institutions. There is also a growing movement among countries, activists, and organizations to boycott Israeli goods, services and academic research or restrict business with Israel, which could affect business operations. If these efforts become widespread, along with any future rulings from international tribunals against Israel, they could significantly and negatively impact business operations.
Exchange rate fluctuations between the U.S. dollar and the New Israeli Shekel currencies may negatively affect our earnings.
Our functional currency is the U.S. dollar. We incur expenses in U.S. dollars and New Israeli Shekels, or NIS. As a result, we are exposed to the risks that the NIS may appreciate relative to the U.S. dollar, or, if either the NIS devalues relative to the U.S. dollar, that the inflation rate in Israel may exceed such rate of devaluation of the NIS, or that the timing of such devaluation may lag behind inflation in Israel. In any such event, the U.S. dollar cost of our operations in Israel would increase and our U.S. dollar-denominated results of operations would be adversely affected. The average exchange rate for the year ended December 31, 2025 was $1.00 = NIS 3.19 We cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation, if any, of the NIS against the U.S. dollar.
Provisions of Israeli law and our articles of association, or Articles, 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.
The Companies Law regulates, among others, 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. See “Item 10. Additional Information—B. —Mergers and Acquisitions under Israeli Law” for additional information.
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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 “Item 10. Additional Information—E. Taxation—Certain Israeli Tax Considerations” for additional information.
Moreover, the classification of our Board into three classes with terms of approximately three years each, per our Articles, the requirement of affirmative vote of at least 75% of the voting rights of the Company represented personally or by proxy and voting thereon at a general meeting in order to amend or replace our Articles, together with the other provisions of the Articles and Israeli law, could deter or delay potential future merger, acquisition, tender or takeover offers, proxy contests or changes in control or management of the Company.
It may be difficult to enforce a judgment of a United States court against us, our officers, directors and the Israeli experts named in this annual report 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.
We were and continue to be organized in Israel. Most 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 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 United States securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of United States 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 United States law is applicable to the claim. If United States law is found to be applicable, the content of applicable United States 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, our shareholders may not be able to collect any damages awarded by either a United States or foreign court.
Your rights, liabilities and responsibilities as a shareholder will be governed by Israeli law and 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 Articles and Israeli 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 towards the company and other shareholders and to refrain from abusing his, her or its power in the company, including, among other things, when 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. In addition, a controlling shareholder, a shareholder who knows that it possesses the power to determine the outcome of a shareholders’ vote or a shareholder who has the power to appoint or prevent the appointment of a director or executive officer in 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 little case law available to assist in understanding the implications of these provisions that govern shareholder behavior. 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. See “Item 10. Additional Information—B Memorandum and Articles of Association—Shareholder Duties” for additional information.
Any of the risk factors referred to above could significantly and negatively affect our business, results of operations or financial condition, which may reduce our ability to pay dividends and lower the trading price of our ordinary shares. The risks referred to above are not the only ones that may exist. Additional risks not currently known by us or that we deem immaterial may also impair our business operations.
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ITEM 4. Information on the Company.
A. Historical Background and Corporate Structure
Galmed Pharmaceuticals Ltd., was incorporated in Israel on July 31, 2013 as a privately held company and is governed by the Companies Law. However, our business has been operating since 2000 under a different group of companies established in the same year, or the Group. Originally, we operated under the parent company, GHI. GHI held all of the equity rights in and to Galmed 2000 Inc., a holdings company incorporated in the British Virgin Islands, or GTTI. GTTI held all of the equity rights in and to Galmed International Limited, a company incorporated in Malta, or GIL (other than 0.1% of the share capital held by GHI). GIL held all of the equity rights in and to Galmed Medical Research Ltd., an Israeli company, or GMR. Our intellectual property was held by GIL. The research and development was conducted by GMR as a service to GIL on a cost plus basis. GIL was responsible for all product development.
On February 2, 2014, we underwent the Reorganization, pursuant to which all of our intangible assets (including our intellectual property) were transferred from GIL to Galmed Research and Development Ltd., or GRD. The Reorganization was effectuated by share transfers and asset transfers, resulting in the Company as the parent company and 100% equity-owner of the following companies: (1) GRD, which holds all the Group’s intellectual property, including the Company’s patent portfolio; (2) GIL, which is an inactive company; and (3) GTTI, which was liquidated in 2017. GIL held GMR, which became an inactive company in 2015 and was liquidated in February 2019. The Reorganization was conducted in order to simplify our capital structure, reduce our operating cost and to improve our ability to raise funds. Immediately prior to the Reorganization, all our shareholders collectively held 9,739 ordinary shares of GHI. In connection with the Reorganization, and in accordance with the Tax Pre-Ruling, we issued to all such shareholders ordinary shares, such that upon the Reorganization all our shareholders collectively held 7,099,731 of our ordinary shares, in the same proportion among all shareholders, which reflected a ratio of 729 of our ordinary shares for each ordinary share of GHI. In July 2023, GRD established a new wholly-owned subsidiary incorporated under the laws of England and Wales called Galmed Therapeutics UK Limited, or Galmed UK.
The following is a diagram of our corporate structure (following GTTI’s liquidation and the incorporation of Galmed UK):
On December 29, 2025, OnKai filed a certificate of dissolution with the Secretary of State of the State of Delaware for winding up its affairs and dissolving as an entity.
On March 18, 2014, we completed our initial public offering and since then have been listed on the Nasdaq Capital Market under the symbol “GLMD”.
Our principal executive offices and registered office in Israel is located at c/o Meitar Law Offices, 16 Abba Hillel Road, Ramat Gan, Israel 5250608 and our telephone number is +972-3-693-8448. Our lease at our prior principal executive offices expired on March 21, 2024. We did not extend the lease and are currently headquartered in Ramat Gan, Israel while we are in the process of searching for a new permanent location for our principal executive offices. Our website address is http://www.galmedpharma.com. The information contained on, or that can be accessed through, our website is neither a part of nor incorporated into this annual report. We have included our website address in this annual report solely as an inactive textual reference. Puglisi & Associates, or Puglisi, serves as our authorized representative in the United States for certain limited matters. Puglisi’s address is 850 Library Avenue, Newark, Delaware 19711.
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The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at http://sec.gov. We use our website (http://www.galmedpharma.com) as a channel of distribution of Company information. The information we post through this channel may be deemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of our website are not, however, a part of this annual report.
Other than as described in “Item 5. Operating and Financial Review and Prospects—Contractual Obligations”, we have not had any material commitments for capital expenditures, including any anticipated material acquisition of plant and equipment or interests in other companies, since January 1, 2014. Additionally, we have not had any material capital divestitures since January 1, 2014.
B. Business Overview
We are a biopharmaceutical company focused on the development of Aramchol, a first-in-class, oral, SCD1 modulator. Historically, we have focused almost exclusively on developing Aramchol for the treatment of liver diseases and were previously developing Aramchol for primary sclerosing cholangitis, or PSC, and exploring the feasibility of developing Aramchol for other fibro-inflammatory indications outside of MASH and liver fibrosis.
We have recently reinitiated the process of evaluating our strategic options alternatives and our structuring to best optimize our resources to enhance shareholder value and achieve our goals.
We are currently seeking to advance the development of Aramchol for combination therapy for GI oncological indications. In addition, as part of our growth strategy, we are actively pursuing opportunities in the biotech and medtech spaces to expand and diversify our product pipeline specifically targeting GI, cardiometabolic indications and other innovative product candidates that align with our core competences.
Aramchol, our lead product candidate, is a synthetic conjugate of 3-amino cholic acid, or a type of modified bile acid, and arachidic acid, or a type of saturated fatty acid, which in its non-synthetic forms, is naturally occurring. The conjugated molecule acts upon important metabolic pathways, reducing fat accumulation in the liver, improving fatty acid oxidation and regulating the transport of cholesterol. The ability of Aramchol to decrease liver fat content may also reduce the inflammation and fibrosis in the liver and the risk of cardiovascular complications associated with NASH. Pre-clinical studies suggest Aramchol’s effect on fibrosis is also direct via collagen production from human hepatic stellate cells. We believe that Aramchol’s ability to reduce liver fat and liver fibrosis and the safety profile observed to date will enable it to be a treatment for all stages of NASH in patients who are overweight or obese and have pre diabetes or type II diabetes mellitus and prevent the hepatic complications associated therewith.
In September 2019, we initiated our Phase 3 ARMOR Study to evaluate the efficacy and safety of Aramchol in subjects with NASH and fibrosis. The ARMOR Study was originally comprised of two parts, a randomized, double-blind, placebo-controlled histology-based registrational part and a clinically based part where subjects will continue with the same treatment for approximately five years. In December 2020, we announced the addition of a 150-patient open label part to the ARMOR Study and suspended randomization of new patients into the double-blind, placebo-controlled histology-based registrational part of ARMOR as all enrolled patients were transitioned to the open label part.
In May 2022, we announced our plan to expand into new anti-fibrotic indications to maximize the potential of Aramchol while at the same time discontinuing the open label part of its ARMOR Study having reached its objectives. Simultaneously, we initiated a cost reduction plan and at various times in the past have conducted a strategic review process. Following the discontinuation of our open label part of the ARMOR Study, we do not currently expect to initiate the second part of the ARMOR Study in the near term.
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In May 2023, we announced the initiation of a new clinical program to evaluate Aramchol meglumine for the treatment of primary sclerosing cholangitis, a rare disease for which there is no approved treatment. Currently, we do not have plans to continue the development of Aramchol for this indication.
During 2024, we entered into a collaboration agreement with the Massy Cancer Center at Virginia Commonwealth University, or VCU, according to which we aim to investigate the effect of adding Aramchol to prevent drug resistance to standard-of-care oncology agents in the treatment of hepatoma (hepatocellular carcinoma, or HCC), cholangiocarcinoma and colorectal cancer. In April 2025, we entered into a sponsored research collaboration with the Massy Cancer Center VCU to investigate Aramchol’s potential in overcoming drug resistance in gastrointestinal, or GI, cancers. For additional information, see “Item 4. Information on the Company— Strategic Collaborations, Research Arrangements and other Agreements—Virginia Commonwealth University.”
We have recently reinitiated the process of evaluating our strategic options alternatives and our structuring to best optimize our resources to enhance shareholder value and achieve our goals.
Non-Alcoholic Fatty Liver Disease (NAFLD) / Non-Alcoholic Steato-Hepatitis (NASH)
It is estimated that the global prevalence of NAFLD, the precondition to NASH, is approximately 25% in the general population and much higher in certain high risk groups. This disease is also now recognized as one of the most common liver disorders, and a significant growing public health problem. In the US alone, 80 - 100 million people are said to be affected by NAFLD, and its prevalence is rapidly growing in parallel with metabolic syndromes, particularly obesity and diabetes.
NAFLD is characterized by the accumulation of fat of 5% or greater in the liver of people who drink alcohol only in moderation, or not at all. There may be numerous causes of NAFLD, however, the disease is mostly associated with a high fat, fructose-rich diet. Although NAFLD is generally asymptomatic, it is a major risk factor for liver inflammation (NASH) and scarring (fibrosis and cirrhosis). In addition, NAFLD is also associated with metabolic syndrome and cardiovascular disease. Currently, NAFLD can only be managed through lifestyle improvements, such as weight reduction and physical activity.
NASH is an emerging world crisis impacting an estimated 3% to 5% of the U.S. population and an estimated 2% to 4% globally, and is associated with increased risk of liver cirrhosis, liver failure, hepatocellular cancer, as well as metabolic and cardiovascular diseases. The major characteristics of NASH are elevated liver fat, inflammation, ballooning and fibrosis. According to the Academy of Managed Care Pharmacy, approximately 22 million Americans living with NASH, of which nearly 9 million individuals live with clinically significant liver disease. According to Grand View Research, the global NASH treatment market was estimated at $7.72 billion in 2024 and is projected to reach $33.80 billion by 2030, growing at a CAGR of 28.1% from 2025 to 2030.
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However, despite the growing need, there are currently no approved therapeutic treatments for NASH. Modification of risk factors, such as obesity and hyperlipidemia, and proper diabetic control is generally recommended for the treatment of NASH, and the standard of care includes lifestyle changes to promote weight loss, including low-calorie, low-fat diets and physical activity. Although weight loss can be potentially significant in delaying the progression of NASH, studies have shown that, for most individuals, it is generally very difficult to maintain over the long-term, even following bariatric surgery.
To date there are only two drugs, Madrigal’s Rezdiffra (resmetirom) and Novo Norsisk’s Wegovy, approved by the FDA for the treatment of NASH (MASH). Even though certain drugs, such as insulin sensitizers and antihyperlipidemic agents, are prescribed for some NASH patients, they are not approved for the treatment of NASH and their efficacy has not been proven in adequate and well-controlled clinical studies.
Currently, it is impossible to predict which of the NAFLD patients will deteriorate to NASH as it is unclear what causes NASH to develop. Researchers are now focusing on several factors that may contribute to the development of NASH. Therefore, lifestyle changes a re recommended for all patients with NAFLD.
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There is an exceptionally wide range of estimates regarding the potential commercial market for NASH. This uncertainty stems from (i) the overall size of the patient population, (ii) the percentage of the addressable market that will be diagnosed and, subsequently, seek treatment, (iii) the ultimate cost of the therapies, (iv) the number of approved drugs for NASH and their profile, and (v) uncertainty regarding the regulatory approval process. Some of these factors cannot be known until NASH drugs begin to hit the market or biomarkers replacing the biopsy diagnosis are validated. Independent estimates generally estimate a commercial multi billion market in developed countries, though we do not endorse any estimates, which are based on a number of different underlying assumptions.
Aramchol for NASH
Overview
Our product candidate, Aramchol, is a first-in-class synthetic fatty acid-bile acid conjugate molecule, or FABAC, molecule that we are developing for oral treatment for NASH in patients who are overweight or obese and have prediabetes or type II diabetes mellitus.
Early in its development, Aramchol’s ability to modulate hepatic lipid metabolism was observed and validated in numerous pre-clinical trials with different animal species. Mice fed a high fat diet and treated with Aramchol did not develop fatty liver as compared to non-treated mice. In these early studies, we also observed that the mechanism of this effect was not a result of malabsorption of fat in the intestines because the FABAC-treated mice gained weight throughout the test periods to a similar degree to the control mice. This led us to conclude that FABAC therapy triggers a beneficial modulation of intra-hepatic lipid metabolism and reduces liver fat content.
In in-vitro and in vivo studies, Aramchol down regulates the SCD1 enzyme, an enzyme recognized as playing an important role in the metabolism of fatty acids. The SCD1 enzyme is essentially the gateway that regulates the use and storage of fat in the body by converting saturated fatty acids to monounsaturated fatty acids. Experimental animal studies showed that complete inhibition of the SCD1 enzyme protects against diet-induced obesity, hepatic steatosis, or fatty liver, and insulin resistance by instructing the body to use, rather than store, all fatty acids. However, various animal studies have indicated that such complete SCD1 enzyme inhibition has mechanism based serious side effects, such as atherosclerosis, and eye and skin disorders. As observed by us in our pre-clinical and clinical studies performed to date, and subsequently published in the European Journal of Gastroenterology and Hepatology and Archives of Medical Research in 2008 and 2010 respectively, one of Aramchol’s unique characteristics is that it down regulates the SCD1 enzyme but does not inhibit it completely – a partial effect. To date, side effects that have been observed in animals with knock out of SCD1 have not been observed in our toxicology and clinical studies.
To better understand the role of Aramchol in NASH, we analyzed the effect of Aramchol in MCD diet model. The aim of this study was to investigate Aramchol’s mechanism of action and its effect on fibrosis using the methionine- and choline-deficient (MCD) diet model of NASH. We collected liver and serum from mice fed a MCD diet containing 0.1% methionine (0.1MCD) for four weeks, which developed steatohepatitis and fibrosis, as well as mice receiving a control diet; the metabolomes and proteomes were determined. 0.1MCD fed mice were given Aramchol (5mg/kg/day for the last 2 weeks); liver samples were analyzed histologically. Aramchol administration was found to reduce features of steatohepatitis and fibrosis in 0.1MCD fed mice. Aramchol downregulated the SCD1 enzyme, a key enzyme involved in triglyceride biosynthesis whose loss enhances fatty acid β-oxidation. In addition, Aramchol increased the flux through the transsulfuration pathway, leading to a rise in glutathione (GSH) and GSH/GSSG ratio, the main cellular antioxidant that maintains intracellular redox status. Comparison of the serum metabolomic pattern between 0.1MCD-fed mice and patients with NAFLD showed a substantial overlap. These findings were published in Hepatology Communications, Vol. 1, No. 9, 2017.
As the effect of Aramchol on fibrosis was first reported we further analyzed the direct effect of Aramchol on collagen production and reported down regulation of collagen production from the hepatic stellate cells (HSCs) by Aramchol. With that we could conclude that Aramchol has potential direct effect on collagen production and therefore reduces fibrosis indirectly by down regulation of steatosis by reducing the sequence of events but also directly affecting collagen producing cells. These findings were published in Hepatology Communications, Vol. 1, No. 9, 2017.
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These findings led us to further analyze the effect of Aramchol using the Thiocatemide (TAA) rat model. TAA is the most commonly used toxic agents to induce liver fibrosis. Repeated IP injections of TAA leads to sever fibrosis / cirrhosis. Among all models for fibrosis, the TAA model share multiple characteristics with human liver fibrosis and is considered to best predict efficacy in humans. Results demonstrated that treatment with Aramchol 5mg/kg, significantly prevented TAA induced fibrosis in a dose dependent manner. These findings were presented at EASL, Amsterdam in April 2017 (The anti Fibrotic effect of Aramchol on liver Fibrosis in TAA animal model).
Phase 1 Single and Multiple-Dose Study of Aramchol in Healthy Male Volunteers (NCT00776841)
Aramchol was evaluated in two Phase 1 clinical trials (under a single protocol) to study its safety, tolerability and PK profile in healthy volunteers, in both single and multiple dose administrations. The first Phase 1 clinical trial was an escalating single-dose trial conducted in 17 healthy subjects testing Aramchol doses ranging from 30 mg to 900 mg, performed in one center in Israel. The subsequent Phase 1 clinical trial was a repeated-dose trial conducted over four days in 25 healthy subjects testing repeated daily doses of Aramchol of 30 mg and 300 mg, performed in one center in Israel. The profiles for the groups were similar and the maximal plasma concentration of Aramchol increased with the higher doses. The PK profile demonstrated that Aramchol is suitable at each dose for once-daily administration and there were neither significant adverse events observed in either Phase 1 trial nor any notable changes in biochemical, hematologic, cardiovascular or other safety parameters.
Phase 2a Trial: Aramchol Treatment in NAFLD or NASH Patients (NCT01094158)
In January 2012, we completed a 60 patient multi-center, randomized, double-blind, placebo-controlled Phase 2a clinical trial of Aramchol in patients with NAFLD or NASH between the ages of 18 and 75 in 12 centers in Israel. The Phase 2a study results were published in July 2014 in the peer-reviewed Clinical Gastroenterology and Hepatology Journal. The trial was performed in patients with either NAFLD or NASH, which design was deemed acceptable by the FDA in 2007 at a pre-IND scientific advisory meeting. The trial’s primary efficacy endpoint was a reduction in liver fat content, and did not consider inflammation or fibrosis, which can be diagnosed only by liver biopsy. We believe that the short study duration of three months of treatment followed by a one-month follow-up period did not warrant repeated biopsies. The trial evaluated the effects on liver fat content of 100 mg and 300 mg once-daily doses of Aramchol compared to a placebo. At the end of the three month treatment period, statistically significant reductions in liver fat concentration as measured by MRS were observed in the 300 mg patient group. Specifically, a 12.57% mean liver fat content reduction was observed in the 300 mg group, as compared to a mean reduction of 2.89% in the 100 mg group and a mean increase of 6.39% in the placebo-treated patients. These results indicate that the effects of Aramchol are dose-dependent, as demonstrated in the graph below, which presents the results with respect to the 57 patients who successfully completed the entire treatment period (three patients were excluded from data analysis because of one protocol violation and two withdrawal consents).
Phase 2b ARREST Study for Aramchol (NCT 02279524)
In September 2014, the FDA granted Fast Track designation status to Aramchol for the treatment of NASH. Fast Track designation may accelerate the development process and may expedite the review of drugs that show promise in treating serious, life-threatening medical conditions for which no other drug either exists or is as effective.
On February 1, 2015, we began our ARREST Study. The ARREST Study was a Phase 2b, multicenter, global, randomized, double-blind, placebo controlled study to evaluate the efficacy and safety and of two doses of Aramchol for the treatment of NASH in patients who are overweight or obese and have pre diabetes or type II diabetes mellitus. In order to be eligible to participate in the ARREST Study, patients had to be affected by NASH, as diagnosed by a biopsy centrally read (steatosis ≥1 + inflammation ≥1 + ballooning ≥1, total activity NAS score of 4 or more), have a fibrosis stage of 1-3, be overweight or obese as measured by a Body Mass Index between 25 and 40 or waist circumference between 88cm to 200cm for women, and between 102cm to 200cm for men, and who are pre diabetic or type II diabetic. We targeted this specific population as it is at the greatest risk of developing NASH and its complications. We have generated data from animal models that lead us to believe that Aramchol targets all three main pathologies of the disease: steatosis, inflammation and fibrosis.
A total of 247 patients (approximately one third in the US, one third in Latin America and one third in Europe and Israel) with liver biopsy-proven NASH who were overweight or obese and had pre-diabetes or type II diabetes mellitus were randomized. Patients were randomized in a ratio of 2:2:1 (600mg, 400mg and placebo) taking once-daily oral Aramchol (in the Aramchol treatment arms) or a placebo (in the placebo arm). The treatment part of the trial was 12 months in duration and patients completing this phase were observed for a three month follow-up period. In February 2017, we completed randomization of the ARREST Study. Baseline histology of patients enrolled into the ARREST study demonstrated a population with advanced disease, with 60% having stage 2 and 3 fibrosis and 70% have NAS>5 at baseline.
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The primary endpoint of the study was the change from baseline to end of study in liver triglycerides ratio as measured by magnetic resonance spectroscopy, or MRS (Aramchol 600mg vs. placebo). Secondary endpoints, demonstrated through biopsy, included fibrosis improvement by at least one stage or more without worsening of NASH (defined by an increase of inflammation and or ballooning) and NASH resolution (defined by ballooning score 0 and inflammation score 0-1 at termination) without worsening of fibrosis. Other secondary endpoints included improvement (2 points or more) in NASH activity index, as measured by NAS or SAF, without worsening fibrosis and change in baseline to week 52/termination in ALT (U/L).
On June 12, 2018, we announced top-line results of the ARREST Study and on November 13, 2018 an oral abstract presentation of one-year results of the ARREST Study was presented during a Late Breaking Abstract Oral Session at The Liver Meeting® 2018 during the American Association for the Study of Liver Diseases 2018 Annual Meeting.
Phase 3 ARMOR Study for Aramchol
In September 2019, we initiated the ARMOR Study, a Phase 3 pivotal study of Aramchol for the treatment of NASH, following a successful End-of-Phase 2 meeting with the FDA in April 2019 in which we reached general agreement on key aspects of the Phase 3 development and registration plan for Aramchol. The ARMOR Study was originally comprised of two parts, a randomized, double-blind, placebo-controlled histology -based registrational part where 1200 subjects will be treated with Aramchol or matching placebo for 52 weeks and a clinically based part where subjects will continue with the same treatment for approximately five years, taking into consideration draft guidance issued by the FDA in December 2018 entitled “Noncirrhotic Nonalcoholic Steatohepatitis with Liver Fibrosis: Developing Drugs for Treatment”, or the “December Guidance”. The histology-based data is intended to serve as the basis for the submission of a marketing authorization application under regulatory provisions of Sub-part H accelerated/conditional approval.
In light of the rapid development of the Aramchol meglumine program and due to the delays resulting from the COVID-19 pandemic, in December 2020, we announced the addition of an open label part to the ARMOR Study and temporarily suspended randomization of new patients into the double-blind, placebo-controlled histology-based registrational phase of ARMOR as currently enrolled patients are transitioned to the open label part.
Part One: Open Label Study
The first part, an open-label study, was originally designed to evaluate treatment response kinetics, pharmacokinetics and safety of twice daily administration of Aramchol 300mg in approximately 150 subjects with NASH and liver fibrosis stage 1-3 (F1 capped at 30 subjects), subjects with NASH who may or may not be overweight, and subjects with NASH who may or may not have type 2 diabetes or be pre-diabetic. Patients were randomized (1:1:1) into three groups with post-baseline liver biopsy being performed at 24 weeks, 48 weeks, or 72 weeks, respectively. A second post-baseline liver biopsy was conducted after one year for subjects whose post-baseline liver biopsy at week 24, 48 or 72 does not show at least one stage improvement in fibrosis. The open label part was being conducted at approximately 50 selected sites in the U.S., and around the world which have been less affected by the COVID-19 pandemic.
The open label study enrolled 157 subjects. Fifty-one (51) subjects underwent post-baseline biopsies prior to study discontinuation (28 subjects at <48 weeks and 23 subjects at ≥48 weeks). The study was designed to assess the safety, pharmacokinetics (PK) and efficacy kinetics as a function of treatment duration. Three independent pathologists and three different histopathology reading methodologies were used to assess the antifibrotic effect of Aramchol: fibrosis stage based on NASH CRN; ranked assessment (improvement/worsening/stable) of paired (pre- and post-baseline) biopsies, blinded to sequence; and an automated and continuous score of Fibrosis Composite Severity (FCS), using FibroNest™, a quantitative AI digital pathology image analysis method. Noninvasive tests (NITs) included imaging (fibroscan) and biomarkers (liver enzymes, FIB-4, Pro-C3 and ELF).
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Aramchol treatment resulted in a high proportion of subjects showing fibrosis improvement based on all three biopsy reading methodologies, with a larger treatment effect with longer duration of therapy. Following a treatment duration of 48 weeks or more, improvement in fibrosis was demonstrated in 39% of subjects according to NASH CRN and 61% of subjects according to ranked assessment. At Week 48 AI demonstrated fibrosis improvement in 100% of subjects when responders were defined by an absolute reduction of the FCS score >0.3, 65% when responders were defined by a relative reduction of >25%, and a statistically significant reduction from baseline in mean FCS score (p<0.0001). NASH resolution without worsening of fibrosis was demonstrated in 26.5% of subjects.
Fibroscan, ALT, AST, and FIB4 were analyzed using MMRM, based on all subjects (N=154). Fibroscan results were consistent, with an improvement in fibrosis showing a mean absolute reduction from baseline to week 72 of 2.5 kPa (p<0.0001). At Week 72, ALT was reduced by 22 U/L (p<0.0001), AST was reduced by 18 U/L (p<0.0001), and FIB-4 was reduced by 0.30 (p<0.0001).
Pro-C3 and ELF were analyzed for 43 subjects at week 24 showing reduction in both Pro-C3 levels (p<0.0001) and ELF (p=0.0038).
The Open Label part demonstrated the good safety profile of Aramchol 300mg BID including long-term follow up. The incidence of serious adverse events (SAEs) was consistent with the population (10.4%) and early discontinuation rates due to adverse events (AEs) were low (4.5%).
Part Two: Histology-Based and Clinically-Based Study
The second part of the ARMOR Study is a randomized, double-blind, placebo-controlled study to evaluate the safety and efficacy of Aramchol 300 mg BID to support regulatory approval, with both a histology-based phase and a clinically-based phase. As was designed, a total of 2000 subjects with NASH and liver fibrosis stage 2 and 3 who are overweight and are either pre-diabetic or have type 2 diabetes would be randomized 2:1 to receive Aramchol 300mg BID or matching placebo. In the histology-based phase, we intend to treat 1000 subjects with Aramchol or matching placebo for 72 weeks until the second biopsy. The histology-based data is intended to serve as the basis for the submission of a Sub-part H marketing authorization application under regulatory provisions of accelerated/conditional approval. The primary histology-based endpoint is NASH resolution without worsening of fibrosis or fibrosis improvement without NASH worsening. In the clinically-based phase, all subjects will continue with the same treatment assignment for up to seven years until study completion to confirm clinical efficacy. We may announce end-of-study at the time when a total of 380 subjects have experienced at least one pre-specified clinical event or at five years from last subject randomization, whichever comes first. The primary clinically-based endpoint is expected to be based on clinical events including all-cause mortality, histological progression to cirrhosis, MELD score >15, and hepatic decompensation events (e.g., hepatic encephalopathy, variceal bleeding, ascites). If the clinical trial results in the histology-based phase are positive, we planned to submit an NDA for Sub-part H accelerated/conditional approval to the FDA. As discussed elsewhere, we suspended the initiation of the double-blind placebo-controlled histology-based registrational part of ARMOR.
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The following is a depiction of part two of the ARMOR Study:
In August 2021, we announced that the FDA agreed with our plan to use Aramchol meglumine (in lieu of Aramchol free acid) in our ARMOR Study without the need to conduct additional nonclinical and clinical studies other than planned limited pharmacology studies relating to Aramchol meglumine. In addition, the Medicines and Healthcare products Regulatory Agency, or MHRA, the pharmaceuticals regulator in the UK, also agreed with our plan to proceed with our proposed clinical studies with Aramchol meglumine in lieu of Aramchol free acid without the need to repeat nonclinical and clinical studies other than planned limited pharmacology studies relating to Aramchol meglumine.
In November 2021, we announced positive interim data on the open label part of the ARMOR Study showing clinically significant effect on fibrosis improvement based on histology in the first 16 patients. Subsequently in November 2021, we announced that new analyses of biomarkers corroborate this effect showing statistically significant reductions in biomarkers associated with liver fibrosis including ALT, AST, Fib-4 and ProC-3. Reductions of a similar magnitude were seen in a cohort of the first 20 patients for which paired biopsy have been analyzed and a cohort of 50 patients for which biomarker data was analyzed based on all available data at that time. In addition, we reported that Aramchol continues to show excellent safety and tolerability profile. Data support that a higher dose of Aramchol could provide statistically and clinically meaningful effect on fibrosis in the double-blind placebo controlled part for submission of the ARMOR Study to support an NDA under Sub-part H.
In April 2022, we announced further positive interim data on the open label part of the ARMOR Study showing robust fibrosis improvement across multimodality histological assessment. Results of post baseline biopsies performed either at 24 weeks or at 48 weeks from 46 subjects with NASH and F1-3 that received Aramchol support the anti-fibrotic effect of Aramchol and reinforce the favorable safety profile of Aramchol.
In May 2022, we announced the discontinuation of the open label part of our ARMOR Study having reached its objectives and in January 2023, we announced full results from the open label part of the ARMOR Study. Following the discontinuation of our open label part of the ARMOR Study, we do not currently expect to initiate the second part of the ARMOR Study.
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Additional Pre-clinical and Clinical Studies Required for Regulatory Submissions of Aramchol
Toxicology Studies
Since the completion of the Phase 2a study, pre-clinical toxicology studies have been conducted to support our clinical programs and regulatory submissions. These studies were performed in compliance with the EMA’s ICH M3 (R2) guidelines. The toxicity program for Aramchol included repeat dose studies of up to six months in rats and up to nine months in dogs by oral administration, the intended route of administration in the clinical trials and beyond. The dose level of 1000 mg/kg/day in rats and 1500 mg/kg/day in dogs, which is the maximal feasible dose in both species showed no side effect and therefore the highest dose of the study was selected as the no-observed-adverse-effect-level, or NOAEL. There were no observations noted in the rat study. The findings in the dog study were limited to changes in plasma lipids, including decreases in total blood cholesterol levels, LDL, HDL and phospholipids, and a slight increase in the size of the adrenal glands, which were considered to be an extension of the primary pharmacology of Aramchol and non-toxic effects, and skin scales from week 13 onwards in all Aramchol-treated groups, with a dose-related incidence. After six months this was not accompanied by any microscopic alteration of the skin and therefore considered not toxicologically relevant. Results from the study show that after nine months the presence of scales in all Aramchol-treated groups was accompanied by minor test item-related microscopic findings in the skin: Hyperkeratosis of the epidermis, correlating to the scales, and keratin plugs in the hair follicles (in males at 750/500 and 1500 mg/kg). After a 12-week treatment-free recovery period, fewer scales were noted and microscopically there was partial recovery. As these findings were minor and no clinical symptoms like scratching were noted, these findings were considered not adverse.
Aramchol was non-mutagenic in vitro in the Ames test and chromosomal aberrations test, each of which is a test to determine whether the subject chemical can cause mutations in the DNA of an organism. In addition, in bone marrow micronucleus test in male rats at a 2000 mg/kg oral dose (the maximum recommended dose in accordance with ICH S2 (R1)), Aramchol was not clastogenic, meaning it did not give rise to or induce disruption or breakages of chromosomes, nor was it aneugenic, meaning it did not cause the number of chromosomes in the nucleus of a cell to not be an exact multiple of the monoploid number of a particular species.
Embryo-fetal development toxicity was assessed in rats and rabbits. No maternal or fetal development toxicity was observed in either species. The NOAEL for maternal and development toxicity was at least 1000 mg/kg in rats and 750 mg/kg in rabbits (the maximum feasible dose in both species).
No maximum tolerated doses were reached in the studies. Over 50-fold safety margin exposure was achieved in dogs but not in rats. However, for rats, at least three of the four ICH M3(R2) safety margin criteria were met, and for dogs all four criteria were met. Blood tests revealed a decrease in total blood cholesterol levels, including LDL, HDL and phospholipids, and there was a slight increase in the size of the adrenal glands of the dogs, which WIL Research assessed as a physiologic compensatory response to the decrease in blood cholesterol levels. WIL Research did not consider the decrease in blood cholesterol levels or the physiologic response of the adrenal glands as a toxic effect, but rather as a pharmacodynamic effect, which is a biochemical and physiological effect of the drug on the body. Based on the above, it was concluded that the overall safety data for Aramchol is sufficient to support the proposed Phase 2b clinical trial.
In addition, we have conducted carcinogenicity studies to identify whether Aramchol has any tumorigenic potential upon long-term administration in support of any future NDAs or MAAs. Under FDA guidance, we are required to perform two studies, one in rats and the other in mice. The carcinogenicity study in rats is a two-year study which was initiated in February 2020 and finalized during 2022. There were no significant adverse findings reported over the course of the study.
Aramchol for the Treatment of Other Indications
On February 14, 2018, we announced topline results from the investigator initiated ARRIVE Study for HIV associated lipodystrophy and NAFLD patients. HIV patients have advanced liver disease which is a major cause for morbidity and mortality. ARRIVE, a Phase 2a, investigator initiated clinical trial conducted at the University of California
San Diego by Professor Rohit Loomba was a randomized, double-blinded, placebo-controlled, 12 weeks, proof-of-concept study that evaluated the safety and efficacy of Aramchol at 600mg/day versus placebo in 50 patients with HIV-associated lipodystrophy and NAFLD. The primary end point of successful therapy was improvement in hepatic steatosis at 12 weeks, as measured by MRI-PDFF. Secondary endpoints were improvement in total body fat, metabolic profile, and liver biochemistry. Liver biopsies were not included as part of the evaluation in this pilot trial. The trial showed no difference between HIV patients receiving Aramchol for 12 weeks when compared with HIV patients in the placebo arm. Aramchol showed a favorable safety and tolerability profile. Although the pathology (fatty liver) is similar to “garden variety” NASH, the pathogenesis involved in the HIV lipodystrophy and NAFLD is different and multi factorial including the effect of the virus itself and the anti-HIV medications.
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In July 2022, we announced results showing significant effects of Aramchol in pre-clinical model of both lung and gastrointestinal (GI) fibrosis. Fibrosis is a common complication of chronic inflammation and can affect all organs and tissues. To date, only limited anti-fibrotic drugs are approved or are in development, most of which have restricting side effects. Aramchol is a partial inhibitor of SCD1 with distinctive, direct, anti-fibrotic activity demonstrated in several pre-clinical models. Treatment with Aramchol resulted in statistically significant fibrosis improvement in a validated bleomycin model of lung fibrosis (IPF), comparable to Pirfenidone which is the gold standard treatment. Findings were seen across all important indicators for the severity of fibrosis including hydroxyproline (a marker for collagen deposition in the fibrotic tissue) P< 0.05, Ashcroft score P < 0.005, % CPA (Percentage Collagen Proportionate Area of the lung) P < 0.001, and immunohistochemistry (type I collagen and a SMA) P < 0.005 for both staining. Statistically significant improvements were also demonstrated in a validated DSS model of inflammatory bowel disease (IBD). Dextran sulfate sodium (DSS) induced colitis model is widely used because of its similarities with human ulcerative colitis. Clinical improvements were statistically significant at least by p value < 0.05 while in histological score (based on inflammation and colon structural changes) significance was as low as p<0.01. Aramchol was found to be the most effective compound tested. Control groups included 5-ASA and local steroids which are the gold standards for current treatment.
In May 2023, we announced the initiation of a new clinical program to evaluate Aramchol meglumine for the treatment of PSC, a rare disease for which there is no approved treatment. Pre-clinical studies done in collaboration with VCU demonstrated that Aramchol both attenuated and prevented biliary fibrosis in mouse models of primary sclerosing cholangitis, or PSC. Aramchol significantly reduced, in a dose-dependent manner, the increased expression of the fibrotic marker plasminogen activator inhibitor-1 and hepatic stellate cell-activating genes (VEGFA and PDGFB) in TGFβ-activated transformed human cholangiocyte cells (H69) and mouse large biliary epithelial cells (MLEs). Aramchol led to a significant inhibition of TGFβ-induced hepatic fibrosis pathways while upregulating peroxisome proliferator activated receptor (PPAR) signaling.
Currently, we do not have plans to continue the clinical development of Aramchol for this indication.
In April 2025, we entered into a sponsored research collaboration with the Massy Cancer Center VCU to investigate Aramchol’s potential in overcoming drug resistance in gastrointestinal, or GI, cancers. For additional information, see “Item 4. Information on the Company— Strategic Collaborations, Research Arrangements and other Agreements—Virginia Commonwealth University.”
In addition, in November 2025, we announced early findings from our sponsored research at Virginia Commonwealth University demonstrating that in pre-clinical GI tumor models, combination of Aramchol with Stivarga® (regorafenib) demonstrated that Aramchol enhances the activity and potentially overcomes regorafenib’s (a standard-of-care treatments for many GI Cancers) drug resistance, which support our plans to advance Aramchol into a Phase 1/2 clinical trial for metastatic CRC, HCC, and cholangiocarcinoma in collaboration with VCU in H2 2026. Based on this approach, we are currently conducting multiple pre-clinical studies with Aramchol to overcome drug resistance and enhance the efficacy of other standard-of-care (SoC) oncology agents for cancer treatment with unmet needs. We believe the successful completion of our Phase 1/2 clinical trial of Aramchol and Stivarga®, will enable the initiation of similar clinical studies with other SoC agents for additional oncology indications.
Aramchol free acid and Aramchol meglumine formulation studies
Aramchol free acid (3β-arachidylamido-7α,12α-dihydroxy-5β-cholan-24-oic acid) is a synthetic small molecule, produced by conjugation of cholic acid (bile acid) and arachidic acid (saturated fatty acid) linked by a stable amide bond. Aramchol free acid has poor aqueous solubility and based on results of absolute bioavailability assessed in Study Aramchol-020, oral bioavailability from a dose of 300 mg is very low (2-4%). Concentrations increase less than proportionally to dose. It is absorbed slowly from the gastrointestinal tract with a median tmax after a single dose of 12 to 14 h. It undergoes first order elimination being excreted mainly unchanged in feces via the biliary tract with average terminal half-life after single doses of 40-45 h.
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A tablet formulation of Aramchol free acid has been used in Phase 2 and 3 clinical trials in patients with MASH. In a Phase 3 trial in patients with MASH (Study Aramchol-018) a dose of 600 mg QD was used initially but as plasma concentrations were shown to be approximately 50% greater after splitting the daily dose to 300 mg BID, the dose in the open-label part of the Phase 3 ARMOR study was therefore adjusted to 300 mg BID with no detriment to safety or tolerability.
Accordingly, the development of a new formulation of Aramchol with higher bioavailability than the free acid (to enable once daily dosing producing similar exposure to that attained with 300 mg Aramchol free acid administered twice daily) was initiated. With this objective, a meglumine salt formulation of Aramchol (Aramchol Meglumine) has been developed. Aramchol Meglumine has been evaluated to date in two Phase 1 studies in healthy subjects. In the first study conducted (Study Aramchol-022), steady state exposure to Aramchol from an aqueous solution of Aramchol Meglumine was approximately twice that from Aramchol Free Acid tablets. The greater bioavailability of Aramchol from the meglumine solution was subsequently confirmed in single and repeat doses, which supported switching from the Acid to an Aramchol Meglumine formulation. In a subsequent study (AM-001) with a formulation of granules for dissolution of Aramchol Meglumine average exposure (Cmax and AUC) of Aramchol after single doses of 400 mg and 200 mg of the meglumine salt were approximately 5-fold and 3-fold respectively those of 300 mg free acid. The Aramchol Meglumine product formulated as granules is less convenient for the self-administering patient than a tablet, a tablet formulation of Aramchol Meglumine has been developed and the safety and tolerability of the selected doses of the tablet formulation are currently being tested in a clinical study (AM-003).
Amilo-5MER
We are also developing Amilo-5MER, specific, targeted immune -modulator for the treatment of chronic inflammatory diseases. Amilo-5MER is a 5 amino acid synthetic peptide MTADV (Methionine, Threonine, Alanine, Aspartic acid, Valine). The 5 amino acids sequence of Amilo-5MER is homologue to a specific MTADV sequence in the human CD44 variant found in synovial fluid cells from joints of rheumatoid arthritis, or RA patients.
Amilo-5MER was being developed through a research collaboration between us and the Hebrew University of Jerusalem. The molecule originated in the laboratory of Prof. David Naor, from the Lautenberg Center for Immunology and Cancer Research, Faculty of Medicine, The Hebrew University. Prof. Naor and his team were the first to publish this specific sequence in the prestigious scientific communication Journal of Clinical Investigation 1.
Amilo-5MER binds to three pro-inflammatory amyloid proteins, Serum Amyloid A, or SAA, Transthyretin and Apolipoprotein B with high affinity. The first two are known to be active only in their aggregated forms. By binding to SAA, Amilo-5MER interferes with SAA aggregation and therefor inhibits the destructive autocrine, self-amplifying cytokine loop that causes additional inflammatory reaction.
SAA constitutes acute phase reactants, whose concentration in serum rise rapidly in response to acute stimuli such as infection and trauma. An elevated concentration of SAA was identified in sera of patients with multiple autoimmune diseases and more recently, an outstanding increase of SAA was also detected in COVID-19 infected patients2-3. SAA in its aggregated form, is a potent and rapid inducer of cytokine secretion (particularly Interleukin 6 (IL-6). IL-6 plays an important role in chronic inflammation and is implicated in the pathogenesis of many autoimmune diseases, such as Multiple Sclerosis, or MS, RA, Inflammatory Bowel Disease, or IBD and acute COVID 19. Interference with SAA polymerization and aggregation is a valid target to prevent chronic inflammatory conditions.
Amilo-5MER has been shown to significantly reduce chronic inflammation in animal models of RA, IBD and MS (research work supported by a grant to Prof. Naor from the National Multiple Sclerosis Society (NMSS) of the USA). Amilo-5MER provides a unique mechanism of action to interfere with this vicious cycle, enabling a specific treatment for chronic inflammatory diseases. Data generated from multiple in-vitro, in-vivo and human ex-vivo models have shown that Amilo-5MER significantly improves clinical symptoms. Histological improvements and reduction of pro-inflammatory cytokine secretion were also observed.
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Amilo-5MER is considered a New Chemical Entity. As such, it is eligible for NCE patent protection until July 2034. Patents have been granted and maintained in the US (US 1061181937), Europe (EP 3169343) and Australia (AU 2015291151) and have been allowed in Japan (JP 6671363).
In March 2021, we dosed the first subject in Amilo-5MERfirst in human Phase 1 trial. The trial was a three-part, single center, double-blind, randomized, placebo-controlled first in human study of single ascending doses (Part 1) and multiple doses (Part 2) of Amilo-5MER in young healthy adult male subjects and a single dose cohort in healthy elderly male and female subjects (Part 3). Overall, 55 healthy male and female subjects were enrolled in the study. Cohorts of 8 subjects were randomized to receive Amilo-5MER or placebo by subcutaneous injection in a ratio of 6:2. In Part 1, cohorts of young male adults received single ascending doses of 10, 30, 90, 180 and 360 mg; in Part 2, a single cohort received doses of 180 mg BID for 5 consecutive days and in Part 3 a single cohort of healthy elderly male and female subjects received a single dose of 180 mg. The primary objectives of the trial were to evaluate the safety, tolerability, and pharmacokinetics of Amilo-5MER. In January 2022, we announced results in which all doses of Amilo-5MER were well tolerated with no clinically significant adverse events and none considered related to the investigational product. All subjects completed the study as per protocol. Overall exposure to Amilo-5MER increased with an increase in dose, with statistically significant dose proportionality over the 10 mg to 360 mg dose range.
We are currently not actively pursuing the clinical development of Amilo-5MER and are seeking to out-license it.
In connection with our ongoing evaluation of Aramchol meglumine we have been conducting a bioavailability study to transition to Aramchol meglumine and to determine the optimal doses allowing Aramchol meglumine’s further clinical development in Phase 2 studies. The bioavailability study consists of two parts comparing single doses of Aramchol acid and Aramchol meglumine in healthy volunteers. Preliminary results from the first part of the study show that Aramchol meglumine suspension 400 mg dose had an area under the curve (AUC) which is almost twice those obtained Aramchol acid tablets. Accordingly, we believe that once daily 200 mg is the optimal dose for future clinical trials. In November 2025, we announced meaningful top-line results from our AM-001 study, a Phase 1 Bioavailability (BA) Study of Aramchol meglumine.
Strategic Collaborations, Research Arrangements and other Agreements
Virginia Commonwealth University
During 2024, we entered into a collaboration agreement with the Massy Cancer Center at VCU according to which we aim to investigate the effect of adding Aramchol to prevent drug resistance to standard-of-care oncology agents in the treatment of hepatoma (hepatocellular carcinoma, or HCC), cholangiocarcinoma and colorectal cancer.
In April 2025, announced a sponsored research collaboration with VCU to investigate Aramchol’s potential in overcoming drug resistance in GI cancers Under the Sponsored Project Agreement, VCU scientists will study Aramchol in preclinical models of advanced GI malignancies – focusing on colorectal and hepatocellular (liver) cancers – in combination with standard-of-care treatments. The goal is to determine whether Aramchol’s novel mechanism of action can prevent or reverse resistance to therapies such as targeted kinase inhibitors and chemotherapies, thereby enhancing their efficacy against these aggressive tumors. This collaboration addresses a critical unmet need: GI cancers (including colon and liver cancers) are among the leading causes of cancer mortality worldwide, and treatment options are often limited by therapy resistance. By targeting Stearoyl-CoA Desaturase 1, or SCD1 – a key enzyme in fatty acid metabolism implicated in cancer progression – Aramchol offers a novel therapeutic strategy. Recent breakthrough research published in Nature Communications has highlighted the role of lipid metabolic pathways (notably SCD1) in driving drug resistance in GI tumors. Leveraging these insights, the Galmed–VCU project will explore Aramchol’s ability to reprogram tumor metabolism and sensitize cancer cells to existing treatments, potentially delivering a breakthrough in resistance reversal for patients with few alternatives.
Samil Pharma. Co., Ltd.
On July 28, 2016, we entered into a license agreement, referred to herein as the Samil Agreement, with Samil for the commercialization of Aramchol (with the option to manufacture) in the Republic of Korea, or the Territory.
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Under the terms of the Samil Agreement, the Company has granted Samil an exclusive licence, or the Samil License, for fatty liver indications including NASH, or the Field of Use, in the Republic of Korea, or the Territory to such information concerning Aramchol as may be required to support Samil’s applications for regulatory approvals, or the Licensed Information, and the patents for the import, marketing, use, sale, offer for sale, commercialisation and distribution (and, if the option is exercised, manufacture) of Aramchol in tablet form, or any other physical form as may be produced or manufactured by or on behalf of Galmed or by a third party for Galmed and, if the option set out below is exercised, any products within the Field of Use, the development, manufacture or sale of which is based, in whole or in part, on, or involves the use of, the Licensed Information or covered under any patent, or the Product.
The Samil License shall remain in force with respect to each Product (if the Samil Agreement is not early terminated) until the later of: (i) the date of expiry in the Territory of the last of any patent covering such Product or any formulation, dosing or administration form thereof; and (ii) the date of expiry of a period of 20 years commencing on the date of first commercial sale by Samil or a sublicensee of such Product in the Territory.
Upon the signing of the Samil Agreement, Samil paid the Company a gross upfront fee of approximately $2.1 million and in September 2018, we received a milestone payment of $1.5 million. Samil has also agreed to pay additional clinical and regulatory-based milestone payments, which may aggregate to an additional $4.5 million, as well as tiered, double-digit royalties payable on sales (lower if sales of a generic equivalent commence in the Territory).
During 2022, we discontinued the open-label part of the ARMOR Study having reached its objectives. Following the discontinuation of our open label part of the ARMOR Study, we do not currently expect to initiate the second part of the ARMOR Study. We do not expect to generate revenue other than subsequent royalties and/or milestones that can be earned in connection with the Samil Agreement.
Competition
The pharmaceutical industry is characterized by rapidly evolving technology, intense competition and a highly risky, costly and lengthy research and development process. Adequate protection of intellectual property, successful product development, adequate funding and retention of skilled, experienced and professional personnel are among the many factors critical to success in the pharmaceutical industry.
Our competitors in the NASH field currently include companies with marketed products and/or advanced clinical programs. Our main competitors of Aramchol include, but are not limited to Novo Nordisk Inc., Madrigal Pharmaceuticals Inc., and Viking Therapeutics among others. Our main competitors include Novo Nordisk with respect to Wegovy, which has typically been known for treating weight loss and diabetes and has recently been approved for NASH; and Madrigal Pharmaceuticals’s Rezdiffra (resmetirom) for the treatment of NASH with moderate to advanced liver fibrosis. Moreover, several additional companies have reported the commencement of research projects and proof-of-concept trials related to our target indications, including those mentioned in the preceding sentence.
We operate in a competitive sector. Several companies are working on technologies, therapeutic targets or drug or biomarker candidates that aim to treat or diagnose the same diseases or identify the same patient population as our product candidates. While we believe that our drug candidates and diagnostic solutions, combined with our expertise and know-how, provide us with competitive advantages, we face potential competition from various sources, including pharmaceutical and biotechnology companies, as well as from academic institutions, governmental agencies and public and private research institutions. We anticipate that we will face intense and increasing competition as new drugs and therapies enter the market and advanced technologies become available. In some indications, off-label use of non-approved drugs can also be considered as competition.
Notwithstanding the foregoing, see “Item 3. Key Information—Risk Factors—Risks Related to Our Business, Industry and Regulatory Requirements—Our market is subject to intense competition. If we are unable to compete effectively, Aramchol or any other product candidate that we develop may be rendered noncompetitive or obsolete” and “Item 3. Key Information—Risk Factors—Risks Related to Our Business, Industry and Regulatory Requirements—We are developing Aramchol for the treatment of NASH, an indication for which there are no approved products, and there is significant uncertainty regarding the regulatory approval process. This makes it difficult to predict the timing and costs of the clinical development of Aramchol for the treatment of NASH.”
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Intellectual Property and Patent Strategy
The proprietary nature of, and protection for, Aramchol or any other product candidate and our discovery programs for new indications, processes and know-how are important to our business. We own patent rights to Aramchol and Amilo-5MER in various jurisdictions worldwide, including within and outside of Israel. We have sought patent protection in the United States and internationally for Aramchol and Amilo-5MER, our discovery programs, and any other inventions to which we have rights, where available and when appropriate.
We have granted patents and pending patent applications in various jurisdictions relating to (1) the composition of matter of Aramchol meglumine as well as a wide range of other salts, or the CoM Patent; (2) a method for treating/inhibiting hepatic fibrosis and non-hepatic fibrosis associated or non-associated with NASH or NAFLD, or the Hepatic Fibrosis Patent; (3) a method of treating dysbiosis, or the Dysbiosis Patent; and (4) a method of treating cancer using aramchol and anti cancer agents combination, or the Cancer Patent . In addition, we have pending patent applications for Aramchol meglumine and other salts, including a granted U.S. patent for low dose composition of Aramchol (US 10,849,911 B2) and other salts. We have been allowed or granted patents for Aramchol and other salts which includes claims for the treatment of fatty liver in Europe and certain other countries. The CoM Patent application was granted in the United States, Brazil and India. The CoM Patent that was granted in the United States and the expected term is December 2034. The Hepatic Fibrosis Patent has been granted in United States (US 11,197,870 B2), Europe, Australia, Brazil, Japan, Canada, Hong-Kong and in Israel and has an expected term in each jurisdiction of 2037. The Dysbiosis Patent was granted in U.S., Europe, Israel, Brazil and Mexico and has an expected term in US of 2038 and of 2037 in Israel and Mexico; and was allowed in Canada. In addition, patent applications were granted in Israel relating to Aramchol use in hepatic fibrosis treatment, optionally associated with NAFLD and NASH ; and in Australia, Canada, Japan, Israel and Mexico relating to Aramchol use to treat pulmonary and/or dermal fibrosis. Also, a patent was granted in Mexico and Europe relating to Aramchol use for inhibition of fibrosis in NAFLD patients (having fibrosis score of zero (0)). We also have granted patents for combination therapy for the treatment of liver disease in United States (US 12,239,712), Australia, Canada, Europe, Hong Kong, Israel, Korea, and Mexico.
We have an exclusive license to a US granted patent directed to Amilo-5MER and anti-inflammatory compositions thereof On 2023 our collaborator, YISSUM RESEARCH DEVELOPMENT COMPANY OF THE HEBREW UNIVERSITY OF JERUSALEM LTD was granted a new patent (US 11,560, 417 B2, a division of US 10,611,819 B2) for using the 5MER for the treatment of inflammatory diseases which has an expected term until 2035.
Our policy is to pursue, maintain and defend patent rights, whether developed internally or licensed from third parties, and to protect the technology, inventions and improvements that are commercially important to the development of our business. We also rely on trade secrets that may be important to the development of our business.
Patent Portfolio for Aramchol and Aramchol Meglumine
The patent portfolio for Aramchol contains patent families including pending patent applications and granted patents directed to composition of matter, manufacturing methods and methods of use.
The first patent family discloses and claims additional FABACs with different conjugation moieties, as well as the use of these and the compounds disclosed in the first patent family above, including Aramchol, in the treatment of fatty liver, reduction of serum cholesterol and treatment of hyperglycemia and diabetes. All patents in this family are expired (term ended).
A patent family directed to topical uses of FABAC compounds (anti-acne) was granted in Europe and maintained in Germany, France, Italy, the Netherlands and the United Kingdom. Expected term is 2033.
A patent family discloses and claims second generation FABAC salt compounds include Aramchol meglumine. This patent family includes Granted U.S., Brazil, India, Europe (maintained in Albania, Austria, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, Greece, Hungary, Iceland, Italy, Latvia, Lithuania, Macedonia, Malta, Norway, Poland, Portugal, Romania, San Marino, Serbia, Slovakia, Slovenia, Spain, Sweden, The Netherlands, Turkey, Belgium, France, Germany, Ireland, Luxembourg, Malta, Monaco, Switzerland and United Kingdom), China, Hong Kong, Macau, Canada, Israel, Korea, Japan, and Australia patents. If the appropriate maintenance, renewal, annuity or other governmental fees are paid, the expected term for this patent family is December 2034.
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A patent family having one U.S. patent application, discloses and claims compositions comprising low doses of the second generation FABAC compounds Aramchol meglumine and other salts which was granted by the USPTO. When the appropriate maintenance, renewal, annuity or other governmental fees are paid, the expected term for this patent family is December 2034.
A family is directed to treatment for modulating gut microbiota and/or dysbiosis using Aramchol. This patent family includes a granted patents in Israel, U.S., Europe, Brazil and in Mexico; and pending foreign patent applications in Canada and China. Expected term for this patent family is 2037, expect for U.S. where the term is 2038.
Patent families are directed to uses of Aramchol and Aramchol meglumine for treating and inhibiting fibrosis. The families have pending patent applications in Australia, Canada, , Israel, and US. For hepatic fibrosis it was granted in Brazil, Europe, Hong-Kong and Japan; and the treatment of pulmonary fibrosis was granted in Australia, Canada, Israel, Mexico and Japan (also dermal fibrosis in Australia, Canada, Israel and Japan). Expected term of this patent family is 2037. Additionally, U.S., Australia and Canada patent applications directed to a method for treating hepatic fibrosis non-associated with non-alcoholic fatty acid liver disease – were granted, and the expected term is 2037. In addition, a US application has been filed and claims the treatment of pulmonary, kidney, dermal, gastro intestinal and heart fibrosis by Aramchol. The improved bio-availability of Aramchol is supported by the pharmacological model based on the preclinical and the ARREST data. Further, a U.S. patent application has been filed and claims the treatment of fibrosis (hepatic, pulmonary, dermal, GI, kidney and heart) via combinations of aramchol and specific GLP1 agonists (e.g. semaglutide). In addition, inhibition of hepatic fibrosis by a regimen of above 300 mg of Aramchol daily is granted in Europe and Mexico. Expected term of this patent family is 2037. Also, treatment and inhibition of hepatic fibrosis by a regimen of 300 mg of Aramchol twice daily is granted in Australia and Israel. Expected term of this patent family is 2039.
A patent family is directed to a combination therapy of Aramchol and MGL3196 for treating fatty liver disease; and has a PCT application which entered National Phase in: Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, India, Japan, Korea, Mexico and U.S. It was granted in U.S., Australia, Canada, Europe, Hong-Kong, Israel, Korea and Mexico. Expected term for this patent family is 2039.
A patent family is directed to a combination therapy of Aramchol and anti cancer agents for treating cancer; with expected term 2046. Galmed Research and Development Ltd. is a co-applicant in this family with Virginia Commonwealth University.
A patent family is directed to preparation methods of Aramchol, having term of 2046.
Patent Portfolio for Amilo-5MER
The patent portfolio for Amilo-5MER contains one patent family including pending patent applications and granted patents directed to composition of matter and methods of use.
A patent family is directed to Amilo-5MER and anti-inflammatory compositions thereof. Galmed Research and Development Ltd. has an exclusive license to the U.S. granted patent within this family, and the expected term of this U.S. patent is 2035. Galmed Research and Development Ltd. has also exclusive licenses to the corresponding granted patents in Europe, Australia, Japan, China, Canada, Korea and India. The corresponding applications in Brazil are pending. The non-US expected patent term is 2035. A divisional application claiming the use of Amilo-5MER for the treatment of inflammatory diseases was granted in 2023.
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Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of our current and other product candidates and the methods used to develop and manufacture them, as well as successfully defending these patents against third-party challenges. Our ability to stop third parties from making, using, selling, offering to sell or importing our products depends on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. We believe that our patents provide broad and comprehensive coverage of Aramchol and the Amilo-5MER and uses thereof. However, the patent positions of biopharmaceutical companies, such as ourselves, are generally uncertain and involve complex legal and factual questions. Our ability to maintain and solidify our proprietary position for the technology will depend on our success in obtaining effective claims and enforcing those claims once granted. There is no certainty that any of the Company’s pending patent applications will result in the issuance of any patents. The issued patents and those that may be issued in the future, may be challenged, narrowed, circumvented or found to be invalid or unenforceable, which could limit our ability to stop competitors from marketing related products or the length of term of patent protection that we may have for our products. In addition, our competitors may independently develop similar technologies or duplicate any technology developed by us, and the rights granted under any issued or future patents may not provide us with any meaningful competitive advantages against these competitors. Furthermore, because of the extensive time required for development, testing and regulatory review of a potential product, before any of our products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of such patent. For more risks associated with the protection of our licensed intellectual property, see “Item 3. Key Information— Risk Factors—Risks Related to Our Intellectual Property.”
Trade Secrets
In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. Trade secrets and know-how can be difficult to protect. We seek to protect our proprietary processes, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and commercial partners. These agreements are designed to protect our proprietary information. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know-how by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, such agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors or others.
Seasonality
Our business and operations are generally not affected by seasonal fluctuations or factors.
Raw Materials and Suppliers
We believe that the raw materials that we require to manufacture Aramchol are readily available commodities commonly used in the pharmaceutical industry.
Manufacturing
We do not own or operate manufacturing facilities for the production of Aramchol or any other product candidate, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We currently rely on third-party contract manufacturers for all of our required raw materials, API and finished product for our non-clinical research and clinical trials. We do not have long term agreements with any of these third parties. We also do not have any current contractual relationships for the manufacture of commercial supplies of Aramchol if it is approved. If Aramchol or any other product candidate are approved by any regulatory agency, we intend to enter into agreements with a third-party contract manufacturer or collaboration partner and one or more back-up manufacturers for the commercial production of those products. Development and commercial quantities of any products that we develop will need to be manufactured in facilities, and by processes, that comply with the requirements of the FDA and the regulatory agencies of other jurisdictions in which we are seeking approval. We currently employ internal resources to manage our manufacturing contractors. The relevant manufacturers of our drug substance and drug products for our current pre-clinical and clinical trials have advised us that they are compliant with both cGMP and, cGLP.
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There can be no assurance that Aramchol, if approved, can be manufactured in sufficient commercial quantities, in compliance with regulatory requirements and at an acceptable cost. We and our contract manufacturers are, and will be, subject to extensive governmental regulation in connection with the manufacture of any pharmaceutical products or medical devices. We and our contract manufacturers must ensure that all of the processes, methods and equipment are compliant with cGMP and cGLP for drugs on an ongoing basis, as mandated by the FDA and other regulatory authorities, and conduct extensive audits of vendors, contract laboratories and suppliers.
Contract Research Organizations
We outsource certain clinical trial activities to CROs. Our clinical CROs comply with guidelines from the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use, which attempt to harmonize the FDA, the EMA, and the Pharmaceuticals and Medical Devices Agency of Japan regulations and guidelines. We create and implement the drug development plans and manage the CROs according to the specific requirements of the drug candidate under development. To the extent clinical research is overseen by the CROs (or directly by us), compliance with certain federal regulations, including but not limited to 21 C.F.R. parts 50, 54, 56, 58 and 312, which pertain to, among other things, IRBs, informed consent, financial conflicts of interest by investigators, correct administration of treatment, follow up of adverse events, good laboratory practices and submitting IND applications, may be required.
Marketing, Sales and Commercialization
Given our stage of development, we do not have any internal sales, marketing or distribution infrastructure or capabilities. In the event we receive regulatory approval for any product candidate we intend, where appropriate, to pursue commercialization relationships, including strategic alliances and licensing, with pharmaceutical companies and other strategic partners, which are equipped to market and/or sell our product candidates through their well-developed sales, marketing and distribution organizations in order to gain access to global markets. In addition, we may out-license some or all of our worldwide patent rights to more than one party to achieve the fullest development, marketing and distribution of any products we develop. Over the longer term, we may consider ultimately building an internal marketing, sales and commercial infrastructure. See “Item 4. Information on the Company— Business Overview—Strategic Collaborations, Research Arrangements and other Material Agreements—Samil Pharm Co.” for information regarding the license agreement we entered with Samil for the commercialization of Aramchol (with an option to manufacture) for the treatment of fatty liver indications including NASH, in the Republic of Korea.
Environmental Matters
We, our agents and our service providers, including our manufacturers, may be subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewater discharges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites. We believe that our business, operations and facilities, including, to our knowledge, those of our agents and service providers, are being operated in compliance in all material respects with applicable environmental and health and safety laws and regulations. All information with respect to any chemical substance is filed and stored as a Material Safety Data Sheet, as required by applicable environmental regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect on us. However, significant expenditures could be required in the future if we, our agents or our service providers are required to comply with new or more stringent environmental or health and safety laws, regulations or requirements.
Government Regulation and Product Approval
Governmental authorities in the United States and in other countries extensively regulate, among other things, the research, development, testing, manufacture, labeling, packaging, promotion, storage, advertising, distribution, marketing and export and import of products such as those we are developing. Aramchol or any other product candidate must be approved by the FDA through the NDA process before they may be legally marketed in the United States and by the Committee on Human Medicinal Products, or CHMP, via the EMA and European Commission through the MAA process before they may be legally marketed in Europe, or MHRA through its authorization procedures before they may be legally marketed in the UK. Aramchol or any other product candidate will be subject to similar requirements in other countries prior to marketing in those countries. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.
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United States Government Regulation
NDA Approval Processes
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or the FDCA, and implementing regulations and guidance documents. Failure to comply with the applicable U.S. requirements at any time during the product development process or approval process, or after approval, may subject an applicant to administrative or judicial sanctions, any of which could have a material adverse effect on us. These sanctions could include refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product seizures, total or partial suspension of production or distribution, injunctions, fines, disgorgement, and civil or criminal penalties.
The process required by the FDA before a drug may be marketed in the United States generally involves the following:
| ● | completion of pre-clinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practice regulations, or GLPs, or other applicable regulations; | |
| ● | submission to the FDA of an IND application, which must become effective before human clinical trials may begin; | |
| ● | approval by an IRB representing each clinical site before each clinical trial may be initiated; | |
| ● | performance of adequate and well-controlled human clinical trials according to GCPs, to establish the safety and efficacy of the proposed drug for its intended use; | |
| ● | submission of data supporting safety and efficacy as well as detailed information on the manufacture and composition of the product in clinical development and proposed labeling; | |
| ● | submission to the FDA of an NDA; | |
| ● | satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMPs to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; | |
| ● | satisfactory completion of FDA inspections of clinical sites and GLP toxicology studies; and | |
| ● | FDA review and approval of the NDA. |
The testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for Aramchol or any other product candidate will be granted on a timely basis, if at all.
Once a product candidate is identified for development, it enters the pre-clinical testing stage. Pre-clinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the pre-clinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND. Some pre-clinical testing may continue after the IND is submitted. In addition to including the results of the pre-clinical studies, the IND will also include a clinical trial protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and, depending on the phase of the study, the effectiveness criteria to be evaluated. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin. A clinical hold may occur at any time during the life of an IND, due to safety concerns or non-compliance, and may affect one or more specific studies or all studies conducted under the IND.
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All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with the FDA’s GCP regulations. These regulations include the requirement that all research subjects provide informed consent. Further, an IRB must review and approve the plan for any clinical trial, including the informed consent document, before it commences at any institution. An IRB considers, among other things, whether the risks to individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the investigator brochure and other information about the trial distributed by the sponsor and the consent form that must be provided to each trial subject or his or her legal representative and must monitor the study until completed. All clinical trials must be conducted under protocols detailing the objectives of the trial, dosing procedures, research subject inclusion and exclusion criteria and the safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND, and progress reports detailing the status of the clinical trials must be submitted to the FDA annually. Sponsors must also report within set timeframes to FDA serious and unexpected adverse reactions, any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigation brochure, or any findings from other studies or animal or in-vitro testing that suggest a significant risk in humans exposed to the drug. Sponsors must also report to FDA certain amendments to the protocol and other essential information concerning the IND that does not fall within the scope of other required reports.
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
| ● | Phase 1. The drug is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and elimination. In the case of some products for severe or life-threatening diseases, such as cancer, especially when the product may be inherently too toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients. | |
| ● | Phase 2. Clinical trials are performed on a limited patient population intended to identify possible adverse effects and risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. | |
| ● | Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites. Phase 3 clinical trials are conducted to provide sufficient data for the statistically valid evidence of safety and efficacy. | |
| ● | Phase 4. The FDA may require that the sponsor conduct additional clinical trials following new drug approval. The purpose of these trials, known as Phase 4 studies, is to monitor long-term risks and benefits, study different dosage levels or evaluate safety and effectiveness. In recent years, the FDA has increased its reliance on these trials. Phase 4 studies usually involve thousands of participants. Phase 4 studies also may be initiated by the company sponsoring the new drug to gain broader market value for an approved drug. |
Human clinical trials are inherently uncertain and Phase 1, Phase 2, Phase 3 and Phase 4 testing may not be successfully completed. The FDA or the sponsor may suspend a clinical trial at any time for a variety of reasons, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.
A sponsor who wishes to conduct a clinical trial outside the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. If a clinical trial outside the United States is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of a NDA so long as the clinical trial is conducted in accordance with GCP and in compliance with an international guideline for the ethical conduct of clinical research known as the Declaration of Helsinki and/or the laws and regulations of the country or countries in which the clinical trial is performed, whichever provides the greater protection to the participants in the clinical trial.
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During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points are typically prior to the submission of an IND, at the end of Phase 2 and before an NDA is submitted. Meetings at other times may also be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date and for the FDA to provide advice on the next phase of development. Sponsors typically use the meeting at the end of Phase 2 to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical trial that they believe will support the approval of the NDA.
Concurrent with clinical trials, sponsors usually complete any remaining animal safety studies and also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing commercial quantities of the product in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug and the manufacturer must develop methods for testing the quality, purity and potency of the drug. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its proposed shelf-life.
The results of product development, pre-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests and other control mechanisms, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product for one or more specified indications. The submission of an NDA is subject to the payment of an application fee, but a waiver of such fees may be obtained under specified circumstances. We will seek a waiver of these fees as a small business submitting its first human drug application to the FDA. If the waiver is granted it would not extend to establishment or product fees. The FDA reviews all NDAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. It may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing.
Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA may refuse to approve an NDA if the applicable statutory and regulatory criteria are not satisfied or may require additional clinical or other data. Even if such data are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant. The FDA may refer the NDA to an advisory committee for review and recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving an NDA, the FDA will typically inspect the facility or facilities where the product is manufactured and tested. The FDA will also inspect selected clinical sites that participated in the clinical studies and may inspect the testing facilities that performed the GLP toxicology studies cited in the NDA.
Expedited Review and Approval
The FDA has various specific programs, including Fast Track, Breakthrough Therapy, Priority Review, and Accelerated Approval, which, in different ways, are each intended to expedite the process for reviewing and approving drugs. Even if a drug qualifies for one or more of these programs, the FDA may later decide that the drug no longer meets the conditions for qualification or that the time period for FDA review or approval will be shortened. Generally, drugs that are eligible for these programs are those for serious or life-threatening conditions, those with the potential to address unmet medical needs and those that offer meaningful benefits over existing treatments. For example, Fast Track is a process designed to facilitate the development and expedite the review of drugs to treat serious or life-threatening diseases or conditions and fill unmet medical needs, and Breakthrough Therapy designation is designed to expedite the development and review of drugs that are intended to treat a serious condition where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint(s). Priority review is designed to give drugs that offer major advances in treatment or provide a treatment where no adequate therapy exists an initial review within six months as compared to a standard review time of ten months. Although Fast Track, Breakthrough Therapy designation, and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent meetings with a sponsor of a Fast Track or Breakthrough Therapy designated drug and expedite review of the application for a drug designated for priority review. The FDA will also provide Breakthrough Therapy designated drugs intensive guidance on an efficient drug development program and provide these drug developers with an organizational commitment from the FDA involving senior managers. Since sponsors can design clinical trials in a number of ways, in providing its guidance for drugs designated as breakthrough therapies, the FDA will seek to ensure that the sponsor of the product designated as a breakthrough therapy receives timely advice and interactive communications in order to help the sponsor design and conduct a development program as efficiently as possible. During these interactions, the FDA may suggest, or a sponsor can propose, alternative clinical trial designs (e.g., adaptive designs, an enrichment strategy, use of historical controls) that may result in smaller trials or more efficient trials that require less time to complete. Such trial designs could also help minimize the number of patients exposed to a potentially less efficacious treatment (i.e., the control group treated with available therapy). On September 23, 2014, the FDA granted Fast Track designation status to Aramchol for the treatment of patients who are overweight or obese and have pre diabetes or type II diabetes mellitus with NASH.
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Accelerated Approval, which is described in 21 C.F.R. § 314.500 et seq., provides for approval of a new drug that is intended to treat a serious or life-threatening disease or condition and that fills an unmet medical need based on a surrogate endpoint. A surrogate endpoint is a laboratory measurement or physical sign used as an indirect or substitute measurement representing a clinically meaningful outcome. To be used in Accelerated Approval, a surrogate endpoint must be “reasonably likely, based on epidemiologic, therapeutic, pathophysiologic, or other evidence to predict benefit on irreversible morbidity or mortality.” The term “reasonably likely” implies that some uncertainty remains about the relationship of the surrogate to the clinical benefit to the patient. Therefore, Accelerated Approval is typically contingent on a sponsor’s agreement to conduct additional post-approval studies to verify and describe the drug’s clinical benefit. Accelerated Approval does not change the standards for approval, but by allowing a demonstration of efficacy based on a surrogate endpoint may expedite the approval process.
FDA Guidance
In December 2018, the FDA issued “Noncirrhotic Nonalcoholic Steatohepatitis with Liver Fibrosis: Developing Drugs for Treatment”, or “the December Guidance”. The December Guidance, though nonbinding on the FDA or us, is intended to assist sponsors in the clinical development of drugs for the treatment of noncirrhotic NASH with liver fibrosis, describes the FDA’s current thinking regarding the necessary components of a drug development program for noncirrhotic NASH with liver fibrosis and identifies knowledge gaps that represent important challenges in the development of drugs for the indication. According to the FDA, the ultimate goal of NASH treatment is to slow the progress of, halt, or reverse disease progression and improve clinical outcomes (i.e., prevent progression to cirrhosis and cirrhosis complications, reduce the need for liver transplantation, and improve survival). Because of the slow progression of NASH and the time required to conduct a trial that would evaluate clinical endpoints such as progression to cirrhosis or survival, the FDA recommends sponsors consider the following liver histological improvements as endpoints reasonably likely to predict clinical benefit to support accelerated approval under the regulations:
| ● | Resolution of steatohepatitis on overall histopathological reading and no worsening of liver fibrosis on NASH CRN fibrosis score. Resolution of steatohepatitis is defined as absent fatty liver disease or isolated or simple steatosis without steatohepatitis and a NAS score of 0–1 for inflammation, 0 for ballooning, and any value for steatosis; or | |
| ● | Improvement in liver fibrosis greater than or equal to one stage (NASH CRN fibrosis score) and no worsening of steatohepatitis (defined as no increase in NAS for ballooning, inflammation, or steatosis) |
Further, according to the FDA, for NASH drugs approved on the basis of liver histology under the accelerated approval pathway, randomized, double-blind, placebo-controlled clinical trials designed to describe and verify the drug’s clinical benefit should be underway at the time of submission of the marketing application. Clinical benefit can be verified by demonstrating superiority to placebo in delaying disease progression measured by a composite endpoint.
The EMA also issued a reflection paper to provide guidance on drug development in the field of NASH. However, the EMA indicated, among other things, that both resolution of NASH without worsening of fibrosis and improvement in fibrosis without worsening of NASH would both be required as intermediate endpoints for demonstrating statistical significance for stage 2 and 3 fibrosis.
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See also “Item 3. Key Information—Risk Factors—Risk Factors—Risks Related to Our Business, Industry and Regulatory Requirements - We are developing Aramchol for the treatment of NASH, an indication for which there are no approved products, and there is significant uncertainty regarding the regulatory approval process. This makes it difficult to predict the timing and costs of the clinical development of Aramchol for the treatment of NASH.”
Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of FDA approval of the use of Aramchol or any other product candidate, U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND, and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the application for extension must be made prior to expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply for restorations of patent term for some of our currently owned patents to add patent life beyond their current expiration date, depending on the expected length of clinical trials and other factors involved in the submission of the relevant NDA.
Market exclusivity provisions under the FDCA can also delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an approved NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the pre-clinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
Post-approval Requirements
Once an approval is granted, the FDA, European authorities and other regulatory authorities may withdraw the approval if compliance with regulatory requirements is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further regulatory authority review and approval. Some of these modifications, especially adding indications, would likely require additional clinical studies. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs.
Any drug product manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including, among other things record-keeping requirements; cGMPs; reporting of adverse experiences with the drug; providing the FDA with updated safety and efficacy information; drug sampling and distribution requirements; notifying the FDA and gaining its approval of specified manufacturing or labeling changes; and complying with FDA promotion and advertising requirements.
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Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and some state agencies for compliance with cGMP and other laws.
We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of Aramchol. Future FDA and state inspections may identify compliance issues at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct.
From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether legislative changes will be enacted, or FDA regulations, guidance or interpretations changed or what the impact of such changes, if any, may be. In particular, it is unknown whether any of the provisions of the 2016 21st Century Cures Act that are intended to accelerate drug approval will result in any change in the current approval pathway for Aramchol.
Pursuant to the Affordable Care Act (discussed in greater detail below), the Centers for Medicare & Medicaid Services, or CMS, is required to collect and publish information reported by applicable manufacturers about payments and other transfers of value manufacturers have made to physicians and teaching hospitals. Such a law, when applicable to our products, could increase the company’s regulatory liability through the imposition of additional reporting and regulatory requirements. There are also an increasing number of state laws that require manufacturers to make similar reports to states on pricing and marketing information.
Reimbursement
We face uncertainties over the pricing of pharmaceutical products. Sales of Aramchol or any other product candidate will depend, in part, on the extent to which the costs of Aramchol or any other product candidate will be covered by third-party payors, such as federal health programs, commercial insurance and managed care organizations. These third-party payors are increasingly challenging the prices charged for medical products and services. Additionally, the containment of healthcare costs has become a priority of federal and state governments and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures, foreign governments and third party payors have shown significant interest in implementing cost-containment programs, including price controls, pricing transparency disclosure obligations, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. If these third-party payors do not consider Aramchol or any other product candidate to be cost-effective compared to other therapies, they may not cover Aramchol or any other product candidate after approved as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell Aramchol or any other product candidate on a profitable basis.
The Medicare Modernization Act imposed new requirements for the distribution and pricing of prescription drugs for Medicare beneficiaries under Part D. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities that provide coverage of outpatient prescription drugs. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in each category or class. The Centers for Medicare & Medicaid Services published a final rule in 2014 implementing the Medicare Modernization Act. Contrary to the proposed rule, which would have enabled Part D plans to offer fewer drugs, the final rule maintained the existing six protected classes of drug categories, but stated that some of the proposals not included in the final rule could still be finalized in the future, which would impact payor formulary and coverage decisions.
The American Recovery and Reinvestment Act of 2009 provides funding for the federal government to compare the effectiveness of different treatments for the same illness. A plan for the research will be developed by the Department of Health and Human Services, the Agency for Healthcare Research and Quality and the National Institutes for Health, and periodic reports on the status of the research and related expenditures will be made to Congress. Although the results of the comparative effectiveness studies are not intended to mandate coverage policies for public or private payors, it is not clear what effect, if any, the research will have on the sales of any product, if any such product or the condition that it is intended to treat is the subject of a study. It is also possible that comparative effectiveness research demonstrating benefits in a competitor’s product could adversely affect the sales of Aramchol or any other product candidate. If third-party payors do not consider Aramchol or any other product candidate to be cost-effective compared to other available therapies, they may not cover Aramchol or any other product candidate as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell Aramchol or any other product candidate on a profitable basis.
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The Affordable Care Act, enacted in March 2010, has had a significant impact on the health care industry. Some of the key changes made to date pursuant to the Affordable Care Act include an expansion of coverage for the uninsured, the creation of insurance marketplaces and increased protection of insureds with new benefits, rights and protections. With regard to pharmaceutical products, among other things, the Affordable Care Act made major changes to the Medicare prescription drug program, which helped reduce drug costs for seniors and increased rebates and other costs for the pharmaceutical industry.
There have been judicial and congressional challenges to the Affordable Care Act. In December 2017, Congress enacted tax reform legislation that made significant changes to the Affordable Care Act including the repeal of the “individual mandate” that was in place to strongly encourage broad participation in the health insurance markets. Given these changes and other statements of political leaders, we cannot predict the ultimate impact on the Affordable Care Act and the subsequent effect on the pharmaceutical industry at this time.
In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. In 2011, the U.S. Congress enacted the Budget Control Act of 2011 (or the “Budget Control Act”), which included provisions intended to reduce the federal deficit. The Budget Control Act resulted in the imposition of 2% reductions in Medicare payments to providers beginning in 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2031 absent additional congressional action. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several provider types, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Further, on August 16, 2022, Congress enacted the Inflation Reduction Act authorizing CMS to negotiate directly with drug manufacturers to lower the price of some of the costliest drugs under the Medicare program, as well as requiring drug manufacturers to provide Medicare with a rebate if the price of the drug increases faster than the rate of inflation.
Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their commercial products. On September 24, 2020, the FDA released a final rule providing guidance for states to build and submit importation plans for drugs from Canada. The Inflation Reduction Act of 2022 contains significant reforms affecting the pricing of drugs and biologics paid by Medicare. The new requirements establish a timeline to negotiate, with CMS, for certain drugs, a “maximum fair price” for certain selected drugs. In 2025, HHS began implementation of “Most Favored Nation” drug pricing by setting the Medicare price of single-source brand drugs without generic or biosimilar competition to the lowest price available in wealthy countries (i.e., with a per capita GDP of at least 60% of that in the United States). We cannot say how these laws would affect the pricing and reimbursement of Aramchol or any other of our product candidates.
Legislative and regulatory proposals have been suggested 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 Aramchol or any other product candidate may be. Further, the Deficit Reduction Act of 2010, directed CMS to contract a vendor to determine “retail survey prices for covered outpatient drugs that represent a nationwide average of consumer purchase prices for such drugs, net of all discounts and rebates (to the extent any information with respect to such discounts and rebates is available).” This survey information can be used to determine the National Average Drug Acquisition Cost, NADAC. Some states have indicated that they will reimburse based on the NADAC and this can result in further reductions in the prices paid for various outpatient drugs.
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In addition, in some non-U.S. jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for Aramchol or any other product candidate. Historically, products launched in the EU do not follow price structures of the United States and generally tend to be significantly lower.
Healthcare Fraud and Abuse Laws
In the U.S., the research, development, testing, manufacturing, handling, storage, distribution, sale and promotion of drug products and medical devices are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the Centers for Medicare & Medicaid Services, other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General), the U.S. Department of Justice, state Attorneys General, and other state and local government agencies. For example, sales, marketing and scientific/educational grant programs must comply with the fraud and abuse provisions applicable to pharmaceutical manufacturers, including the federal “Anti-Kickback Statute”, the Civil Monetary Penalty Statute, the Stark Law, the federal False Claims Act, as amended, state and federal “Physician Payment Sunshine Act” laws and regulations, the privacy regulations promulgated under the Health Insurance Portability and Accountability Act, or HIPAA, and similar state laws. Pricing and rebate programs must comply with the Medicaid Drug Rebate Program requirements of the Omnibus Budget Reconciliation Act of 1990, as amended, and the Veterans Health Care Act of 1992, as amended. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. All of these activities are also potentially subject to federal and state consumer protection and unfair competition laws. Some of these health care laws include:
The Anti- Kickback Statute makes it illegal for any person, including a prescription drug manufacturer (or a party acting on its behalf) to knowingly and willfully solicit, receive, offer, or pay any remuneration that is intended to induce the referral of business, including the purchase, order, or prescription of a particular drug, for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. Many states enacted analogous anti-kickback and false claims laws which may apply to items or services reimbursed by any payer, including commercial insurers. Additionally, many states have laws that require pharmaceutical companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources.
The federal False Claims Act prohibits anyone from knowingly presenting, conspiring to present, making a false statement in order to present, or causing to be presented, for payment to federal programs (including Medicare and Medicaid) claims for items or services, including drugs, that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. This law also prohibits anyone from knowingly underpaying an obligation owed to a federal program. Increasingly, U.S. federal agencies are requiring nonmonetary remedial measures, such as corporate integrity agreements in False Claims Act settlements.
The Civil Monetary Penalty Act of 1981 imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health care program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent, or offering or transferring remuneration to a federal health care beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier. These penalties include monetary fines ranging from $2,670 and $127,973 per violation and exclusion from participation in a federal health care program such as Medicare and Medicaid, meaning that items and services provided by excluded entities are not directly or separately billable to federal health care programs.
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The Physician Payment Sunshine Act, enacted in 2010 as part of the Affordable Care Act, requires certain manufacturers of pharmaceuticals and medical devices to annually report certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as investment interests held by physicians and their immediate family members. Since January 1, 2022, covered manufacturers began reporting on payments and other transfers of value to physician assistants, nurse practitioners or clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, and certified nurse-midwives during the previous year. In recent years, several states in the United States have also enacted legislation requiring pharmaceutical companies to file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register their sales representatives, as well as establish marketing compliance programs. These laws may affect our sales, marketing, and other promotional activities by imposing administrative and compliance burdens on us. Failure to meet these requirements, to the extent they are applicable to our activities, could also result in a variety of governmental sanctions that could have a material adverse effect on our business.
If our operations are found to be in violation of any of the foregoing or other applicable health care laws and regulations, we may be subject to penalties, including significant administrative, civil and criminal penalties, monetary damages, disgorgement, imprisonment, the curtailment or restructuring of our operations, loss of eligibility to obtain approvals from the FDA, or exclusion from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid.
European Economic Area
In addition to approval in the United States, we currently intend to seek regulatory approval of Aramchol in the EU. As such, a summary of the EU regulatory processes follows below.
A medicinal product may only be placed on the market in the European Economic Area, or the EEA, composed of the 27 EU member states of the EU, plus Norway, Iceland and Lichtenstein, when a marketing authorization has been obtained according to the applicable EU and/or member state law. A marketing authorization may either be granted in a national procedure, or in a coordinated procedure of several member states pursuant to Directive 2001/83/EC, as amended January 1, 2025, or an authorization has been granted under the centralized procedure in accordance with Regulation (EC) No. 726/2004, as amended on January 28, 2022. There are essentially three community procedures created under prevailing European pharmaceutical legislation that, if successfully completed, allow an applicant to place a medicinal product on the market in the respective EU or EEA member states.
The withdrawal of the United Kingdom (UK) from the EU took effect on January 1, 2021, and there are 27 member states remaining in the EU. As of January 1, 2021, the UK is a “third country” with regard to the EU (subject to the terms of the EU UK Trade Agreement) and EU law ceased to apply directly in the UK. However, the UK has retained the EU medicines regulatory regime with certain modifications as standalone UK legislation. Therefore, the UK regulatory regime is currently similar to EU regulations, but under new legislation, the Medicines and Medical Devices Act 2021, the UK may adopt changed regulations that may diverge from the EU legislative regime for medicines and their research, development and commercialization. In order to market a medicinal product in the UK, a license or marketing authorization must be obtained from the UK Medicines and Healthcare Products Regulatory Agency (MHRA). The UK legislation includes multiple assessment routes for applications for medicinal products, including a 150-day national assessment or a rolling review application. Further, and for a transitional period until 31 December 2022, the MHRA may rely on a decision taken by the European Commission on the approval of a new marketing authorization in the centralized procedure. In addition, the MHRA has the power to have regard to marketing authorizations approved in EU member states through the decentralized and mutual recognition procedures.
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Centralized Procedure
Regulation 726/2004/EC, as amended, governs the centralized procedure when a marketing authorization is granted by the European Commission, acting in its capacity as the European Licensing Authority on the advice of the EMA. That authorization is valid throughout the entire EEA on the basis of a single marketing authorization. The EMA is the administrative body responsible for coordinating the existing scientific resources available in the member states for evaluation, supervision and pharmacovigilance of medicinal products. Certain medicinal products, as described in the Annex to Regulation 726/2004, must be authorized centrally. These are products that are developed by means of certain biotechnological processes in accordance with Paragraph 1 to the Annex to the Regulation. Medicinal products for human use containing a new active substance that, on the date of effectiveness of the Regulation, was not authorized in the European Union, and for which the therapeutic indication is the treatment of acquired immune deficiency syndrome, or AIDS, cancer, neurodegenerative disorder or diabetes, autoimmune diseases and other immune dysfunctions and viral diseases must also be authorized centrally. Finally, all medicinal products that are designated as orphan medicinal products pursuant to Regulation 141/2000 and Advanced Therapy Medicinal Products (ATMP) according to Reg. (EC) No. 1394/2007. An applicant may also opt for assessment through the centralized procedure if the medicinal product contains a new active substance which was not authorized in the EU when Reg. (EC) No. 726/2004 entered into force, or if the applicant can show that the medicinal product constitutes a significant therapeutic, scientific or technical innovation or that the granting of authorization centrally is in the interests of patients at the EEA level. For each application submitted to the EMA for scientific assessment, the EMA is required to ensure that the opinion of the Committee for Medicinal Products for Human Use, or CHMP, is given within 210 days after receipt of a valid application (or within 150 days by means of an accelerated procedure (excluding clock stops) the review period can be extended). This 210 day period does not include the time that the applicant needs to answer any questions raised during the application procedure, the so-called ‘clock stop’ period. If the opinion is positive, the EMA is required to send the opinion to the European Commission, which is responsible for preparing the draft decision granting a marketing authorization. This draft decision may differ from the CHMP opinion, stating reasons for diverging from the CHMP opinion. The draft decision is sent to the applicant and the member states, after which the European Commission takes a final decision. If the initial opinion of the CHMP is negative, the applicant is afforded an opportunity to seek a re-examination of the opinion. In that case, the applicant may, within 15 days after receipt of the opinion, give written notice to EMA that he wishes to request a re-examination of the opinion. The applicant is then required to forward the detailed grounds for request within 60 days after receipt of the opinion. The CHMP is required to re-examine its opinion within 60 days following receipt of the request by the applicant. All CHMP refusals and the reasons for refusal are made public on the EMA website. Without a centralized marketing authorization it is prohibited to place a medicinal product that must be authorized centrally on the market in the EU. Once a centralized marketing authorization has been granted by the European Commission, it is valid in all EEA States for 5 years on a renewable basis. Marketing authorizations for medicinal products for veterinary use that fall within the scope of article 42(2) Regulation (EU) 2019/6, as amended January 28, 2022, are also granted through a centralized procedure, in accordance with the relevant provisions of this regulation.
Mutual Recognition and Decentralized Procedures
With the exception of products that are authorized centrally, the competent authorities of the member states are responsible for granting marketing authorizations for medicinal products placed on their national markets. If the applicant for a marketing authorization intends to market the same medicinal product in more than one member state, the applicant may seek an authorization progressively in the community under the mutual recognition or decentralized procedure. Mutual recognition procedure, or MRP is used if the medicinal product has already been authorized in a member state. In this case, the holder of this marketing authorization requests the member state where the authorization has been granted to act as reference member state by preparing an assessment report on the product or, if necessary, to update any existing assessment report that is then used to facilitate mutual recognition of the existing authorization in the other member states in which approval is sought (the so-called concerned member state(s)). The reference member state must prepare an updated assessment report within 90 days of receipt of a valid application. This report together with the approved Summary of Product Characteristics, the SmPC (which sets out the conditions of use of the product), and a labeling and package leaflet are sent to the concerned member states for their consideration. The concerned member states are required to approve the assessment report, the SmPC and the labeling and package leaflet within 90 days of receipt of these documents. The reference member state shall record the agreement of all parties, close the procedure and inform the applicant accordingly. Each member state in which an application has been submitted shall adopt a decision in conformity with the approved documents, within 30 days after acknowledgement of the agreement. In most cases, the total procedural time of the MRP is 180 days plus 30 days.
The decentralized procedure, or DCP, is used in cases where the medicinal product has not received a marketing authorization in the EU at the time of application. The applicant requests a member state of its choice to act as reference member state to prepare an assessment report that is then used to facilitate agreement with the concerned member states and the grant of a national marketing authorization in all of these member states. In this procedure, the reference member state must prepare, for consideration by the concerned member states, the draft assessment report, a draft SmPC and a draft of the labeling and package leaflet within 120 days after receipt of a valid application. As in the case of mutual recognition, the concerned member states are required to approve these documents within 90 days of their receipt. The reference member state shall record the agreement of all parties, close the procedure and inform the applicant accordingly. Each member state in which an application has been submitted shall adopt a decision in conformity with the approved documents, within 30 days after acknowledgement of the agreement. In most cases the total time of the DCP will be 210 days plus 30 days.
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For both MRP and DCP, if a concerned member state objects to the grant of a marketing authorization on the grounds of a potential serious risk to public health, it shall give a detailed exposition of the reasons for its position with the reference member state, to the other member states concerned and to the applicant. The points of disagreement are in the first instance referred to the co-ordination Group on MRP and DCP to reach an agreement within 60 days of the communication of the points of disagreement. If member states fail to reach an agreement, the reference Member State shall record the agreement, close the procedure and inform the applicant accordingly. If the member states fail to reach an agreement within the 60-day period, then the matter is referred to the EMA and CHMP for arbitration. The CHMP is required to deliver a reasoned opinion within 60 days of the date on which the matter is referred. The scientific opinion adopted by the CHMP forms the basis for a binding European Commission decision. If the member states fail to reach an agreement within the 60-day period, member states that have approved the assessment report, the draft summary of product characteristics and the labelling and package leaflet of the reference Member State may, at the request of the applicant, authorize the medicinal product without waiting for the outcome of the procedure.
Irrespective of whether the medicinal product is assessed centrally, de-centrally or through a process of mutual recognition, the medicinal product must be manufactured in accordance with the principles of GMP for human use as set out in Directive 2001/83/EC and 2017/1572/EU and Delegated Regulation 2017/1569 that have replaced Directive 2003/94/EC.
Directive 2017/1572/EU and Volume 4 of the rules governing medicinal products in the European Union govern GMP in the EU. Moreover, EU law requires the clinical results in support of clinical safety and efficacy based upon clinical trials conducted in the EU to be in compliance with the requirements of Regulation (EU) 536/2014, as amended on December 5, 2022, on clinical trials with medicinal products for human use and Implementing Regulation 556/2017 on GCP-inspections which implement good clinical practice in the conduct of clinical trials on medicinal products for human use. Clinical trials conducted outside the European community and used to support applications for marketing within the EU must have been conducted in a way consistent with the principles set out in Regulation (EU) 536/2014 as regards the rights and safety of the subject and the reliability and robustness of the data generated in the clinical trial. The conduct of a clinical trial in the EU requires, pursuant to Regulation (E) 536/2017, authorization by the relevant national competent authority where a trial takes place, and subject to the relevant national law, an ethics committee to have issued a favorable opinion in relation to the arrangements for the trial. It also requires that the sponsor of the trial, or a person authorized to act on his behalf in relation to the trial, be established in the community. In comparison to the former regime, Regulation (EU) 536/2014 further harmonizes EU law on clinical trials and to some extent facilitates clinical trials conducted in more than one EU Member State. Under Regulation (EU) 536/2014, trial sponsors submit their application for trial approval via an EU Portal, Clinical Trials Information System (CTIS). The approvals will still have to be granted by the competent authorities of the EU Member States where a trial takes place, however, the procedure for approval is conducted in a coordinated manner among the concerned EU Member States as provided under Regulation (EU) 536/2014. While the process for the application and granting of the approvals is streamlined, it is still a complex process that can significantly delay the start of a multinational clinical trial.
The UK has not adopted Regulation (EU) 536/2014 with respect to clinical trials in the UK. Instead, the Medicines for Human Use (Clinical Trials) Regulations 2004 applies with respect to clinical trials in the UK. The UK has adopted new legislation, the Medicines and Medical Devices Act 2021 and has issued a consultation with respect to changes to clinical trial legislation to be made under this Act.
National Procedure
This procedure is available for medicinal products that do not fall within the scope of mandatory centralized authorization. In addition, the national procedure can only be used if the medicinal product does not already have a marketing authorization in another EEA state or has already submitted an application for marketing authorization in one of the other member states of the EU/EEA and the application is under consideration. Specific procedures and timelines differ between member states, but the duration of the procedure without clock-stop time is generally 210 days and based on a risk/efficacy assessment by the competent authority of the member state concerned, followed by determination of SmPC, package leaflet and label text/layout and subsequently grant of the marketing authorization. Marketing authorizations granted on this basis are not mutually recognized by other member states, but the national marketing authorization can later be used in an MRP to obtain marketing authorizations in other member states.
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There are various types of applications for marketing authorizations:
| ● | Full Applications. A full application is one that is made under any of the community procedures described above and that “stands alone” in the sense that it contains all of the particulars and information required by Article 8(3) of Directive 2001/83 (as amended) to allow the competent authority to assess the quality, safety and efficacy of the product and in particular the balance between benefit and risk. Article 8(3)(i) in particular refers to the need to present the results of the applicant’s research on (i) pharmaceutical (physical-chemical, biological or microbiological) tests, (ii) pre-clinical (toxicological and pharmacological) studies and (iii) clinical trials in humans. The nature of these tests, studies and trials is explained in more detail in Annex I to Directive 2001/83/EC. Full applications would be required for products containing new active substances not previously approved by the competent authority, but may also be made for other products. | |
| ● | Abridged Applications. Article 10 and 10(a) of Directive 2001/83/EC, as amended, contain exemptions from the requirement that the applicant has to provide the results of its own pre-clinical and clinical research. There are three regulatory routes for an applicant to seek an exemption from providing such results, namely (i) cross-referral to an innovator’s results without consent of the innovator, (ii) well established use according to published literature and (iii) consent to refer to an existing dossier of research results filed by a previous applicant. |
Cross-referral to Innovator’s Data
Articles 10(1) of Directive 2001/83/EC provide the legal basis for an applicant to seek a marketing authorization on the basis that its product is a generic medicinal product (a copy) of a reference medicinal product that has already been authorized, in accordance with community provisions. A reference product is, in principle, an original product granted an authorization on the basis of a full dossier of particulars and information. This is the main exemption used by generic manufacturers for obtaining a marketing authorization for a copy product. The generic applicant is not required to provide the results of pre-clinical studies and of clinical trials if its product meets the definition of a generic medicinal product and the applicable regulatory results protection period for the results submitted by the innovator has expired. A generic medicinal product is defined as a medicinal product:
| ● | having the same qualitative and quantitative composition in active substance as the reference medicinal product; having the same pharmaceutical form as the reference medicinal product; and | |
| ● | whose bioequivalence with the reference medicinal product has been demonstrated by appropriate bioavailability studies. |
Applications in respect of a generic medicinal product cannot be made before the expiry of the protection period. Where the reference product was granted a national marketing authorization pursuant to an application made before October 30, 2005, the protection period is either six years or 10 years, depending upon the election of the particular member state concerned. Regulation 726/2004, as amended, to Directive 2001/83/EC, as amended, provide for a harmonized protection period regardless of the approval route utilized. The harmonized protection period is in total 10 years, including eight years of research data protection and two years of marketing protection. The effect is that the originator’s results can be the subject of a cross-referral application after eight years, but any resulting authorization cannot be exploited for a further two years. The rationale of this procedure is that the relevant particulars can, if the research data protection period has expired, be found on the originator’s file and used for assessment of the generic medicinal product. The 10-year protection period can be extended to 11 years where, in the first eight years post-authorization, the holder of the authorization obtains approval for a new therapeutic indication assessed as offering a significant clinical benefit in comparison with existing therapies.
If the copy product does not meet the definition of a generic medicinal product (as defined in article 10(2)(b) of the Regulation) or if bioequivalence could not be demonstrated through bioavailability studies or in case of certain types of changes in the active substance(s) or in the therapeutic indications, strength, pharmaceutical form or route of administration in relation to the reference medicinal product, Article 10(3) of Directive 2001/83/EC provides that the results of the appropriate pre-clinical studies or clinical trials must be provided by the applicant.
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Where a biological medicinal product which is similar to a reference biological product does not meet the conditions in the definition of generic medicinal products, owing to, in particular, differences relating to raw materials or differences in manufacturing processes of the biological medicinal product and the reference biological medicinal product, the results of appropriate pre-clinical tests or clinical trials relating to these conditions must be provided ex. article 10(3) of the Regulation. The type and quantity of supplementary data to be provided must comply with the relevant criteria stated in Annex I of the Regulation and the related detailed guidelines. In that case, the results of other tests and trials from the reference medicinal product’s dossier shall not be provided.
Well-established Medicinal Use
Under Article 10a of Directive 2001/83/EC, an applicant may, in substitution for the results of its own pre-clinical and clinical research, present detailed references to published literature demonstrating that the active substance(s) of a product have a well- established medicinal use within the community for at least ten years with recognized efficacy and an acceptable level of safety in terms of the conditions set out in Annex I of Directive 2001/83/EC. In that event, the test and trial results shall be replaced by appropriate scientific literature. The applicant is entitled to refer to a variety of different types of literature, including reports of clinical trials with the same active substance(s) and epidemiological studies that indicate that the constituent or constituents of the product have an acceptable safety/efficacy profile for a particular indication. However, use of the published literature exemption is restricted by stating that in no circumstances active substances be treated as having a well- established use if they have been used for less than 10 years from the first systematic and documented use of the substance as a medicinal product in the EU. Even after 10 years’ systematic use, the threshold for well-established medicinal use might not be met. European pharmaceutical law requires the competent authorities to consider among other factors the period over which a substance has been used, the amount of patient use of the substance, the degree of scientific interest in the use of the substance (as reflected in the scientific literature) and the coherence (consistency) of all the scientific assessments. For this reason, different substances may reach the threshold for well-established use after different periods, but the minimum period is 10 years. If the applicant seeks approval of an entirely new therapeutic use compared with that to which the published literature refers, additional pre-clinical and/or clinical results would have to be provided.
Authorization Holder’s Consent
Under Article 10c of Directive 2001/83/EC, following the grant of a marketing authorization the holder of such authorization may consent to a competent authority utilizing the pharmaceutical, pre-clinical and clinical documentation that it submitted to obtain approval for a medicinal product to assess a subsequent application relating to a medicinal product possessing the same qualitative and quantitative composition with respect to the active substances and the same pharmaceutical form.
Law Relating to Pediatric Research
Regulation (EC) 1901/2006 (as amended by Regulation (EC) 1902/2006 and Regulation (EU) 2019/5) was adopted on December 12, 2006. This Regulation, as amended on January 28, 2019, governs the development of medicinal products for human use in order to meet the specific therapeutic needs of the pediatric population (children aged 0 to 17 years). It requires any application for marketing authorization made after July 26, 2008 in respect of a medicinal product not authorized in the European Community on January 26, 2007 (the time the Regulation entered into force), to include the studies performed in accordance with a pediatric investigation plan agreed by the Pediatric Committee of the EMA, unless the product is subject to an agreed waiver or deferral or unless the product is excluded from the scope of Regulation 1901/2006 (generics, hybrid medicinal products, biosimilars, homeopathic and traditional (herbal) medicinal products and medicinal products containing one or more active substances of well-established medicinal use) according to article 9 of Regulation (EC) 1901/2006, as amended on January 28, 2019. Waivers can be granted in certain circumstances where pediatric studies are not required or desirable. Deferrals can be granted in certain circumstances where the initiation or completion of pediatric studies should be deferred until appropriate studies in adults have been performed. The EMA does not evaluate an application for market authorization that is not exempt from Regulation (EC) 1901/2006, as amended, if there is no agreed PIP, deferral or waiver. Moreover, this regulation imposes the same obligation from January 26, 2009 on an applicant seeking approval of a new indication, pharmaceutical form or route of administration for a product already authorized and still protected by a supplementary protection certificate granted under Regulation EC 469/2009 and its precursor Regulation (EEC) 1768/92 or by a patent that qualifies for the granting of such a supplementary protection certificate. The pediatric Regulation (EC) 1901/2006 also provides, subject to certain conditions, a reward for performing such pediatric studies, regardless of whether the pediatric results provided resulted in the grant of a pediatric indication. This reward comes in the form of an extension of six months to the supplementary protection certificate granted in respect of the product, unless the product is subject to orphan drug designation, in which case the 10-year market exclusivity period for such an orphan product is extended to 12 years. If any of the non-centralized procedures for marketing authorization have been used, the six-month extension of the supplementary protection certificate is only granted if the medicinal product is authorized in all member states. Where the product is no longer covered by a patent or supplementary protection certificate, the applicant may make a separate application for a Pediatric Use Marketing Authorization, or PUMA, which, on approval, will provide eight years’ protection for data and 10 years’ marketing protection for the pediatric results.
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Post-authorization Obligations
In the pre-authorization phase, the applicant must provide a detailed pharmacovigilance plan that it intends to implement post- authorization. An authorization to market a medicinal product in the EU carries with it an obligation to comply with many post- authorization organizational and behavioral regulations relating to the marketing and other activities of authorization holders. These include requirements relating to post-authorization efficacy studies, post-authorization safety studies, adverse event reporting and other pharmacovigilance requirements, advertising, packaging and labeling, patient package leaflets, distribution and wholesale dealing. The regulations frequently operate within a criminal law framework and failure to comply with the requirements may not only affect the authorization, but also can lead to financial and other sanctions levied on the company in question and responsible officers. EU pharmacovigilance legislation has been significantly modified by the Pharmacovigilance Directive, Dir. 2010/84/EC, as amended on January 20, 2011 which amended the legal framework of pharmacovigilance for medicines marketed within the EU provided in Regulation (EC) No 726/2004 with respect to EU authorized medicinal products and in Directive 2001/83/EC with respect to nationally authorized medicinal products (including those authorized through the mutual recognition and decentralized systems). In addition, Commission Implementing Regulation (EU) No 520/2012 outlines the practical details to be respected by marketing authorization holders, national competent authorities and the EMA, Regulation (EU) No 1027/2012 and Directive 2012/26/EU which further amended the pharmacovigilance legislation to further strengthen the protection of patient health by allowing prompt notification and assessment of safety issues and Commission Delegated Regulation (EU) No 357/2014 on post-authorization efficacy studies specifies the situations in which such studies may be required. Furthermore, EU good pharmacovigilance practice (GVP) rules apply. With these amended pharmacovigilance requirements, the financial and organizational burden on market authorization holders is significant, such as the obligation to maintain a pharmacovigilance system master file that applies to all holders of marketing authorizations granted in accordance with Directive 2001/83/EC, as amended on January 1, 2025, or Regulation (EC) No 726/2004, as amended on January 28, 2022. Marketing authorization holders must furthermore collect data on adverse events associated with use of the authorized product outside the scope of the authorization. Pharmacovigilance for biological products and medicines with a new active substance is even stricter, as their authorization is subject to additional monitoring activities.
Any authorization granted by member state authorities, which within three years of its granting is not followed by the actual placing on the market of the authorized product in the authorizing member state, ceases to be valid (Art. 24 (4) Directive 2001/83/EC). When an authorized product previously placed on the market in the authorizing member state is no longer actually present on the market for a period of three consecutive years, the authorization for that product shall cease to be valid (Art. 24 (5) Directive 2001/83/EC). The same two three-year periods apply to authorizations granted by the European Commission based on the centralized procedure (Art. 14 (4) and (5) Regulation (EC) 726/2004).
Other Countries
In addition to regulations in the United States, the EU, the UK and Israel, we are subject to a variety of other regulations governing clinical trials and commercial sales and distribution of drugs in other countries. Whether or not Aramchol or any other product candidate receive approval from the FDA, approval of such product candidates must be obtained by the comparable regulatory authorities of countries other than the United States before we can commence clinical trials or marketing of the product in those countries. The approval process varies from jurisdiction to jurisdiction, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials and product licensing vary greatly from country to country.
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The requirements that we and our collaborators must satisfy to obtain regulatory approval by government agencies in other countries prior to commercialization of Aramchol or any other product candidate in such countries can be rigorous, costly and uncertain. In the European countries, UK, Canada and Australia, regulatory requirements and approval processes are similar in principle to those in the United States. Additionally, depending on the type of drug for which approval is sought, there are currently two potential tracks for marketing approval in the European countries: mutual recognition and the centralized procedure. These review mechanisms may ultimately lead to approval in all EU countries, but each method grants all participating countries some decision-making authority in product approval. The UK has a separate review period but for a transitional period until 31 December 2022, may rely on approvals under the EU mutual recognition and/or centralized procedure. Foreign governments also have stringent post-approval requirements including those relating to manufacture, labeling, reporting, record keeping and marketing. Failure to substantially comply with these on-going requirements could lead to government action against the product, us and/or our representatives.
Related Matters
From time to time, legislation is drafted, introduced and passed in governmental bodies that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA, MHRA or EMA and other applicable regulatory bodies to which we are subject. In addition, regulations and guidance are often revised or reinterpreted by the national agency in ways that may significantly affect our business and our therapeutic candidates. It is impossible to predict whether such legislative changes will be enacted, whether FDA, MHRA or EMA regulations, guidance or interpretations will change, or what the impact of such changes, if any, may be. We may need to adapt our business and therapeutic candidates and products to changes that occur in the future.
Digital Asset Management Strategy
In August 2025, we announced that our board of directors approved a digital asset management strategy as part of a new treasury investment policy and capital allocation initiative. We established a crypto committee of our board of directors with respect to evaluating and, if appropriate, overseeing the implementation of any crypto investing related activities, including a potential allocation of up to 50% of our cash reserves to be used for the purchase of digital assets, such as Bitcoin and Ethereum. To support the execution of this initiative, we entered into a non-binding letter of intent for the engagement of Tectona Ltd. (TASE: TECT), or Tectona, a specialized and reputable crypto treasury management service provider, that provides advisory and operational services for the management of digital asset exposures. While we have not yet implemented any allocation of our cash reserves toward digital assets, we continue to evaluate potential opportunities under digital asset management strategy. After further evaluation, we have determined not to proceed with the implementation of this digital asset management strategy at this time; however, we may revisit and reconsider such initiatives in the future as market conditions, regulatory developments, strategic priorities and our business need evolve.
C. Organizational Structure
See “Item 4. Information on the Company—Historical Background and Corporate Structure” above.
D. Property, Plant and Equipment
Our principal executive offices and registered office in Israel is located at 16 Abba Hillel Road, Ramat Gan, Israel 5250608 and our telephone number is +972-3-693-8448.
ITEM 4A. Unresolved Staff Comments.
None.
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ITEM 5. Operating and Financial Review and Prospects.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes that appear elsewhere in this annual report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Our discussion and analysis for the year ended December 31, 2024 can be found in our Annual Report on Form 20-F for the fiscal year ended December 31, 2024, filed with the SEC on April 2, 2025 (File No. 001-36345).
Overview
We are a biopharmaceutical company focused on the development of Aramchol. Historically, we have focused almost exclusively on developing Aramchol for the treatment of liver disease and were previously developing Aramchol for primary sclerosing cholangitis, or PSC, and exploring the feasibility of developing Aramchol for other fibro-inflammatory indications outside of NASH and fibrosis.
We are currently seeking to advance the development of Aramchol for oncological indications outside of NASH and fibrosis. In addition, as part of our growth strategy, we are actively pursuing opportunities to expand and diversify our product pipeline specifically targeting cardiometabolic indications and other innovative product candidates that align with our core expertise in drug development.
To date, we have not generated revenue from the sale of any product, excluding the licensing revenue we recorded in connection with the Samil Agreement, and we do not expect to generate any significant revenue other than the amortization of the upfront payments under the license agreement with Samil and of the subsequent royalties and/or milestones that may be earned in connection with the Samil Agreement or potential other license Agreements, unless and until we commercialize Aramchol, or license the product to additional third parties. As of December 31, 2025, we had an accumulated deficit of approximately $210.8 million.
Our financing activities are described below under “Liquidity and Capital Resources.” Obtaining approval of an NDA, MMA, or other similar application is an extensive, lengthy, expensive and uncertain process, and the FDA, EMA, MHRA and other regulatory agencies may delay, limit or deny approval of Aramchol or any other product candidate.
Financial Overview
To date, we have funded our operations primarily through proceeds from private placements and public offerings. At December 31, 2025, we had current assets of $18.6 million, which is mainly comprised of cash and cash equivalents of $4.0 million, restricted cash of $0.1 million, short-term deposits of $7.1 million and short-term marketable securities of $7.0 million. This compares with current assets of $16.1 million at December 31, 2024 which is mainly comprised of cash and cash equivalents of $4.7 million, restricted cash of $0.1 million, short-term deposits of $3.5 million and short-term marketable securities of $7.2 million. We believe that such existing funds will be sufficient to continue our business and operations as currently conducted for more than 12 months from the date of issuance of this annual report. However, significant additional funding will be necessary to fund our ongoing research and development work and to advance our product candidates through regulatory approval and into commercialization, if approved. We intend to obtain additional funding through debt or equity financings, governmental grants or through entering into collaborations, strategic alliances or license agreements to increase the funds available to support our operating and capital needs. Although we have been successful in raising capital in the past, there is no assurance that we will be successful in obtaining additional financing on terms acceptable to us. If funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans for, or commercialization efforts with respect to Aramchol, and/or our other pre-clinical and clinical programs. This may raise substantial doubts about our ability to continue as a going concern.
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Costs and Operating Expenses
Our current costs and operating expenses consist of two components: (i) research and development expenses; and (ii) general and administrative expenses.
Research and Development Expenses
Our research and development expenses consist primarily of outsourced development expenses, salaries and related personnel expenses and fees paid to external service providers, patent-related legal fees, costs of pre-clinical studies and clinical trials and drug and laboratory supplies. We account for all research and development expenses as they are incurred. We expect our research and development expense to remain one of our primary expenses in the near future as we continue to develop Aramchol. Increases or decreases in research and development expenditures are primarily attributable to the number and/or duration of the pre-clinical and clinical studies that we conduct.
We expect that a substantial amount of our research and development expense in the future will be incurred in support of our current and anticipated pre-clinical and clinical development projects. Due to the inherently unpredictable nature of pre-clinical and clinical development studies, we are unable to estimate with any certainty the costs we will incur in the continued development of Aramchol and other product candidate. Clinical development timelines, the probability of success and development costs can differ materially from expectations. We currently expect to continue testing Aramchol in pre-clinical studies for toxicology, safety and efficacy, and to conduct additional clinical trials for Aramchol.
The lengthy process of completing clinical trials and seeking regulatory approval for Aramchol requires the expenditure of substantial resources. Any failure or delay in completing clinical trials, or in obtaining regulatory approvals, could cause a delay in generating product revenue and cause our research and development expenses to increase and, in turn, have a material adverse effect on our operations. Because of the factors set forth above, we are not able to estimate with any certainty when we would recognize any net cash inflows from our projects.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation for employees in executive and operational roles, including finance/accounting, legal and other operating positions in connection with our activities. Our other significant general and administrative expenses include non-cash stock-based compensation costs and facilities costs (including the rental expense for our offices in Tel Aviv, Israel), professional fees for outside accounting and legal services, travel costs, investors relations, insurance premiums and depreciation.
General and administrative expenses also consist of costs associated with being a public company, including expenses related to services associated with maintaining compliance with The Nasdaq Capital Market and SEC requirements, directors and officers insurance, increased legal and accounting costs and investor relations costs.
Financial Income, Net
Our financial income, net consists mainly of interest income from marketable debt securities, expenses that we incurred in establishing the SEPA, which includes ordinary shares to the equity line provider, and foreign currency gains. Our financial expenses consist of fees associated with banking activities and losses from realization of marketable debt securities.
Financial expenses in connection with SEPA
Financial expenses in connection with the SEPA (as defined below) consists of one-time expenses that we incurred in establishing the SEPA, which includes fees paid in cash and ordinary shares to the equity line provider.
Impairment on associate and associated loan
The impairment of associate consists of changes in the fair value of our investment in OnKai and an associate loan.
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A. Results of Operations
The table below provides our results of operations for the year ended December 31, 2025 as compared to the year ended December 31, 2024.
| Year Ended December 31, | ||||||||
| 2024 | 2025 | |||||||
| (thousands) | ||||||||
| Research and development expenses | $ | 2,979 | $ | 4,874 | ||||
| General and administrative expenses | 3,299 | 3,636 | ||||||
| Operating loss | 6,278 | 8,510 | ||||||
| Financial income, net | (516 | ) | (741 | ) | ||||
| Financial expenses related to SEPA | 610 | 79 | ||||||
| Impairment on associate and associated loan | 1,145 | 2,461 | ||||||
| Net loss | $ | 7,517 | $ | 10,309 | ||||
| Other comprehensive loss: | ||||||||
| Net unrealized gain on available for sale securities | (38 | ) | (113 | ) | ||||
| Comprehensive loss | $ | 7,479 | $ | 10,196 | ||||
| Basic and diluted net loss per share from continuing operations | $ | 8.08 | $ | 2.39 | ||||
Research and Development Expenses
Our research and development expenses amounted to approximately $4.9 million during the year ended December 31, 2025, representing an increase of approximately $1.9 million, or approximately 64%, compared to approximately $3.0 million for the year ended December 31, 2024. The increase primarily resulted from an increase in clinical trial expenses in the amount of approximately $1.1 million as well as an increase in pre-clinical studies expenses of approximately $0.6 million.
General and Administrative Expenses
Our general and administrative expenses amounted to approximately $3.6 million for the year ended December 31, 2025, representing an increase of approximately $0.3 million, or 10.2%, compared to approximately $3.3 million for the year ended December 31, 2024. The increase primarily resulted from an increase in salaries and benefits expenses of $0.3 million.
Operating Loss
As a result of the foregoing research and development and general and administrative expenses, as well as our failure to generate substantial operating revenues, our operating loss for the year ended December 31, 2025 was approximately $8.5 million, representing an increase in our operating loss of approximately $2.2 million, or approximately 35%, compared to approximately $6.3 million for the year ended December 31, 2024.
Financial Income, Net
Our financial income, net, for the year ended December 31, 2025 was approximately $0.7 million, representing an increase of approximately $0.2 million, compared to a financial income of approximately $0.5 million for the year ended December 31, 2024. The increase primarily resulted from an increase of interest income of $0.4 million during the year ended in 2025 as compared to such income for the comparable period in 2024.
Financial expenses related to SEPA
For the year ended December 31, 2025, we incurred financial expenses of approximately $0.1 million in relation to the SEPA compared to financial expenses of approximately $0.6 million in relation to the SEPA for the year ended December 31, 2024.
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Impairment on associate and associated loan
Our investment in Onkai is presented in our consolidated financial statements at its fair value. As of December 31, 2024, management, based on fair value estimation, assessed the qualitative aspects of the equity investment and macroeconomic factors and determined that an impairment should be recognized in the amount of approximately $1.1 million. On December 29, 2025, OnKai filed a certificate of dissolution with the Secretary of State of the State of Delaware for winding up its affairs and dissolving as an entity. As of December 31, 2025, we determined that our investment and related balances in OnKai, including a long-term loan, were not recoverable and recorded a full write-off of such amounts, resulting in an aggregate loss of approximately $2.5 million.
Net Loss
Our net loss for the year ended December 31, 2025 was approximately $10.3 million, representing an increase of approximately $2.8 million, or approximately 37%, compared to approximately $7.5 million for the year ended December 31, 2024. The increase primarily resulted from the increase in research development expenses and general and administrative expenses and as well the impairment in associate and associated loan recorded.
B. Liquidity and Capital Resources
Overview
To date, we have funded our operations primarily through proceeds from private placements and public offerings and we have incurred substantial losses since our inception. As of December 31, 2025, we had an accumulated deficit of approximately $210.8 million and positive working capital (current assets less current liabilities) of approximately $15.8 million. We expect that operating losses will continue for the foreseeable future.
As of December 31, 2025, we had cash and cash equivalents of approximately $4.0 million, restricted cash of $0.1 million, short-term deposits of $7.2 million and short-term marketable debt securities of approximately $7.0 million invested in accordance with our investment policy, totaling approximately $18.3 million, as compared to cash and cash equivalents of approximately $4.7 million, restricted cash of $0.1 million, short-term deposits of $3.5 million and short-term marketable debt securities of approximately $7.2 million invested in accordance with our investment policy, totaling approximately $15.5 million as of December 31, 2024.
We generally enter into contracts in the ordinary course of business with CROs for clinical trials and clinical supply manufacturing and with vendors for pre-clinical research studies and other services and products for operating purposes, which generally provide for termination within 30 to 90 days of notice, and therefore are cancelable contracts and not included in the discussion above. We have included as purchase obligations our commitments under agreements to the extent they are quantifiable and are not cancelable.
Other than as described above, we did not have any material commitments for capital expenditures, including any anticipated material acquisition of plant and equipment or interests in other companies, as of December 31, 2024.
Cash Flow from Operating Activities
We had negative cash flow from operating activities of approximately $6.3 million for the year ended December 31, 2025 as compared to a negative cash flow from operating activities of approximately $5.9 million for the year ended December 31, 2024. The negative cash flow from operating activities for the year ended December 31, 2025 was mainly attributable to our net loss of approximately $10.3 million, partially offset by non-cash stock-based compensation expenses of approximately $0.5 million, an impairment of an investment in associate and associated loan of approximately $2.5 million and an increase in trade payables of $0.7 million
Cash Flow from Investing Activities
We had negative cash flow from investing activities of approximately $3.4 million for the year ended December 31, 2025 as compared to a negative cash flow from investing activities of approximately $1.1 million for the year ended December 31, 2024. The negative cash flow from investing activities for the year ended December 31, 2025 was primarily due to a net investment of $3.6 million in short-term deposits.
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Cash Flow from Financing Activities
We had positive cash flow from financing activities of approximately $9.0 million for the year ended December 31, 2025 as compared to a positive cash flow from financing activities of $8.8 million for the year ended December 31, 2024. The positive cash flow from financing activity for the year ended December 31, 2025 was due to net proceeds from our ATM Facility (as defined below) and proceeds raised under the SEPA (as defined below).
On July 14, 2023, we entered into a definitive securities purchase agreement with investors for the purchase and sale in a public offering of (i) 31,667 of our ordinary shares, (ii) 435,000 pre-funded warrants to purchase 435,000 ordinary shares, or the Pre-Funded Warrants, and (iii) 466,666 warrants to purchase 466,666 ordinary shares, or the Investor Warrants, at a purchase price of $15.00 per Share and accompanying Investor Warrant and $14.988 per Pre-Funded Warrant and accompanying Investor Warrant. The net proceeds to the offering were approximately $6.5 million before deducting estimated offering expenses payable by us. As of the date hereof, all Pre-Funded Warrants have been exercised in full into 435,000 ordinary shares and 293,333 Investor Warrants have been exercised into 293,333 ordinary shares for a total net proceeds of approximately of $4.4 million. As of March 25, 2026 Warrants to purchase 173,333 ordinary shares are outstanding.
On August 30, 2024, we entered into a Standby Equity Purchase Agreement, (or the “SEPA”), with YA II PN, LTD., a Cayman Islands exempt limited partnership, or YA. Pursuant to the SEPA, we have the right, but not the obligation, to sell to YA from time to time, each such occurrence, an Advance, up to $10.0 million, or the Initial Commitment Amount, of our ordinary shares, during the 36 months following the execution of the SEPA, subject to the restrictions and satisfaction of the conditions in the SEPA. On October 21, 2024, we and YA entered into an amendment to the SEPA to increase the Initial Commitment Amount to $20.0 million of our ordinary shares. At our option, the ordinary shares would be purchased by YA from time to time at a price equal to 97% of the lowest of the three daily VWAPs (as hereinafter defined) during a three consecutive trading day period commencing on the date that we, subject to certain limitations, deliver a notice to YA that we are committing YA to purchase such ordinary shares, or the Advance Shares. We may also specify a certain minimum acceptable price per share in each Advance. “VWAP” means, for any trading day, the daily volume weighted average price of our ordinary shares for such trading day on the Nasdaq Stock Market during regular trading hours as reported by Bloomberg L.P. As consideration for YA irrevocable commitment to purchase our ordinary shares up to the Initial Commitment Amount, we issued 31,566 ordinary shares, or the Commitment Shares, to YA and also paid a $15,000 structuring fee to an affiliate of YA. During the year ended December 31, 2025, we issued an aggregate of 1,076,326 ordinary shares that we sold to YA as Advance Shares for aggregate gross proceeds of approximately $1.4 million.
On November 14, 2024, we entered into a Capital on Demand Sales Agreement, or the 2024 Sales Agreement, with JonesTrading Institutional Serviecs LLC, or JonesTrading. Pursuant to the 2024 Sales Agreement, we may offer and sell our ordinary shares having an aggregate offering price of up to $8.1 million, from time to time through JonesTrading, or the ATM Facility. JonesTrading will receive a commission equal to 3.0% of the gross proceeds from the sale of the ordinary shares and will be reimbursed for certain specified expenses in connection with entering into the Sales Agreement. During the year ended December 31, 2025, we sold 3,687,038 of our ordinary shares for aggregate gross proceeds of approximately $8.1 million ($7.7 million net) pursuant to the 2024 Sales Agreement.
Current Outlook
Although we provide no assurance, we believe that our existing funds will be sufficient to continue our business and operations as currently conducted for more than 12 months from the date of this Annual Report. However, significant additional funding will be necessary to fund ongoing research and development work, to advance our product candidates through regulatory approval and into commercialization, if approved. We intend to obtain additional funding through debt or equity financings, governmental grants or through entering into collaborations, strategic alliances or license agreements to increase the funds available to support our operating and capital needs. Although we have been successful in raising capital in the past, there is no assurance that we will be successful in obtaining additional financing on terms acceptable to us. If funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans for, or commercialization efforts with respect to Aramchol, and/or our other pre-clinical and clinical programs. This may raise substantial doubts about our ability to continue as a going concern.
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The extent of our future capital requirements will depend on many other factors, including:
| ● | the outcome of an evaluation of potential strategic alternatives; |
| ● | the progress and costs of our pre-clinical studies, clinical trials and other research and development activities; |
| ● | the regulatory pathway of Aramchol any other product candidate; |
| ● | the scope, prioritization and number of our clinical trials and other collaboration research and development programs; |
| ● | the amount of revenues and contributions we receive under future licensing, development and commercialization arrangements with respect to Aramchol or any other product candidate; |
| ● | the costs of the development and expansion of our operational infrastructure; |
| ● | the costs and timing of obtaining regulatory approval for Aramchol or any other product candidate; |
| ● | the ability of us, or our collaborators, to achieve development milestones, marketing approval and other events or developments under our potential future licensing agreements; |
| ● | the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; |
| ● | the costs and timing of securing manufacturing arrangements for clinical or commercial production; |
| ● | the costs of contracting with third parties to provide sales and marketing capabilities for us; |
| ● | the costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or platforms; |
| ● | the magnitude of our general and administrative expenses; |
| ● | any cost that we may incur under future in- and out-licensing arrangements relating to Aramchol or any other product candidate; |
| ● | market conditions; |
| ● | our ability to main the listing of our ordinary shares on The Nasdaq Capital Market; |
| ● | our ability to identify, evaluate and complete any strategic alternative that yields value for our shareholders; and |
| ● | the impact of the security situation in Israel, which may exacerbate the magnitude of the factors discussed above. |
C. Research and Development, Patents and Licenses
For information concerning our research and development policies and a description of the amount spent during each of the last three fiscal years on company-sponsored research and development activities, see “Item 5. Operating and Financial Review and Prospects—Results of Operations.”
D. Trend Information
We are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development or commercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information to not necessarily be indicative of future operating results or financial conditions. However, to the extent possible, certain trends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”
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E. Critical Accounting Policies and Estimates
We prepare our financial statements in accordance with U.S. GAAP. In doing so, we must make estimates and assumptions that affect our reported amounts of assets, liabilities and expenses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably have used different accounting policies and estimates. Changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected.
While our significant accounting policies are described in more detail in the notes to our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 20-F we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements:
Accounting for stock-based compensation:
We grant equity-based awards under share-based compensation plans. We estimate the fair value of share-based payment awards using the Black-Scholes option valuation model. The Black-Scholes option valuation model requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free interest rate, dividend yield, and expected life of the option. Share-based compensation expense is based on awards ultimately expected to vest. Changes in assumptions used under the Black-Scholes option valuation model could materially affect our net loss and net loss per share.
Accounting for Marketable Debt Securities
Our debt securities are classified as available-for-sale and recorded at fair value. We determine the appropriate classification of investments in debt securities at the acquisition date and re-evaluates the classification at each balance sheet date. Unrealized gains and losses during the year, net of the related tax effect applicable to available-for-sale are excluded from income and reflected in other comprehensive income (loss) as a separate component of shareholders’ equity until realized. As the result of the adoption of Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument (“ASU 2016-13”) we assess the need at each period end to record an allowance for credit loss. Any portion of the market decline related to debt securities that is believed to arise from factors other than credit is recorded as a component of other comprehensive income (loss) rather than against income.
Accounting for Investment in Associate at Fair Value
We, through our wholly-owned subsidiary in Israel, Galtopa Therapeutics Ltd., hold an equity investment of a privately-owned company Onkai, over which have the ability to exercise significant influence, but not control. The investment was included as a non-current asset in our balance sheet as of December 31, 2024. On December 29, 2025, OnKai filed a certificate of dissolution with the Secretary of State of the State of Delaware for winding up its affairs and dissolving as an entity. As of December 31, 2025, we determined that our investment and related balances in OnKai, including a long-term loan, were not recoverable and recorded a full write-off of such amounts, resulting in an aggregate loss of approximately $2.5 million. We have elected the fair value option allowed by Accounting Standards Codification 825, Financial Instruments, with respect to this investment because our management believes this approach will better reflect the economics of our equity interest. Under the fair value option, the investment is remeasured at fair value (level 3) at each reporting period with changes in fair value, if any, recorded in the statement of operations.
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ITEM 6. Directors, Senior Management and Employees.
A. Directors and Senior Management.
Set forth below is information concerning the directors, senior management and executive officers of the Company as of March 25, 2026, the latest practicable date for inclusion in this annual report. The business address for each of our directors, senior management and corporate officers is c/o Galmed Pharmaceuticals Ltd., c/o Meitar Law Offices, 16 Abba Hillel Silver Rd. Ramat Gan, 5250608.
| Name | Age | Position | ||
| Allen Baharaff | 61 | President and Chief Executive Officer, Class II Director | ||
| Dr. Liat Hayardeny | 59 | Chief Scientist Officer | ||
| Doron Cohen | 59 | Chief Financial Officer | ||
| Yohai Stenzler | 43 | Chief Accounting Officer | ||
| Guy Nehemya | 41 | Chief Operating Officer and Data Protection Officer | ||
| David Sidransky, M.D.(1)(2)(3)(4)(5) | 65 | Lead Independent Director and Chairman of the R&D Committee, Chairman of our Nomination Committee, Chairman of our Remuneration Committee, and Class III director | ||
| Shmuel Nir(2)(3)(4)(5) | 64 | Class I Director | ||
| Amir Poshinski(2)(3)(4)(5) | 65 | Chairman of our Audit Committee, Class III director | ||
| Carol L. Brosgart, M.D. (1) (2) | 74 | Class I Director |
| (1) | A member of our research & development committee. | |
| (2) | Independent director under applicable Nasdaq Capital Market and SEC rules, as affirmatively determined by our Board. | |
| (3) | A member of our audit committee. | |
| (4) | A member of our remuneration committee. | |
| (5) | A member of our nomination committee. |
Allen Baharaff, our President and Chief Executive Officer of our Board, co-founded the Group in 2000, served as the Chief Financial Officer of GHI from 2000 until January 2015, and has served as our Chief Executive Officer since January 2012 and as our President since March 2015. Previously, he held a senior executive position at Isramex Projects Ltd., an energy project financing company, and Managing Director of T+M Trusteeship & Management Services (Israel) Ltd., a subsidiary of a Swiss company providing trust and similar services. Since 2005, Mr. Baharaff serves as a Director of the Rubin Museum. From October 2023 to September 2025 , Allen served as a director of Onkai Inc, a private US-based technology company Mr. Baharaff holds a Bachelor of Science degree in economics from the London School of Economics, University of London and LLB and MA degrees from Cambridge University. Since 1993, Mr. Baharaff has been a member of the Israel Bar Association.
Dr. Liat Hayardeny, our Chief Scientific Officer joined the Company in September 2016 bringing more than 17 years of experience in drug development at all stages as part of Teva Pharmaceuticals’ global Research and Development Division. Prior to joining Galmed, Dr. Hayardeny served as Teva’s Senior Director and Head of Research Scientific Affairs. In that capacity, Dr. Hayardeny established the scientific positioning of Teva’s innovative compounds. Additionally, Dr. Hayardeny was responsible for Teva’s relationship with institutions of higher education; managing Teva’s global research collaborations and publications. Dr. Hayardeny holds a Ph.D. from Sackler School of Medicine and an MBA from Recanati Business School at Tel Aviv University.
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Doron Cohen, our Chief Financial Officer, joined the Company in February 2022, after providing the Company consulting services, including with respect to management of the Company’s funds, since 2018. Mr. Cohen brings more than twenty-five years of experience in the global financial markets, including significant experience on the buy side of life sciences companies. Since 2016, Mr. Cohen has served as Chief Executive Officer at Tangram Strategic Ltd., a boutique investment firm offering strategic solutions in economic & financial research, risk and regulation. Before that, between 1992 and 2017, Mr. Cohen served as Research Director at Gems Investments Research Ltd., an investment research company. During his tenure there, he provided research to hedge funds and managed three teams of analysts, focusing on investment research, operations research, and risk analysis. Prior to that from 1990 to 1992, Mr. Cohen served as Director of Public Relations at the World Union of Jewish Students. Since October 2023, Doron serves as the interim CFO of Onkai Inc, a private US-based technology company Mr. Cohen holds a Master of Science degree in management from Boston University, and a Bachelor’s degree in philosophy and political science from the University of New South Wales.
Yohai Stenzler, our Chief Accounting Officer, has served in such capacity since February 2022. Mr. Stenzler joined the Company in June 2014 as the Company’s corporate controller, and later on served as the Company’s Director of Finance. Between February 2017 to February 2022, Mr. Stenzler served as our Chief Financial Officer. Mr. Stenzler has six years of financial management experience as an accountant at the real estate department at Ernst & Young LLP, where he was involved in financing, taxes, auditing, advising and accounting of public and private companies, both domestic and international. Mr. Stenzler is a certified CPA and holds a MBA in Finance from Recanati Business School at Tel Aviv University, and a BA in Economics and Accounting from Ben-Gurion University of the Negev.
Guy Nehemya, our Chief Operating Officer and Data Protection Officer, has served in each role since January 2019 and March 2021, respectively. Between March 2017 and January 2019, Mr. Nehemya served as our Vice President, Operations. Mr. Nehemya joined the Company in October 2013 as the Company’s Director of Operations, after completing his internship at Agmon, Rosenberg, HaCohen & Co. Law Offices. Mr. Nehemya was a key member of management during the Company’s initial public offering and execution thereof. Mr. Nehemya holds a LL.B. from the College of Management and is currently completing his MBA degree at the IDC Herzliya. Mr. Nehemya has been a member of the Israeli Bar Association since 2012.
David Sidransky, M.D., the chairman of our Nomination, Remuneration and R&D Committees, joined our Board in June 2014, originally as an external director. Dr. Sidransky is a renowned oncologist and research scientist named and profiled by TIME magazine in 2001 as one of the top physicians and scientists in America, recognized for his work with early detection of cancer. He serves as the Director of the Head and Neck Cancer Research Program at the Sidney Kimmel Comprehensive Cancer Center at Johns Hopkins University. He is a Professor of Oncology, Otolaryngology, Cellular & Molecular Medicine, Urology, Genetics, and Pathology at Johns Hopkins University and Hospital. Dr. Sidransky has written over 600 peer-reviewed publications and has contributed to more than 60 cancer reviews and chapters. Dr. Sidransky is a founder of a number of biotechnology companies and holds numerous biotechnology patents. He has been the recipient of many awards and honors, including the 1997 Sarstedt International prize from the German Society of Clinical Chemistry, 1998 Alton Ochsner Award Relating Smoking and Health by the American College of Chest Physicians and the 2004 Hinda Rosenthal Award and 2017 Team Award presented by the American Association of Cancer Research. Dr. Sidransky has served as Vice Chairman of the Board of Directors of ImClone. He is Chairman of the Board of Ayala Pharma (Nasdaq: AYLA), and is a lead director at Champions Oncology and on the board of directors of Ascentage Pharma and Nectin Therapeutics (Nasdaq: AAPG). He previously served on the board of director of Orgensis Inc. (Nasdaq ORGS. He is serving and has served on scientific advisory boards of corporations and institutions, including Amgen, MedImmune, Roche and Veridex, LLC (a Johnson & Johnson diagnostic company), among others. In addition, Dr. Sidransky served as Director of American Association for Cancer Research from 2005 to 2008. Dr. Sidransky received his B.A. from Brandeis University and his M.D. from the Baylor College of Medicine.
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Shmuel Nir, a director of the Company since 2007, serves as President and Chief Executive Officer of Tushia Consulting Engineers Ltd., an investment and management services company. From January 2001 to January 2016, Mr. Nir served as Chairman of the board of directors of Matan Digital Printers Ltd. From March 1998 to January 2008, he served as President and Chief Executive Officer of Macpell Industries Ltd., a leading industrial group. Between January 1991 and March 1998, Mr. Nir was an Executive Vice President of Operations at Macpell Industries Ltd. and President and Chief Executive Officer of two of its subsidiaries, New Net Industries Ltd. and New Net Assets Ltd. Prior to January 1991, Mr. Nir had held various positions with Intel Corporation in Jerusalem, Israel and Tefen Management Consulting. Between 1999 and 2006, Mr. Nir served as managing partner at Spring Venture Capital Fund. Mr. Nir holds a B.Sc. in Industrial Engineering and Management from the Technion - Israel Institute of Technology in Haifa, which was awarded in 1989.
Amir Poshinski, joined our Board in June 2020. Mr. Poshinski is an entrepreneur with over 20 years’ management and leadership experience across multiple industries, including technology, biotechnology, banking and real estate. Mr. Poshinski is the owner of DAP Holdings, through which he has acted since 2010 as a management consultant and strategic advisor to global companies. Mr. Poshinski currently serves as a member of the advisory board of Benson Oak Ventures, a venture focused fund, as well as several other private companies. Prior to 2010, Mr. Poshinski served as Deputy CEO of Primsa Investment House, which at the time was Israel’s largest investment house, Deputy CEO of Discount Mortgage Bank, the real estate lending arm of one of Israel’s largest banks, VP of Marketing at Comverse, a telecommunications software company that was listed on Nasdaq, VP Marketing, Sales and Advertising of Mifal Hapayis, Israel’s national lottery, and VP and Deputy CEO of the Economic Company of the Israeli Local Authorities Association. Mr. Poshinski previously served on the board of directors of each of TAS-AGT (a TATA joint venture), Excellence Nessuah Mutual Funds, and Therapix Biosciences (Nasdaq: TRPX) as well as several other private companies. Mr. Poshinski holds a B.A. in Business Administration and Marketing from the New York Institute of Technology.
Carol L. Brosgart, M.D. joined our Board on June 7, 2017. Dr. Brosgart served as a member of Tobira Therapeutics’s Board of Directors from 2009 until it was acquired by Allergan in 2016 and on the Board of Juvaris, a vaccine company acquired by Bayer. From 2018, until 2025 she served on the Board of Directors of Abivax, a biotechnology company, headquartered in Paris, working on ulcerative colitis. Dr. Brosgart also previously was on the Boards of Intrivo Diagnostic, Renovaro Bio and Mirum Pharmaceuticals (Nasdaq:MIRM) 2021-2025. Dr. Brosgart is also a member of the Board of Directors of Eradivir , a company developing antibody-recruiting molecules that selectively target disease cells and activate a precise immune response to eliminate them and Merlin Biotech, developing novel treatments using a clinically proven mRNA platform. Dr. Brosgart has served as a consultant to Dynavax, Allergan and a number of biotechnology companies in the areas of liver diseases and infectious diseases Dr. Brosgart has served on the Steering Committee of the National Viral Hepatitis Roundtable, the Executive Committee of the Forum for Collaborative Research and the Steering Committee of the HBV Cure Group at the Forum. She is on the Board of Directors of the Hepatitis B Foundation. She is active in the public policy arena for AASLD and IDSA/HIVMA. Dr. Brosgart served as Senior Advisor on Science and Policy to the Division of Viral Hepatitis at the CDC and to the Viral Hepatitis Action Coalition at the CDC Foundation from 2011 to 2013. Dr. Brosgart has also served as a member of the clinical faculty of the School of Medicine at the University of California, San Francisco for the past four decades, where she is a Clinical Professor of Medicine, Biostatistics and Epidemiology in the Division of Global Health and Infectious Diseases. In 2011, Dr. Brosgart served as Chief Medical Officer at biotechnology company Alios BioPharma, Inc. Prior to Alios, Dr. Brosgart served as Senior Vice President and Chief Medical Officer of Children’s Hospital & Research Center in Oakland, California, from 2009 until February 2011. Previously, she served for eleven years, from 1998 until 2009, at the biopharmaceutical company Gilead Sciences, Inc., where she held a number of senior management roles, most recently as Vice President, Public Health and Policy and earlier as Vice President, Clinical Research and Vice President, Medical Affairs. Prior to Gilead, Dr. Brosgart was the Medical Director of the East Bay AIDS Center in Berkeley, California (1987-1998) and the Medical Director of the Central Health Center for the Alameda County Public Health Department (1978-1987). Dr. Brosgart received a B.S. in Community Medicine from the University of California, Berkeley and received an M.D. from the University of California, San Francisco. Her residency training was in pediatrics, public health and preventive medicine at UCSF and UC Berkeley School of Public Health. She has published extensively in the areas of HIV, HBV, CMV, and liver disease.
There are no family relationships between any director or executive officer. There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any director or executive officer was selected as a director or member of senior management, as the case may be.
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B. Compensation.
Certain Approvals Required for Office Holders’ Compensation of the Companies Law
Pursuant to the Companies Law, the Company is required to adopt a compensation policy regarding the terms of office and employment of its Office Holders (as such terms are defined below), which includes exemption and release of the Office Holders from liability for breach of his or her duty of care to the Company, an undertaking to indemnify the Office Holder, post factum indemnification or insurance; any grant, payment, remuneration, compensation, or other benefit provided in connection with termination of service; and any benefit, other payment or undertaking to provide any payment as aforesaid, or the Terms of Office and Employment.
The Company’s current amended and restated compensation policy with respect to the terms of office and employment of the Company’s Office Holders, or the Compensation Policy, was adopted by the Board on May 30, 2023, and will remain in effect for a period of three years according to the Companies Law, unless replaced prior. The Compensation Policy was approved in accordance with the mechanism set forth in the Companies Law, which allows the Board to approve the Compensation Policy, notwithstanding the resolution of the general meeting on May 11, 2023, provided that the remuneration committee and thereafter the Board have concluded, following further and detailed discussion of the matter and for specified reasons, that such approval is in the Company’s best interests. To that end, the remuneration committee and our Bord considered the results of the general meeting vote, details of the Compensation Policy and its alignment with the Company’s compensation philosophy and other relevant considerations and thereafter determined that the approval of the Compensation Policy is in the best interest of the Company.
The term ‘Office Holder’ as defined in the Companies Law includes a general manager, chief business manager, deputy general manager, vice general manager, any other person fulfilling or assuming the responsibilities of any of the foregoing positions without regard to such person’s title, as well as a director, or a manager directly subordinate to the general manager or the chief executive officer.
Pursuant to the Companies Law, arrangements between the Company and its Office Holders must generally be approved by the remuneration committee and the Board and be consistent with the Compensation Policy. However, under certain circumstances, the Company may approve an arrangement that is not consistent with the Compensation Policy, if such arrangement is approved by a majority of the Company’s shareholders, provided that (i) such majority includes a majority of the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting (abstentions are disregarded), or (ii) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter who were present and voted against the arrangement constitute two percent or less of the voting power of the company, or the Special Majority.
The terms of office and employment of directors (including an officer who is a director but is not a controlling shareholder) further require the approval of the shareholders by a simple majority in addition to the approval of the Remuneration Committee and the Board, in that order, and under certain circumstances, a Special Majority; with respect to a chief executive officer who is not also a director or an officer who is a controlling shareholder, the approval of the shareholders must be made by the Special Majority. In addition, under certain circumstances, a company may be temporarily exempt from receiving the shareholders’ approval with respect to the terms of office and employment of a non-affiliated candidate for chief executive officer.
Under certain circumstances, if the terms of office and employment of Office Holders (who are not directors or controlling shareholders) are not approved by the shareholders, where such approval is required, the remuneration committee and the Board may subsequently override the resolution of the shareholders following a new discussion of the matter and for specified reasons. In addition, amendment of terms of office and employment of Office Holders (who are not directors or controlling shareholders) requires the approval of the remuneration committee only, if the remuneration committee determines that the amendment is not material.
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Aggregate Executive Compensation
The aggregate compensation, including share-based compensation, paid by us to all of our Office Holders as a group, with respect to the year ended December 31, 2025, was approximately $3.4 million. This amount includes approximately $0.3 million set aside or accrued to provide pension, severance, retirement, vacation or similar benefits or expenses, but does not include business travel, relocation, professional and business association dues and expenses reimbursed to Office Holders, and other benefits commonly reimbursed or paid by companies in our industry. In addition to the five current members of the Board (including the Company’s President and Chief Executive Officer), the Company considers four other individuals, namely, the Company’s directors that are members of the audit and remuneration committees, Chief Financial Officer, Chief Accounting Officer and the Chief Operating Officer, to have been Office Holders in 2025.
As of December 31, 2025, options to purchase 47,908 of our ordinary shares granted to our Office Holders as a group were outstanding, of which options to purchase 21,634 of our ordinary shares have vested, with a weighted average exercise price of $384.8 per ordinary share and 450,694 RSUs granted to our Office Holders were outstanding.
For outstanding equity-based awards granted to our Office Holders, see below under “Item 6. Directors, Senior Management and Employees—E. Share Ownership—Certain Information Concerning Equity Awards to Office Holders.”
Individual Compensation of Covered Executives
The following table sets forth the compensation granted to the five most highly compensated Office Holders during or with respect to the year ended December 31, 2025. All amounts reported in the table reflect the cost to the Company, as recognized in its financial statements for the year ended December 31, 2025. The five individuals for whom disclosure is provided are referred to herein as “Covered Executives.”
Information Regarding the Covered Executives | Compensation for Services(1) | |||||||||||||||||||||||
| Base | Benefits and | Cash | Equity-Based | |||||||||||||||||||||
| Salary | Perquisites | Bonus | Compensation | Other | Total | |||||||||||||||||||
| Name and Principal Position(1) | ($) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ($) | ||||||||||||||||||
| Allen Baharaff (President and Chief Executive Officer) | 569,514 | 164,476 | 834,250 | 223,066 | 40,000 | 1,858,306 | ||||||||||||||||||
| Yohai Stenzler (Chief Accounting Officer) | 181,761 | 62,067 | 97,429 | 69,098 | - | 410,355 | ||||||||||||||||||
| Guy Nehemya (Chief Operating Officer and Data Protection Officer) | 181,761 | 54,552 | 97,429 | 69,098 | - | 402,840 | ||||||||||||||||||
| Doron Cohen (Chief Financial Officer) | 157,901 | 44,041 | 84,639 | 75,945 | - | 362,526 | ||||||||||||||||||
| Amir Poshinski / Shmuel Nir/ David Sidransky (Directors) | - | - | - | 27,580 | 50,000 | 77,580 | ||||||||||||||||||
| (1) | Cash compensation amounts denominated in currencies other than the Dollar were converted into Dollars at an exchange rate of NIS 3.43 = $1.00, which reflects the average conversion rate for fiscal year ended December 31, 2025. | |
| (2) | Amounts reported in this column include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites may include, to the extent applicable to the Covered Executives, payments, contributions and/or allocations for savings funds, pension, severance, vacation, car allowance, risk insurance (e.g., life, disability, accident), telephone, convalescence pay, payments for social security and other benefits and perquisites consistent with the Company’s policies. |
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| (3) | Amounts reported in this column refer to the cash bonuses provided by the Company with respect to 2025, which have been provided for in the Company’s financial statements for the year ended December 31, 2025 (including if such bonuses were paid in 2026). They exclude bonuses paid in 2024 which were provided for in the Company’s financial statements for previous years. Cash bonuses are paid in accordance with the Company’s 2023 Annual Cash Bonus Plan and are intended to promote the Company’s work plan and business strategy by rewarding officers for achievement of the Company’s business and financial goals through teamwork and collaboration. Key performance indicators which are factored into cash bonus determinations are based both on personal | |
| (4) | Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2025 with respect to equity-based compensation. Assumptions and key variables used in the calculation of such amounts are discussed in Note 10 to the Financial Statements. For outstanding equity-based awards granted to Covered Executives see below under “Item 6. Directors, Senior Management and Employees—E. Share Ownership—Certain Information Concerning Equity Awards to Office Holders.” | |
| (5) | Amounts reported in this column include payments made with respect to the year 2025 and recorded in the financial statements for the year ended December 31, 2025 relating to directors’ fees. |
Compensation of Directors
As approved by our shareholders at our 2020 annual meeting of shareholders, in connection with their services as directors of the Company, each of our directors from time to time, is entitled to an annual payment of $40,000, plus value-added tax, or VAT, if applicable, and with respect to an expert external director (if applicable), $50,000 plus VAT, payable quarterly at the end of each quarter, and, upon first becoming a member of the Board.
For information concerning our equity compensation plan, see “Item 6. Directors, Senior Management and Employees—E. Share Ownership—Certain Information Concerning Equity Awards to Office Holders.”
Our Board has determined that each of Mr. Nir, Mr. Poshinski, and Dr. Sidransky are entitled to receive compensation equivalent to what an ‘expert external director’ would have received. See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—External Directors” and “Item 7. Major Shareholders and Related Party Transactions—C. Related Party Transactions” below.
For the outstanding equity-based awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. Share Ownership—Certain Information Concerning Equity Awards to Office Holders.”
Employment Agreements and Arrangements with Directors and Related Parties
We entered into written employment agreements with each of our executive officers. These agreements provide for notice periods of varying duration for termination of the agreement by us or by the relevant executive officer, during which time the executive officer will continue to receive base salary and benefits. These agreements also contain customary provisions regarding non-competition, confidentiality of information and assignment of inventions. However, the enforceability of the non-competition and assignment of inventions provisions may be limited under applicable law. See “Item 3. Key Information—Risk Factors—Risks Related to Our Business, Industry and Regulatory Requirements.”
Employment Agreement with Our President and Chief Executive Officer
On December 23, 2013, we entered into a personal employment agreement with Mr. Allen Baharaff who serves as our president and chief executive officer and as the chairman of our Board, as last amended on November 13, 2025, which provides that Mr. Baharaff’s terms of office and employment are for an undefined term, subject to termination in accordance with the terms of the employment agreement.
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In order to allow Mr. Baharaff to explore business opportunities which may also benefit the Company, Mr. Baharaff is engaged by the Company on an 80% basis, which allows Mr. Baharaff to devote up to 20% of his working hours to other activities that do not conflict with his duties and responsibilities to the Company under his employment agreement.
Under the current terms of his employment agreement, Mr. Baharaff is entitled to a gross monthly salary of NIS 170,000, following shareholder approval which was obtained at our 2021 annual meeting of shareholders. In addition, Mr. Baharaff will be entitled to an annual cash bonus based on achievement of qualitative and quantitative performance goals and objectives. As approved at our 2025 annual meeting of shareholders the annual cash bonus amount may be of up to nine times Mr. Baharaff’s monthly base salary if we have current assets of at least $20 million As of the end of each year, and up to six times Mr. Baharaff’s monthly base salary if we have current assets below $20 million, and the actual bonus paid in a given year shall be determined based on the achievement of certain qualitative and quantitative performance goals and objectives set by our remuneration committee and Board, which effective as of October 28, 2025, does not require further shareholder approval.
Mr. Baharaff is also entitled to receive the following bonuses (i) upon execution of a Strategic Agreement (as defined below), and subject to the discretion of the Board, a cash bonus in an amount of up to twelve times his monthly base salary. A “Strategic Agreement” means: a license agreement or any other strategic agreement (i.e. research and development, manufacture, distribution, etc.) for the U.S., Europe, Japan or China; (ii) upon consummation of a fund raising (excluding funds received from a Strategic Agreement), and, subject to the discretion of the Board, a cash bonus in an amount of up to ten times his monthly base salary if the funds received by the Company are between $8 Million to $10 million and up to twelve times his monthly base salary if the funds received by the Company are $10 million or more; (iv) upon a Change of Control Event (as defined below), and, subject to the discretion of the Board, a cash bonus in an amount of up to twelve times his monthly base salary, a “Change of Control Event” means: (a) the acquisition of the Company by another entity or individual or group of individuals by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, share purchase or consolidation), unless the Company’s shareholders of record as constituted immediately prior to any such transaction will, immediately after such transaction (by virtue of securities issued as consideration for the Company’s share capital, assets or otherwise) hold more than 50% of the voting power of the surviving or acquiring entity; or (b) a sale of all or substantially all of the assets of the Company.
Mr. Baharaff will also be entitled to the following equity based compensation: (i) in the event that our options are cashed-out upon a Change of Control Event, all unvested options granted to Mr. Baharaff will vest immediately prior to the consummation of the Change of Control Event; (ii) if upon a Change of Control Event (a) Mr. Baharaff’s employment as chief executive officer of the Company or the surviving entity is terminated within twelve months as of the Change of Control Event, and (b) unvested options are replaced for new options of the surviving entity as part of the Change of Control Event with a vesting schedule and terms identical to the replaced options, or the Replacement Options, then (x) all unvested Replacement Options granted to Mr. Baharaff will vest immediately prior to the termination of Mr. Baharaff’s employment, and (y) Mr. Baharaff’s Replacement Options will be exercisable until the earlier of (a) two years from termination, and (b) expiration of the Replacement Options.
Mr. Baharaff will also receive other benefits required under Israeli law or that are customary for senior executives in Israel such as confidentiality, reimbursement of expenses, payment for absence days, sick leave, pension and/or a manager’s insurance policy and study fund.
Mr. Baharaff is also entitled to accumulate vacation days for no more than two years. As approved at our 2021 annual meeting of shareholders, unused accumulated vacation days that exceed the number of vacation days that may be accumulated over a two-year period (currently, 48 vacation days) shall be redeemed once a year, on March 1, provided that the redemption will not result in the number of accumulated vacation days following the redemption being less than 48 days, or as otherwise required by law. Accumulated vacation days shall also be redeemed in the event of termination of employment of Mr. Baharaff.
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Mr. Baharaff’s employment agreement is terminable by either party upon six months prior written notice, or Prior Notice Period, and contains customary provisions regarding noncompetition, confidentiality of information and assignment of inventions. Upon termination, provided such termination was not for cause, Mr. Baharaff shall be entitled, in addition to the Prior Notice Period, to a payment in an amount of up to twelve times his monthly base salary, to be paid in twelve equal monthly installments, in exchange for Mr. Baharaff’s undertaking not to compete with the Company for a period of twelve months, or Non-Compete Grant. Other than in case of resignation by Mr. Baharaff, excluding resignation for a Good Reason Event (as defined below), or termination for cause: (i) all Mr. Baharaff’s unvested options will vest upon termination; and (ii) unexercised options granted to Mr. Baharaff may be exercised until the earlier of (a) two years from his termination, and (b) expiration of his options. A “Good Reason Event” means: any of the following events, provided that the event is effected by the Company without the written consent of Mr. Baharaff: (i) a material reduction or adverse change in Mr. Baharaff’s authority, duties or responsibilities; (ii) a reduction in Mr. Baharaff’s monthly base salary, other than a reduction of no more than 10% of his then current monthly base salary as part of an across the board reduction in all salaries for employees of the Company; (iii) a material breach by the Company of Mr. Baharaff’s employment agreement or any other agreements pertaining directly to Mr. Baharaff’s compensation or employment or (iv) death, disability or severe illness. Upon termination for cause by the Company, Mr. Baharaff shall not be entitled to any Prior Notice Period, Non-Compete Grant or any other payment, and any unvested outstanding equity awards shall terminate immediately upon the date of such termination for cause.
For cash bonuses granted to Mr. Baharaff see “Item 6. Directors, Senior Management and Employees— B. Compensation—Individual Compensation of Covered Executives.” For outstanding equity-based awards granted to Mr. Baharaff see below under “Item 6. Directors, Senior Management and Employees—E. Share Ownership—Certain Information Concerning Equity Awards to Office Holders.”
C. Board Practices.
We are incorporated in Israel, and, therefore, we are subject to various corporate governance practices under Israeli law relating to such matters as external directors (if required), independent directors, audit committees, remuneration committees and internal auditors. These Israeli law requirements are in addition to the requirements of the Nasdaq Listing Rules and other relevant provisions of U.S. securities laws. Under such Nasdaq Listing Rules, a foreign private issuer may generally follow its home country practices for corporate governance in lieu of such comparable listing rules’ requirements, except for certain matters such as composition and responsibilities of the audit committee and the SEC-mandated standards for the independence of its members. See below under “Item 16G. Corporate Governance” for further information.
Membership of the Board
Our Articles provide that the minimum number of members of the Board is three and the maximum number of members is eleven. The Board is presently comprised of five members. Pursuant to regulations promulgated under the Companies Law, or the Relief Regulations, companies with no controlling shareholder whose shares are listed for trading on specified exchanges outside of Israel, including the Nasdaq Capital Market, may adopt exemptions from various corporate governance requirements of the Companies Law so long as the company satisfies the applicable foreign country laws and regulations, including applicable stock exchange rules, that apply to companies organized in that country relating to the appointment of independent directors and the composition of audit and remuneration committees. Such exemptions include an exemption from the requirement to appoint external directors and the requirement that an external director be a member of the audit and remuneration committees.
In March 2020, our Board adopted this exemption, and our directors then in office who were elected and classified as an external director, were no longer classified as such under the Companies Law.
The minimum and maximum number of directors may be changed, at any time and from time to time, by a majority vote of our directors then in office, provided that no decrease in the number of directors shall shorten the term of any incumbent director. Under our Articles, the Board consists of three classes of directors which are appointed for fixed terms of office in accordance with the Companies Law and our Articles, with one class being elected each year for a term of approximately three years by our shareholders at our annual general meeting.
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Directors so elected cannot be removed from office by the shareholders until the expiration of their term of office. The directors do not receive any benefits upon the expiration of their term of office.
The three classes of directors are Class I Directors, Class II Directors and Class III Directors. Shmuel Nir and Dr. Carol Brosgart serve as our Class I Directors until the close of the annual general meeting to be held in 2027; Allen Baharaff serves as our Class II Director until the close of the annual general meeting to be held in 2028; and Dr. David Sidransky and Amir Poshinski serve as our Class III Directors until the close of the annual general meeting to be held in 2026.
In accordance with the Articles, any vacancies on the Board of, including unfilled positions, may be filled by a vote of a majority of the directors then in office, and each director chosen in this manner would hold office until the next annual general meeting of the Company (or until the earlier termination of his or her appointment as provided for in the Companies Law or the Articles).
Any amendment of our Articles regarding the election of directors, as described above, requires the affirmative vote of at least 75% of the voting rights in the Company, represented personally or by proxy and voting thereon at a general meeting. See “Item 6. Directors, Senior Management and Employees—C. Board Practices—External Directors” for a description of the procedure for the election of external directors.
A nominee for service as a director in a public company may not be elected without submitting a declaration to the company, prior to election, specifying that he or she has the requisite qualifications to serve as a director, independent director or external director (if required), as applicable, and the ability to devote the appropriate time to performing his or her duties as such.
A director, who ceases to meet the statutory requirements to serve as a director, external director or independent director, as applicable, must notify the company to that effect immediately and his or her service as a director will expire upon submission of such notice.
Alternate Directors
Our Articles provide, as allowed by the Companies Law, that any director may, subject to the conditions set thereto, appoint a person as an alternate to act in his place, to remove the alternate and appoint another in his place and to appoint an alternate in place of an alternate whose office is vacated for any reason whatsoever. Under the Companies Law, a person who is not qualified to be appointed as a director, a person who is already serving as a director or a person who is already serving as an alternate director for another director, may not be appointed as an alternate director. Nevertheless, a director who is already serving as a director may be appointed as an alternate director for a member of a committee of the board of directors so long as he or she is not already serving as a member of such committee. A person who is not qualified to be appointed as an independent director, pursuant to the Companies Law, may not be appointed as an alternate director of an independent director qualified as such under the Companies Law. Unless the appointing director limits the time or scope of the appointment, the appointment is effective for all purposes until the appointing director ceases to be a director or terminates the appointment.
External Directors
Generally, unless a regulatory relief is available, under the Companies Law and the regulations promulgated pursuant thereto, Israeli companies whose shares have been offered to the public, or that are publicly traded outside of Israel, which we refer to as a public company, are required to appoint at least two natural persons as “external directors.”
Pursuant the Relief Regulations, companies with shares traded on certain U.S. stock exchanges, including Nasdaq, which do not have a “controlling shareholder,” may, subject to certain conditions, “opt out” from the Companies Law requirements to appoint external directors and related Companies Law rules concerning the composition of the audit committee and remuneration committee of the board of directors. In accordance with these regulations, in March 2020, our Board elected to “opt out” from the Companies Law requirement to appoint external directors and related Companies Law rules concerning the composition of the audit committee and remuneration committee of our Board.
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Director Independence
Following our “opt-out” of the requirement to have external directors serving on our Board, we comply with the director independence requirements and the audit committee and the remuneration committee composition requirements under U.S. laws (including applicable Nasdaq Capital Market rules) applicable to U.S. domestic issuers. Our Board has undertaken a review of the independence of each director. Based on information provided by each director concerning their background, employment and affiliations, our Board has determined that Mr. Nir, Mr. Poshinski, Dr. Sidransky, and Dr. Brosgart do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the listing standards of the Nasdaq. In making these determinations, our Board considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial ownership of our capital shares by each non-employee director.
Committees of the Board
Our Articles also provide that the Board may delegate any, or all, of its powers to one or more committees of the Board, and may entrust to and confer upon a “managing director” such of its powers as it deems appropriate. However, the Companies Law provides that certain powers and authorities (for example, the power to approve the financial statements) may not be delegated and may be exercised only by the Board. Notwithstanding the foregoing, we currently do, and intend to continue to, comply with the corporate governance requirements of the Nasdaq Capital Market, except to the extent indicated elsewhere in this annual report, including as set forth under “Item 16G. Corporate Governance” below. The Companies Law requires public companies such as the Company to appoint an audit committee and a remuneration committee.
Audit Committee
The Companies Law requires public companies to appoint an audit committee comprised of at least three directors, including all of the external directors, if any the majority of whom must be independent directors under the Companies Law. The Companies Law further stipulates that the following may not be members of the audit committee: (i) the chairman of the board of directors; (ii) any director employed by or providing services on an ongoing basis to the company, to a controlling shareholder of the company or an entity controlled by a controlling shareholder of the company; (iii) a director whose livelihood mainly depends on a controlling shareholder; and (iv) a controlling shareholder or any relative of a controlling shareholder.
The Companies Law further requires that: (i) the chairperson of the audit committee must be an external director; (ii) generally, any person who is not entitled to be a member of the audit committee may not attend the audit committee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting a specific subject matter thereof; and (iii) the quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the members of the audit committee, provided that the majority of the members present are independent directors and at least one of them is an external director. As noted, under the Relief Regulation, companies with no controlling shareholder whose shares are listed for trading on specified exchanges outside of Israel, including the Nasdaq Capital Market, may adopt exemptions from various corporate governance requirements of the Companies Law so long as the company satisfies the applicable foreign country laws and regulations, including applicable stock exchange rules, that apply to companies organized in that country relating to the appointment of independent directors and the composition of audit and remuneration committees. Such exemptions include an exemption from the requirement to appoint external directors and the requirement that an external director be a member of certain committees. In accordance with these Regulations, we elected to “opt out” from such requirements of the Companies Law.
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The responsibilities of the audit committee under the Companies Law include: (i) identifying flaws in the management of a company’s business and making recommendations to the board of directors as to how to correct them; (ii) with respect to certain actions involving conflicts of interest and with respect to certain related party transactions, deciding whether such actions are material actions and whether such transactions are extraordinary transactions, respectively, all for the purpose of approving such actions or transactions; (iii) reviewing and deciding whether to approve certain related party transactions and certain actions involving conflicts of interest; (iv) reviewing the internal auditor’s work program; (v) examining the company’s internal control structure and processes, the performance of the internal auditor and whether the internal auditor has at his or her disposal the tools and resources required to perform his or her duties, considering, inter alia, the special needs of the company and its size; (vi) examining the independent auditor’s scope of work as well as the independent auditor’s fees and providing its recommendations to the appropriate corporate organ; (vii) providing for arrangements as to the manner in which the company will deal with employee complaints with respect to deficiencies in the management of the company’s business and the protection to be provided to such employees; and (viii) with respect to related party transactions with a controlling shareholder, regardless of whether such transactions are extraordinary transactions, that prior to entering into such transaction, to establish the requirement of having a competitive process under the supervision of the audit committee or any individual, committee or body on its behalf and according to criteria established by the audit committee and to determine procedures for approving certain related party transactions with a controlling shareholder, which were determined by the audit committee to be non-extraordinary transactions, but which are not negligible transactions. In addition, the audit committee is required to supervise the manner the Company implements the requirements of the Privacy Protection Law, 1981 and the Privacy Protection Regulations (Data Security), 2017.
Our Board has adopted an audit committee charter setting forth the responsibilities of the audit committee consistent with the rules of the SEC and the Nasdaq Listing Rules, as well as the requirements for such committee under the Companies Law, as described below.
Our audit committee oversees the accounting and financial reporting processes of the Company. It also provides assistance to the Board in fulfilling its legal and fiduciary obligations with respect to matters involving the accounting, auditing, financial reporting and internal control functions of the Company. In carrying out its duties, our audit committee meets with management at least once a quarter, at which time, among other things, it reviews, and either approves or disapproves, the financial results of the Company for the immediately preceding calendar quarter and conveys its conclusions in this regard to the Board. Our audit committee also monitors generally the services provided by the Company’s independent auditors to ensure their independence and reviews all audit and non-audit services provided by them.
Our Board has resolved to delegate to the audit committee the power to pre-approve non-auditing services rendered by the Company’s independent auditors without the need for further approval by our Board. As such, on March 15, 2016, our audit committee approved the adoption of a pre-approval policy, such that the Chairman of the audit committee is authorized to pre-approve any engagement of our independent auditors during a period of twelve months from the date of such approval, for the provision of non-auditing services, for fees not to exceed $20,000, and any such engagement which exceeds $20,000 shall require a pre-approval by the entire audit committee. Once services have been pre-approved, our management must then report to the audit committee on a periodic basis regarding the extent of services actually provided in accordance with the pre-approval policy, and regarding the fees for the services performed.
The Company’s independent and internal auditors also report regularly to our audit committee, and our audit committee discusses with the Company’s independent auditors the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the Company’s financial statements, as and when it deems it appropriate to do so.
Under the provisions of the Sarbanes-Oxley Act, the audit committee is directly responsible for the appointment, compensation and oversight of the work of the company’s independent auditors. However, under Israeli law, the appointment of independent auditors and their compensation require the approval of the shareholders of a public company. Pursuant to Israeli law, the shareholders may delegate the authority to determine the compensation of the independent auditors to the board of directors. In addition, pursuant to the Companies Law, the audit committee is required to examine the independent auditors’ fees and to provide its recommendations with respect thereto to the appropriate corporate body. Accordingly, the appointment of our independent auditors is required to be approved and recommended to the shareholders by our audit committee and Board and approved by the shareholders. The compensation of the independent auditors for audit services is required to be approved and recommended to the Board by our audit committee and approved by the Board. The Board has delegated its authority to approve the compensation of independent auditors for non-auditing services to the audit committee.
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Mr. Nir, Mr. Poshinski and Dr. Sidransky are the current members of our audit committee, with Mr. Poshinski serving as chairperson. Each of our audit committee members are “independent directors” in accordance with the Nasdaq Capital Market corporate governance requirements, as affirmatively determined by our Board. In addition, our Board has affirmatively determined that Mr. Poshinski also qualifies as an audit committee financial expert pursuant to the applicable SEC rules, and accordingly has the necessary financial sophistication as required by the Nasdaq Capital Market rules.
Remuneration Committee
The Companies Law requires public companies to appoint a remuneration committee comprised of at least three directors, including all of the external directors, who must generally also constitute a majority of the members. All other members of the committee, who are not external directors, must be directors who receive compensation consistent with that of external directors and that is in compliance with the compensation related regulations promulgated under the Companies Law. In addition, the chairperson of the remuneration committee must be an external director. As noted, under the Relief Regulations, we elected to “opt out” from such requirements of the Companies Law.
The Companies Law further stipulates that directors who are not qualified to serve on the audit committee, as described above, may not serve on the remuneration committee either and that similar to the audit committee, generally, any person who is not entitled to be a member of the remuneration committee may not attend the remuneration committee’s meetings. Our Board has adopted a remuneration committee charter setting forth the responsibilities of our remuneration committee, as described below.
The responsibilities of the remuneration committee under the Companies Law include: (i) making recommendations to the board of directors with respect to the approval of the compensation policy and any extensions thereto; (ii) periodically reviewing the implementation of the compensation policy and providing the board of directors with recommendations with respect to any amendments or updates thereto; (iii) reviewing and resolving whether or not to approve transactions with respect to the terms of office and employment of Office Holders; and (iv) resolving, under certain circumstances prescribed under the Companies Law, whether or not to exempt a transaction with a candidate for chief executive officer who meets non-affiliation criteria from shareholder approval.
Our remuneration committee also oversees the administration of the Company’s various compensation plans and arrangements, in particular, the incentive compensation, deferred compensation and equity based plans of the Company (and to the extent appropriate, of the subsidiaries of the Company) and assists the Board in fulfilling its responsibilities relating to the compensation of directors, the Chief Executive Officer and other Office Holders of the Company. In carrying out these duties, our remuneration committee meets on an ad hoc basis. Under the Companies Law, our remuneration committee may need to seek the approval of the Board and the shareholders for certain compensation decisions as described above. Each member of our remuneration committee is an “independent director” in accordance with the Nasdaq Capital Market corporate governance requirements, as affirmatively determined by our Board. Mr. Nir, Mr. Poshinksi and Dr. Sidransky are the current members of our remuneration committee, with Dr. Sidransky serving as chairperson.
Compensation Policy
As approved by our shareholders, and as required by the Companies Law, we have adopted a Compensation Policy regarding the terms of office and employment of our “office holders” (as defined under the Companies Law, which includes directors, the CEO, other executive officers and any other managers directly subordinate to the CEO), including cash compensation, equity-based awards, releases from liability, indemnification and insurance, severance and other benefits. Each of the named executive officers is an “office holder” within the meaning of the Companies Law. The Compensation Policy is reviewed from time to time by our remuneration committee and our Board to ensure its appropriateness, and is required to be brought at least once every three years to our shareholders for approval. See “Item 6. Directors, Senior Management and Employees — B. Compensation — Certain Approvals Required for Office Holders’ Compensation of the Companies Law”.
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Our current Compensation Policy was approved and adopted on May 30, 2023 and will be in effect for a period of three years until May 29, 2026, unless replaced in accordance with the Companies Law prior. The Compensation Policy links pay to performance and aligns our executive officers’ interests with those of the Company and of our shareholders. It allows us to provide meaningful incentives that reflect both our short and long-term goals and performance, as well as the executive officers’ individual performance and impact on shareholder value, while providing compensation that is competitive in the global marketplace in which we recruit talent and is designed to reduce incentives for our executive officers to take excessive risks.
The Compensation Policy emphasizes each executive officer’s individual characteristics (such as his or her respective position, education, scope of responsibilities and contribution to the attainment of our goals) as the basis for compensation variation among executive officers, taking into account the internal ratios between compensation of our executive officers and directors and other employees of the Company. Pursuant to the Compensation Policy, the compensation that may be granted to an executive officer may include: base salary and benefits, annual cash bonuses and other cash bonuses (such as retention and special bonuses), as well as equity-based compensation, retirement and termination of employment benefits, change of control provisions and other benefits. The cash bonuses that may be granted under the Compensation Policy are limited to a maximum amount linked to the executive officer’s base salary.
Under the Compensation Policy, an annual cash bonus that will be awarded to executive officers (other than the CEO) will be based on performance objectives and a discretionary evaluation of the executive officer’s overall performance by the CEO and may be subject to minimum thresholds. The remuneration committee and the Board will determine any applicable minimum thresholds that must be met for entitlement to the annual cash bonus (all or any portion thereof) and the formula for calculating any annual cash bonus payout on the basis of, but not limited to, company and individual objectives. Notwithstanding the above, we may determine that, with respect to any executive officer subordinated to the CEO, which does not serve as a director, a portion or all of his or her annual cash bonus will be based on the evaluation of the CEO.
The Compensation Policy provides that the annual bonus awarded to the Company’s CEO will be mainly based on measurable objectives of the Company, subject to a minimum threshold on the basis of, but not limited to, company and personal objectives. 30% or less of the annual cash bonus granted to the Company’s CEO may be based on a discretionary evaluation of the CEO’s overall performance by the remuneration committee and the Board. The measurable objectives will be determined annually by the remuneration committee and the Board at the commencement of each calendar year, or upon engagement, in case of newly hired CEO, or in other special circumstances as set forth in the Compensation Policy.
The equity-based compensation under the Compensation Policy for our executive officers is designed in a manner intended to attract and retain officers and align their interests with shareholders’ interests to maximize creation of long-term economic value for the Company, and to strengthen the retention and the motivation of executive officers in the long term. Equity-based awards may be granted from time to time in the form of options and/or other equity- based awards, such as RSUs in accordance with our 2013 Plan as may be updated from time to time.
The Compensation Policy contains compensation recovery provisions in the event of accounting restatement, which would allow us, under certain conditions, to recover bonuses or performance-based equity paid in excess of what would have been paid under the financial statements, as restated. The Compensation Policy also contains provisions that allow us to exculpate, indemnify and insure our executive officers and directors subject to certain updated limitations set forth in the Compensation Policy.
The Compensation Policy also governs the compensation of our non-management Board members and provides that our directors will be entitled to an annual cash fee retainer, which shall not exceed US$100,000 plus VAT, or the Maximum Amount, and with respect to an Expert External Director, as defined in the compensation related regulations promulgated under the Companies Law, plus 33% to the Maximum Amount. Our non-management Board members may also receive equity awards up to the limits set forth in the Compensation Policy.
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Nominating Committee
The Nasdaq Capital Market corporate governance requires each company adopting a nominating committee to certify that it has adopted a formal written charter or board resolution, as applicable, addressing the nominations process and such related matters as may be required under U.S. federal securities laws. Although not required as a foreign private issuer to adopt a nominating committee, we have decided to follow such requirement.
Our Board has adopted a nominating committee charter setting forth the responsibilities of the nominating committee consistent with the Nasdaq Listing Rules.
The nominating committee is responsible for identifying individuals qualified to be appointed as board members, and recommending to the Board appropriate director nominees for election at the general meeting of shareholders.
Independent director oversight of nominations enhances investor confidence in the selection of well-qualified director nominees, as well as independent nominees as required by the rules. The Nasdaq Capital Market listing rule is also intended to provide flexibility for a company to choose an appropriate board structure and reduce resource burdens, while ensuring that independent directors approve all nominations.
Mr. Nir, Mr. Poshinski, and Dr. Sidransky are the current members of our nominating committee, with Dr. Sidransky serving as chairperson. Nasdaq Capital Market Listing Rule 5605(e) requires that our nominating committee be comprised solely of independent directors unless the nominating committee is comprised of at least three members and the Board determines that such non-independent director’s membership, which shall not be longer than two years, is required by the best interests of the Company and our shareholders.
R&D Committee
Our R&D Committee, which was established by the Board on May 2014, advises and assists the Board in its oversight of our research and development programs, including the rationale and timeline of clinical trials and other studies, as well as market surveys in connection therewith. The R&D Committee operates in accordance with the purposes and objectives determined by the Board from time to time. Dr. Sidransky, Dr. Brosgart and Mr. Baharaff are the current members of our R&D Committee, with Dr. Sidransky serving as chairperson.
Internal Auditor
Under the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor recommended by the audit committee and nominated by the board of directors. The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. An internal auditor should comply with the requirements of the Companies Law and the Internal Audit Law, 5752-1992, and may not be:
| (a) | a person (or a relative of a person) who holds more than 5% of the Company’s outstanding shares or voting rights; | |
| (b) | a person (or a relative of a person) who has the power to appoint a director or the general manager of the Company; | |
| (c) | an Office Holder, including a director, of the Company (or a relative thereof); or | |
| (d) | a member of the Company’s independent accounting firm, or anyone on his or her behalf. |
Pursuant to Israeli law, an internal auditor’s tenure cannot be terminated without his or her consent, nor can he or she be suspended from such position unless the board of directors of the company has so resolved following the recommendations of the company’s audit committee and, after providing the internal auditor with the opportunity to present his or her position to the board of directors of the company and to the audit committee.
On April 12, 2026, our audit committee re-appointed Zachi Refaeli, CPA, from Ernst & Young Israel - Kost Forer Gabbay & Kasierer, Tel Aviv, Israel, as the Company’s internal auditor for a period of three years, effective until April 12, 2026. Mr. Refaeli has been serving as the Company’s internal auditor since January 12, 2021.
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Exculpation and Indemnification of Directors and Officers
Under the Companies Law, a company may not exculpate an Office Holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an Office Holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of the duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our Articles include such a provision. The Company may not exculpate in advance a director from liability arising out of a prohibited dividend or distribution to shareholders.
Under the Companies Law, and the Israeli Securities Law, 5738—1968, or the Securities Law, a company may indemnify, or undertake in advance to indemnify, an Office Holder for the following liabilities and expenses, imposed on Office Holder or incurred by Office Holder due to acts performed by him or her as an Office Holder, provided its articles of association include a provision authorizing such indemnification:
| ● | a monetary liability incurred by or imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an Office Holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria; | |
| ● | reasonable litigation expenses, including attorneys’ fees, incurred by the Office Holder as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such Office Holder as a result of such investigation or proceeding; and (ii) no financial liability was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent or as a monetary sanction; | |
| ● | a monetary liability imposed on him or her in favor of an injured party at an Administrative Procedure (as defined below) pursuant to Section 52(54)(a)(1)(a) of the Securities Law; | |
| ● | expenses incurred by an office holder or certain compensation payments made to an injured party that were instituted against an office holder in connection with an Administrative Procedure under the Securities Law, including reasonable litigation expenses and reasonable attorneys’ fees; and | |
| ● | reasonable litigation expenses, including attorneys’ fees, incurred by the Office Holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf, or by a third-party, or in connection with criminal proceedings in which the Office Holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent. | |
| ● | An “Administrative Procedure” is defined as a procedure pursuant to chapters H3 (Monetary Sanction by the Israeli Securities Authority), H4 (Administrative Enforcement Procedures of the Administrative Enforcement Committee) or I1 (Arrangement to prevent Procedures or Interruption of procedures subject to conditions) to the Securities Law. |
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Under the Companies Law and the Securities Law, a company may insure an Office Holder against the following liabilities incurred for acts performed by him or her as an Office Holder if and to the extent provided in the company’s articles of association:
| ● | a breach of the duty of loyalty to the company, provided that the Office Holder acted in good faith and had a reasonable basis to believe that such act would not prejudice the company; | |
| ● | a breach of the duty of care to the company or to a third-party; | |
| ● | a monetary liability imposed on the Office Holder in favor of a third-party; | |
| ● | a monetary liability imposed on the office holder in favor of an injured party at an Administrative Procedure pursuant to Section 52(54) (a)(1)(a) of the Securities Law; and | |
| ● | expenses incurred by an office holder in connection with an Administrative Procedure instituted against him or her, including reasonable litigation expenses and reasonable attorneys’ fees. |
Nevertheless, under the Companies Law, a company may not indemnify, exculpate or insure an Office Holder against any of the following:
| ● | a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company in the event Office Holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; | |
| ● | a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the Office Holder; | |
| ● | an act or omission committed with intent to derive unlawful personal benefit; or | |
| ● | a fine, monetary sanction, penalty or forfeit levied against the Office Holder. |
Under the Companies Law, exculpation, indemnification and insurance of Office Holders require the approval of the remuneration committee, board of directors and, in certain circumstances, the shareholders, as described above under “Item 6—Directors, Senior Management and Employees—B. Compensation.”
Our Articles permit us to exculpate, indemnify and insure our Office Holders to the fullest extent permitted by the Companies Law. Each of our Office Holders have entered into an indemnification agreement with us, exculpating them, to the fullest extent permitted by Israeli law, from liability to us for damages caused to us as a result of a breach of the duty of care and undertaking to indemnify them to the fullest extent permitted by Israeli law, including with respect to liabilities resulting from certain acts performed by such Office Holders in their capacity as an Office Holder of the Company, our subsidiaries or our affiliates.
In the opinion of the SEC, indemnification of directors and Office Holders for liabilities arising under the Securities Act, however, is against public policy and therefore unenforceable.
Agreements with Directors
Other than a written agreement with our President, Chief Executive Officer and Chairman, as detailed in “Item 6. Directors, Senior Management and Employees—B. Compensation—Employment Agreements and Arrangements with Directors and Related Parties—Employment Agreement with Our President, Chief Executive Officer and Chairman of the Board,” we do not have written agreements with any director providing for benefits upon the termination of his or her services with our Company.
D. Employees.
As of December 31, 2025, we had six employees, of which three were full-time employees and three were part-time employees. Three of our employees were involved in our clinical and product development operations and three served in general and administrative capacities.
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While none of our employees are party to any collective bargaining agreements or represented by any labor unions, certain provisions of the Israeli labor laws and certain collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (including the Industrialists’ Associations) are applicable to our employees by order of the Israel Ministry of Economics. These provisions primarily concern the length of the workday, minimum daily wages for professional workers, pension fund benefits for all employees, insurance for work-related accidents, procedures for dismissing employees, determination of severance pay and other conditions of employment. We generally provide our employees with benefits and working conditions beyond the required minimums. We have never experienced any employment-related work stoppages and believe our relationship with our employees is favorable.
E. Share Ownership.
The following table sets forth information regarding beneficial ownership of our ordinary shares as of March 25 2026, the latest practicable date for inclusion in this annual report, held by our directors and executive officers, individually and as a group and beneficial owners of more than 5% of our outstanding shares.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares. Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 25 2026 are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, or other conversion rights, but are not deemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned is based on 6,599,654 ordinary shares outstanding on March 25 2026.
Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power and the right to receive the economic benefit of ownership with respect to all ordinary shares held by that person.
Unless otherwise stated, the address for our directors and senior management is Galmed Pharmaceuticals Ltd., c/o Meitar Law Offices, 16 Abba Hillel Road, Ramat Gan, Israel 5250608.
| Number of ordinary shares beneficially owned(1) | Percentage of ordinary shares beneficially owned | |||||||
| More than 5% Holders | ||||||||
| CVI Investments, Inc. (2) | 173,333 | 2.6 | % | |||||
| Directors and Executive Officers | ||||||||
| Allen Baharaff(3) | 132,703 | 2.0 | % | |||||
| Shmuel Nir(4) | 14,507 | * | ||||||
| Dr. David Sidransky(5) | 14,277 | * | ||||||
| Dr. Carol L. Brosgart(6) | 14,342 | * | ||||||
| Yohai Stenzler(7) | 28,725 | * | ||||||
| Guy Nehemya(8) | 28,614 | * | ||||||
| Amir Poshinski(9) | 14,236 | * | ||||||
| Doron Cohen(10) | 28,138 | * | ||||||
| Dr. Liat Nissimiv-Breuck (Hayardeny)(11) | 1,000 | * | ||||||
| All directors and executive officers as a group (9 persons) | 276,542 | 4.2 | % | |||||
*Less than 1%.
(1) All options included are either currently exercisable or will be exercisable within 60 days of March 25, 2026.
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(2) Based upon information contained in a Schedule 13G/A filed by the shareholder on November 7, 2025. Shares beneficially owned consist of 173,333 ordinary shares issuable upon the exercise of warrants. The warrants are subject to a beneficial ownership limitation of 9.99%, which such limitation restricts the holder from exercising that portion of the warrants that would result in the holder and its affiliates owning, after exercise, a number of ordinary share in excess of the beneficial ownership limitation. Heights Capital Management, Inc., the authorized agent of CVI Investments, Inc. (“CVI”), has discretionary authority to vote and dispose of the shares held by CVI and may be deemed to be the beneficial owner of these shares. Martin Kobinger, in his capacity as Investment Manager of Heights Capital Management, Inc., may also be deemed to have investment discretion and voting power over the shares held by CVI. Mr. Kobinger disclaims any such beneficial ownership of the shares. The principal business address of CVI is c/o Heights Capital Management, Inc., 101 California Street, Suite 3250, San Francisco, California 94111.
(3) Consists of (i) 103,0457 ordinary shares held by Mr. Baharaff; (ii) 18 ordinary shares held by Mr. Baharaff’s spouse; (iii) options to purchase 5,471 ordinary shares that are currently exercisable within 60 days of March 25, 2026 and (iv) 24,167 RSUs that will vest within 60 days of March 25, 2026.
(4) Consists of (i) 11,313 ordinary shares held by Mr. Nir; (ii) 277 ordinary shares issuable upon the exercise of options that are currently exercisable or will be exercisable within 60 days of March 25, 2026; and (iv) 2,917 RSUs that will vest within 60 days of March 25, 2026.
(5) Consists of (i) 11,083 ordinary shares held by Dr. Sidransky; (ii) 277 ordinary shares issuable upon the exercise of options that are currently exercisable or will be exercisable within 60 days of March 25, 2026; and (iii) 2,917 RSUs that will vest within 60 days of March 25, 2026.
(6) Consists of 14,342 ordinary shares issuable upon the exercise of options that are currently exercisable or will be exercisable within 60 days of March 25, 2026.
(7) Consists of (i) 22,115 ordinary shares held by Mr. Stenzler; (ii) 777 ordinary shares issuable upon the exercise of options that are currently exercisable or will be exercisable within 60 days of March 25, 2026; and (iii) 5,833 RSUs that will vest within 60 days of March 25, 2026.
(8) Consists of (i) 22,115 ordinary shares held by Mr. Nehemya; (ii) 666 ordinary shares issuable upon the exercise of options that are currently exercisable or will be exercisable within 60 days of March 25, 2026; and (iii) 5,833 RSUs that will vest within 60 days of March 25, 2026.
(9) Consists of (i) 11,042 ordinary shares held by Mr. Poshinski; (ii) 277 ordinary shares issuable upon the exercise of options that are currently exercisable or will be exercisable within 60 days of March 25, 2026; and (iii) 2,917 RSUs that will vest within 60 days of March 25, 2026.
(10) Consists of (i) 22,083 ordinary shares held by Mr. Cohen; (ii) 222 ordinary shares issuable upon the exercise of options that are currently exercisable or will be exercisable within 60 days of March 25, 2026; and (iii) 5,833 RSUs that will vest within 60 days of March 25, 2026.
(11) Consists of 1,000 ordinary shares issuable upon the exercise of options that are currently exercisable or will be exercisable within 60 days of March 25, 2026.
Change in Control
To our knowledge, (i) we are not directly or indirectly owned or controlled by another corporation, by any foreign government or by any other natural or legal person severally or jointly, except as disclosed in the above table regarding our major shareholders, and (ii) there are no arrangements which would result in our change in control at a subsequent date.
Significant Changes in the Ownership of Major Shareholders
To our knowledge, other than as disclosed in the table above, our other filings with the SEC and this annual report, there has been no significant change in the percentage ownership held by any major shareholder since January 1, 2023.
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Major Shareholders Voting Rights
Our major shareholders do not have different voting rights.
Record Holders
To our knowledge, as of March 25, 2026, we had 8 holders of record of our ordinary shares with a U.S. address, including Cede & Co., the nominee of The Depository Trust Company. This holder held in the aggregate 6,589,198 ordinary shares, or 99.99% of our outstanding ordinary shares as of March 25, 2026. The number of record holders in the United States is not representative of the number of beneficial holders of our ordinary shares nor is it representative of where such beneficial holders are resident since many of these ordinary shares were held by brokers or other nominees.
2013 Incentive Share Option Plan
We maintain one equity-based incentive plan, our 2013 Plan. As of March 25, 2026, the latest practicable date for inclusion in this annual report, a total of 1,000,000 shares were reserved for issuance under our 2013 Plan, of which (1) options to purchase 45,605 ordinary were issued and outstanding thereunder (i.e., were granted but not canceled, expired or exercised); (2) RSUs to purchase 432,430 ordinary shares were issued and outstanding; (3) options to purchase 7,390 ordinary shares were exercised and 192,509 ordinary shares were issued upon vesting of RSUs; and (4) 332,406 shares remain unallocated for future equity awards pursuant to our 2013 Plan.
Our 2013 Plan, which was adopted by our Board on September 2, 2013, and approved by our shareholders in December 30, 2013 (as amended on March 30, 2015, May 11, 2015, August 30, 2018 and August 7, 2023), will be in effect until October 4, 2026 and provides for the grant of options to purchase our ordinary shares and the issuance of RSUs to our officers, directors, employees, service providers and consultants. Our 2013 Plan provides for such equity-based compensation under various and different tax regimes, including those detailed below.
The 2013 Plan is administered by our Board, which, on its own or upon the recommendation of our remuneration committee or any other similar committee of the Board, shall determine, subject to applicable law, the identity of grantees of awards and various terms of the grant. Consistent with our Compensation Policy, the 2013 Plan provides for granting options to purchase our ordinary shares pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, under the capital gains route, to directors, officers and employees who are Israeli residents holding (or have a right to hold or to purchase) less than 10% of our total share capital and do not have a right to receive 10% or more of the Company’s profits.
Section 102 of the Ordinance allows Israeli employees, directors and officers, who are not controlling shareholders to receive favorable tax treatment for compensation in the form of shares or options. However, under this route we are not allowed to deduct any expense with respect to the issuance of the options or shares. Israeli non-employee service providers, consultants and shareholders who hold 10% or more of our total share capital or are otherwise controlling shareholders, may be granted options pursuant to Section 3(i) of the Ordinance, which does not provide for similar tax benefits. In order to comply with the terms of the capital gains route pursuant to Section 102 of the Ordinance, the granted options as well as the ordinary shares issued upon exercise of these options and other shares received subsequently following any realization of rights with respect to such options (such as share dividends and share splits), must be granted to a trustee for the benefit of the relevant grantee and should be held by the trustee for at least two years after the date of the grant. If such options or shares are sold by the trustee or are transferred to the grantee before the end of the two-year period, then the grantee would be taxed at top marginal rates upon selling the shares.
For residents, or deemed residents, of the United States, the 2013 Plan provides grants, which are pursuant to Section 422 of the Internal Revenue Code of 1986, as amended, or the Code, as incentive stock options, or ISOs, and any other participants which do not qualify for ISOs, as non-statutory stock options, or NSOs, pursuant to the Code.
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Section 422 of the Code allows employees, directors and officers, who are non-controlling shareholders (e.g., less than 10% shareholders) and are considered residents of the United States or those who are deemed to be residents of the United States for purposes of the payment of tax, or are otherwise subject to taxation in the United States with respect to the grant of awards, to receive favorable tax treatment for compensation in the form of shares or ISOs. 10% shareholders or persons which are not service providers will receive NSOs, which do not entitle them to receive similar tax benefits. Section 422(b) of the Code provides for the ISO track such that the individual does not have to pay ordinary income tax (nor employment taxes) on the difference between the exercise price and the fair market value of the shares issued (however, the holder may have to pay U.S. alternative minimum tax instead). However, if the shares are held for one year from the date of exercise and two years from the date of grant, then the profit (if any) made on sale of the shares is taxed as long-term capital gain. Section 422 of the Code requires that any grant of awards shall not be made at a price which is less than 100% of the fair market value of such awards on the date of the grant, all pursuant to the terms of Section 409A of the Code. However, under this ISO track, we are not allowed to deduct any expense with respect to the issuance of the options or shares. In order to comply with the terms of the ISO track, the option granted thereunder must meet the requirements of Section 422 of the Code when granted and at all times until the exercise thereof.
Options and RSUs granted under the 2013 Plan will vest in accordance with the vesting dates as determined by the Board following the recommendation of the remuneration committee or any other similar committee of the Board with respect to each grant. Generally, options that are not exercised within ten years from the grant date expire, unless otherwise determined by the Board and the remuneration committee, as applicable, provided, however, that, pursuant to our Compensation Policy, any equity-based awards to Office Holders must include both a gradual vesting period of at least three years from the date of grant, and an exercise period of no more than ten years from the date of grant.
Upon such date or dates designated in the applicable award agreement, unless earlier forfeited, subject to the receipt of any approvals required from any relevant tax authority, we shall settle each RSU upon vesting by delivering one ordinary share.
In case of termination for reasons of disability or death, the grantee or his legal successor may exercise options that have vested prior to termination within a period of twelve months from the date of disability or death. If we terminate a grantee’s employment or service for cause, all of the grantee’s vested and unvested unexercised options will expire and terminate on the date of termination. If a grantee’s employment or service is terminated for any other reason, the grantee may exercise his or her vested options within 90 days of the date of termination or within a longer period under specified circumstances determined by our Board. Any expired or unvested options shall return to the option pool reserved under the 2013 Plan for reissuance.
In the event of grantee’s termination prior to a vesting date by reason of such grantee’s death or disability, all of such grantee’s RSUs shall immediately become vested as of the date of such termination. In the event of a grantee’s termination for cause prior to settlement, all of such grantee’s RSUs shall immediately be forfeited for no consideration as of the date of such termination. If a grantee’s employment or service is terminated for any other reason, (1) all vesting with respect to such grantee’s RSUs shall cease, (2) all of such grantee’s unvested RSUs shall immediately be forfeited for no consideration as of the date of such termination, and (3) to the extent not already settled, all of such grantee’s vested RSUs shall be settled in accordance with the settlement schedule set forth in the applicable award agreement.
In the event of a merger or consolidation of our company subsequent to which we would no longer exist as a legal entity, or a sale of all, or substantially all, of our ordinary shares or assets or other transaction having a similar effect on us, or a Transaction, any unexercised options then outstanding will be cancelled. Notwithstanding the foregoing, the Board, or the relevant committee of the Board, may determine that the options will not be cancelled but will be assumed or substituted for an appropriate number of the same type of shares or other securities of the successor company as were distributed to the Company or the shareholders in connection with the Transaction. In addition, the Board, or the relevant committee of the Board, may determine to include in certain option agreements either a clause that provides for acceleration of vesting of all or part of the unvested options in the event of a Transaction or the occurrence of another event or a clause which provides that if the optionee’s employment with the successor company is terminated by the successor company without cause within a certain period, not to exceed two years from the closing of such Transaction, all or part of the unvested options shall be accelerated.
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Certain Information Concerning Equity Awards to Office Holders
The following tables set forth information, as of March 25, 2026 concerning all outstanding equity awards to Office Holders as of such date.
Options
| Name of Office Holder | Date of grant | Exercise price per share ($)* | Shares subject to the option | Shares vested and unexercised | Shares unvested | Schedule date of expiration | ||||||||||||||
| Allen Baharaff | December 30, 2013 | NIS 1.80 | 1,399 | 1,399 | - | Dec-12-2028 | ||||||||||||||
| December 30, 2013 | NIS 1.80 | 466 | 466 | - | Dec-12-2028 | |||||||||||||||
| July 10, 2018 | $ | 2,080.8 | 1,222 | 1,222 | - | Jul-10-2028 | ||||||||||||||
| December 17, 2019 | $ | 921.6 | 1,222 | 1,222 | - | Dec-17-2029 | ||||||||||||||
| November 10, 2020 | $ | 599.4 | 1,222 | 1,222 | - | Nov-17-2030 | ||||||||||||||
| Shmuel Nir | July 10, 2018 | $ | 2,080.8 | 166 | 166 | - | Jul-10-2028 | |||||||||||||
| July 15, 2021 | $ | 558 | 111 | 111 | - | Jul-10-2031 | ||||||||||||||
| Amir Poshinski | August 13, 2020 | $ | 858.6 | 166 | 166 | - | August 13, 2030 | |||||||||||||
| July 15, 2021 | $ | 558 | 111 | 111 | - | Jul-10-2031 | ||||||||||||||
| David Sidransky | July 10, 2018 | $ | 2,080.8 | 166 | 166 | - | Jul-10-2028 | |||||||||||||
| July 15, 2021 | $ | 558 | 111 | 111 | - | Jul-10-2031 | ||||||||||||||
| Dr. Liat Hayardeny | January 31, 2017 | $ | 68.4 | 222 | 222 | - | Jan-31-2027 | |||||||||||||
| July 10, 2018 | $ | 68.4 | 222 | 222 | - | Jul-10-2028 | ||||||||||||||
| December 17, 2019 | $ | 68.4 | 222 | 222 | - | Dec-17-2029 | ||||||||||||||
| November 10, 2020 | $ | 68.4 | 222 | 222 | - | Nov-10-2030 | ||||||||||||||
| Yohai Stenzler | November 7, 2017 | $ | 68.4 | 111 | 111 | - | Nov-07-2020 | |||||||||||||
| July 10, 2018 | $ | 68.4 | 222 | 222 | - | Jul-10-2028 | ||||||||||||||
| December 17, 2019 | $ | 68.4 | 222 | 222 | - | Dec-17-2029 | ||||||||||||||
| November 10, 2020 | $ | 68.4 | 222 | 222 | - | Nov-10-2030 | ||||||||||||||
| 68.4 | - | |||||||||||||||||||
| Guy Nehemya | July 10, 2018 | $ | 68.4 | 222 | 222 | - | Jul-10-2028 | |||||||||||||
| December 17, 2019 | $ | 68.4 | 222 | 222 | - | Dec-17-2029 | ||||||||||||||
| November 10, 2020 | $ | 68.4 | 222 | 222 | - | Nov-10-2030 | ||||||||||||||
| Carol L. Brosgart | April 25, 2017 | $ | 876.6 | 111 | 111 | - | Apr-25-2027 | |||||||||||||
| July 10, 2018 | $ | 2,080.8 | 166 | 166 | - | Jul-10-2028 | ||||||||||||||
| July 15, 2021 | $ | 558 | 111 | 111 | - | Jul-10-2031 | ||||||||||||||
| August 7, 2023 | $ | 12.6 | 6,250 | 5,208 | 1,042 | Augt-7-2033 | ||||||||||||||
| November 12, 2024 | $ | 2.88 | 17,500 | 5,833 | 11,667 | Nov-12-2034 | ||||||||||||||
| October 29, 2025 | $ | 1.41 | 12,500 | - | 12,500 | Oct-29-2034 | ||||||||||||||
| Doron Cohen | February 23, 2022 | $ | 68.4 | 222 | 152 | 70 | Feb-23-2032 | |||||||||||||
(*) All exercise prices are in USD unless otherwise specified.
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RSUs
| Shares | ||||||||||||||
| Name of Office | subject to | Shares | Shares | |||||||||||
| Holder | Date of grant | the RSUs | vested | unvested | ||||||||||
| Allen Baharaff | Aug-7-2023 | 53,333 | 17,778 | 35,555 | ||||||||||
| Nov-12-2024 | 145,000 | 48,334 | 96,666 | |||||||||||
| Oct-29-2025 | 100,000 | - | 100,000 | |||||||||||
| Shmuel Nir | Feb-04-2016 | 41 | 41 | - | ||||||||||
| Aug-7-2023 | 6,250 | 2,083 | 4,167 | |||||||||||
| Nov-12-2024 | 17,500 | 5,834 | 11,666 | |||||||||||
| Oct-29-2025 | 12,500 | - | 12,500 | |||||||||||
| David Sidransky | Feb-04-2016 | 41 | 41 | - | ||||||||||
| Aug-7-2023 | 6,250 | 2,083 | 4,167 | |||||||||||
| Nov-12-2024 | 17,500 | 5,834 | 11,666 | |||||||||||
| Oct-29-2025 | 12,500 | - | 12,500 | |||||||||||
| Amir Poshinski | Aug-7-2023 | 6,250 | 2,083 | 4,167 | ||||||||||
| Nov-12-2024 | 17,500 | 5,834 | 11,666 | |||||||||||
| Oct-29-2025 | 12,500 | - | 12,500 | |||||||||||
| Yohai Stenzler | Jan-03-2016 | 32 | 32 | - | ||||||||||
| Aug-7-2023 | 12,500 | 4,167 | 8,333 | |||||||||||
| Nov-12-2024 | 35,000 | 11,667 | 23,333 | |||||||||||
| Aug-26-2025 | 25,000 | - | 25,000 | |||||||||||
| Guy Nehemya | Jan-03-2016 | 32 | 32 | - | ||||||||||
| Aug-7-2023 | 12,500 | 4,167 | 8,333 | |||||||||||
| Nov-12-2024 | 35,000 | 11,667 | 23,333 | |||||||||||
| Aug-26-2025 | 25,000 | - | 25,000 | |||||||||||
| Doron Cohen | Aug-7-2023 | 12,500 | 4,167 | 8,333 | ||||||||||
| Nov-12-2024 | 35,000 | 11,667 | 23,333 | |||||||||||
| Aug-26-2025 | 25,000 | - | 25,000 | |||||||||||
F. Disclosure of a registrant’s action to recover erroneously awarded compensation.
There was no erroneously awarded compensation that was required to be recovered pursuant to the Galmed Pharmaceuticals Ltd. Executive Officer Clawback Policy during the fiscal year ended December 31, 2025.
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ITEM 7. Major Shareholders and Related Party Transactions.
A. Major Shareholders.
Except as set forth in “Item 6. Directors, Senior Management and Employees—E. Share Ownership,” to the best of our knowledge, no other person who we know beneficially owns 5% or more of the Company’s ordinary shares outstanding as of March 25, 2026, the latest practicable date for inclusion in this annual report. None of our shareholders has different voting rights from other shareholders. Other than as described herein, to the best of our knowledge, we are not owned or controlled, directly or indirectly, by another corporation, by any foreign government or by any natural person or legal persons, severally or jointly, and we are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
B. Related Party Transactions.
The following is a summary description of the material terms of those transactions with related parties to which we, or our subsidiaries, are party and which were in effect since January 1, 2025.
Financing Agreement with GRD
We have provided financing to GRD from time to time, pursuant to which the Company and GRD have executed several capital notes for an aggregate outstanding principal amount of approximately $165.0 million. The par value of such notes is in NIS, and they bear no interest nor repayment date; provided, however, that no repayment shall be made before the fifth anniversary from the issuance date of each note.
Agreements with Directors and Officers
Employment and Consulting Agreements. We have entered into written employment or consulting agreements with certain of our Office Holders. These agreements provide for notice periods of varying duration for termination of the agreement by us or by the relevant Office Holder, during which time the Office Holder will continue to receive base salary and benefits. We have also entered into customary non-competition, confidentiality of information and ownership of inventions arrangements with these Office Holders. However, the enforceability of the noncompetition provisions may be limited under applicable law.
Options. Since our inception, we have granted options to purchase our ordinary shares to certain of our Office Holders. Such option agreements may contain acceleration provisions upon certain merger, acquisition, or change of control transactions. See also “Item 6. Directors, Senior Management and Employees—E. Share Ownership”. We describe our 2013 Plan under “Item 6. Directors, Senior Management and Employees—B. Compensation— 2013 Incentive Share Option Plan.” If the relationship between us and an Office Holder is terminated except for “cause” (as defined in the 2013 Plan and/or the applicable option award agreement), options that are vested will generally remain exercisable for 90 days after such termination; provided, however, that prior to the date of such termination, our remuneration committee may authorize an extension of the terms of all or part of the vested options beyond the date of such termination for a period not to exceed the period during which the options by their terms would otherwise have been exercisable, and provided further that the vested options may lose their status as incentive stock options and/or approved 102 options if such extension extends beyond the maximum extension authorized by the Ordinance or the Code, as applicable.
RSUs. We have granted RSUs to certain of our Office Holders. Such award agreements may contain acceleration provisions upon certain merger, acquisition, or change of control transactions. See also “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” We describe our 2013 Plan under “Item 6. Directors, Senior Management and Employees—B. Compensation—2013 Incentive Share Option Plan.” If the relationship between us and an Office Holder is terminated, RSUs that are vested shall be settled in accordance with the settlement schedule set forth in the applicable award agreement.
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OnKai
In May 2023, we entered into the OnKai Agreement for a $1.5 million equity investment in OnKai, a US-based technology company developing an AI-based platform to advance healthcare for underserved populations across the United States by facilitating alignment between healthcare stakeholders. The signing of the definitive agreement followed an announcement that we made in January 2023 that we had entered into a non-binding termsheet for an equity investment in OnKai. The OnKai Agreement provided that we will invest $1.5 million in exchange for series seed preferred shares of OnKai (which is in addition to a $1.5 million investment that was made by us in OnKai through a SAFE and which converted at a 15% discount into series seed preferred shares upon consummation of the Investment Round). Our investment in OnKai was part of an approximately $6 million Investment Round with other investors that was led by us of which SAFE notes of approximately $3.8 million were converted into preferred shares. On June 19, 2023, the Investment Round closed. Following the Investment Round, we hold approximately 23.9% of the outstanding share capital of OnKai on an as-converted and fully basis and our Chief Executive Officer and director, Allen Baharaff was appointed as a board member of OnKai. In 2024, we assigned our investment in Onkai to one our wholly-owned subsidiaries in Israel, Galtopa Therapeutics Ltd. In connection with the OnKai Agreement, our wholly-owned subsidiary, GRD entered into the OnKai Services Agreement with OnKai. The OnKai Services Agreement provides that GRD shall on a non-exclusive basis (i) provide support services to OnKai relating to finance, business development, strategic planning, execution and others; and (ii) lend its experience to OnKai in building a strategy and for the development of treatments for the underserved and that OnKai shall on a non-exclusive basis (i) take part in plan preparation to serve GDR’s vision of developing drugs for the underserved population and (ii) when relevant, design a process on the clinical trial dashboard that could potentially serve GDR’s future trial. On October 15, 2024, we entered into a bridge loan agreement with OnKai pursuant to which we made a loan in an aggregate amount of $250,000 to OnKai payable by January 1, 2028. The loan bears interest at an annual rate of 15%. In addition, in connection with the OnKai Services Agreement, we paid OnKai $150,000 for OnKai to assist the Company in (i) identifying and preparing eligible sites for the Company’s future clinical trials and (ii) preparing and submitting applications for clinical and research grants in respect of such future clinical trials, including preparing reimbursement strategies. In the event that we are awarded a clinical or research grant, OnKai agreed to repay us the $150,000 that we initially paid to OnKai. In September 2025, our Chief Executive Officer and director, Allen Baharaff resigned from the OnKai board. On December 29, 2025, OnKai filed a certificate of dissolution with the Secretary of State of the State of Delaware for winding up its affairs and dissolving as an entity. As of December 31, 2025, we determined that our investment and related balances in OnKai, including a long-term loan, were not recoverable and recorded a full write-off of such amounts, resulting in an aggregate loss of approximately $2.5 million.
C. Interests of Experts and Counsel.
Not applicable.
ITEM 8. Financial Information.
A. Consolidated Financial Statements and Other Financial Information.
See “Item 18. Financial Statements” for a list of all financial statements filed as part of this annual report.
Legal Matters
We are neither party to any legal or arbitration proceedings, including those relating to bankruptcy, receivership or similar proceedings and those involving any third-party, nor any governmental proceedings pending or known to be contemplated, which may have, or have had in the recent past, significant effects on the Company’s financial position or profitability.
Dividend Policy
We have never declared or paid any cash dividends on our ordinary shares and do not anticipate paying any cash dividends in the foreseeable future. Payment of cash dividends, if any, in the future will be at the discretion of our Board and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our Board may deem relevant.
Payment of dividends may also be subject to Israeli withholding taxes. See “Item 10. Additional Information—E. Taxation—Certain Israeli Tax Considerations” for additional information.
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B. Significant Changes.
Other than as otherwise described in this Annual Report on Form 20-F and as set forth below, no significant change has occurred in our operations since the date of our consolidated financial statements included in this Annual Report on Form 20-F.
ITEM 9. The Offer and Listing.
A. Offer and Listing Details
Our ordinary shares have been listed on the Nasdaq Capital Market under the symbol “GLMD” since March 13, 2014. Prior to that date, there was no public trading market for our ordinary shares.
B. Plan of Distribution
Not applicable.
C. Market for Ordinary Shares
Our ordinary shares are listed on the Nasdaq Capital Market under the symbol “GLMD.”
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the issue
Not applicable.
ITEM 10. Additional Information.
A. Share Capital.
Not applicable.
B. Memorandum and Articles of Association.
Our registration number is 51-495351-2. At the 2014 annual general meeting of shareholders, our shareholders adopted our Articles, which became effective on the consummation of our initial public offering in the United States in March 2014. Under Section 2 of our Articles, the purpose of the Company is to engage in any lawful activity.
The information set forth in Exhibit 2.1 of this Annual Report is incorporated herein by reference.
C. Material Contracts
For a description of our material agreements relating to our strategic collaborations and research arrangements and other material agreements, please refer to “Item 4.B. Information on the Company—Business Overview—Strategic Collaborations, Research Arrangements and other Material Agreements.” “and “Item 7.B “Related Party Transactions”.
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Employment Agreements
See “Item 6. Directors, Senior Management and Employees—B. Compensation”.
D. Exchange Controls.
There are no Israeli government laws, decrees, regulations or other legislation that restrict or that affect our export or import of capital, including the availability of cash and cash equivalents for use by us and our wholly-owned subsidiaries, or the remittance of dividends, interest or other payments to non-resident holders of our securities, except for ownership by nationals of certain countries that are, or have been, declared as enemies of Israel or otherwise as set forth under “Item 10. Additional Information—E. Taxation.”
E. Taxation.
The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of our ordinary shares. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israel, or other taxing jurisdiction.
Certain Israeli Tax Considerations
The following is a brief summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli tax consequences concerning the ownership and disposition of our ordinary shares. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of this kind of investor include residents of Israel or investors in securities who are subject to special tax regimes not covered in this discussion. To the extent that the discussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date hereof and does not take into account possible future amendments which may be under consideration.
General Corporate Tax Structure in Israel
Israeli resident companies (as defined below), such as the Company, are generally subject to corporate tax at the rate of 23% on their taxable income, as of January 1, 2018 (23% in 2025). However, the effective tax rate payable by a company that derives income from a Preferred Enterprise or a Technology Enterprise, as discussed below, may be considerably less.
Capital gains derived by an Israeli resident company are generally subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporation will be considered an “Israeli resident” if it meets one of the following: (i) it was incorporated in Israel; or (ii) the control and management of its business are exercised in Israel.
Law for the Encouragement of Industry (Taxes), 5729-1969
The Law for the Encouragement of Industry (Taxes), 5729-1969, which we refer to as the Industry Encouragement Law, provides several tax benefits for “Industrial Companies,” which are defined as Israeli resident-companies which were incorporated in Israel, of which 90% or more of their income in any tax year, other than income from certain government loans, is derived from an “Industrial Enterprise” that it owns and located in Israel or in the “Area”, in accordance with the definition under Section 3A of the Israeli Tax Ordinance. An “Industrial Enterprise” is defined as an enterprise whose principal activity in a given tax year is industrial production. Eligibility for benefits under the Industry Encouragement Law is not contingent upon approval of any governmental authority.
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The following tax benefits, among others, are available to Industrial Companies:
| ● | amortization over an eight year period of the cost of purchasing a patent, rights to use a patent and rights to know-how, which are used for the development or advancement of the company, commencing in the year in which such rights were first exercised; | |
| ● | under limited conditions, an election to file consolidated tax returns with related Industrial Companies controlled by it; and | |
| ● | deductions of expenses related to a public offering in equal amounts over a three year period commencing on the year of the offering. |
We believe that we qualify as an “Industrial Company” within the meaning of the Industry Encouragement Law. There can be no assurance that we will continue to qualify as an Industrial Company in the future or that the benefits described above will be available to us at all.
Law for the Encouragement of Capital Investments, 5719-1959
The Law for the Encouragement of Capital Investments, 5719-1959, which we refer to as the Investment Law, provides certain incentives for capital investments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law). Generally, an investment program that is implemented in accordance with the provisions of the Investment Law, is entitled to benefits. These benefits may include cash grants from the Israeli government and tax benefits, based upon, among other things, the geographic location in Israel of the facility in which the investment is made. In order to qualify for these incentives, an Approved Enterprise, a Beneficiary Enterprise or a Preferred Enterprise is required to comply with the requirements of the Investment Law.
The Investment Law was significantly amended effective April 1, 2005, further amended as of January 1, 2011, or the 2011 Amendment, and as of January 1, 2017, or the 2017 Amendment. The 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. However, companies entitled to benefits under the Investment Law as in effect up to January 1, 2011 were entitled to choose to continue to enjoy such benefits, provided that certain conditions are met, or elect instead, irrevocably, to forego such benefits and elect the benefits of the 2011 Amendment. The 2017 Amendment introduces new benefits for Technological Enterprises, alongside the existing tax benefits.
The following discussion is a summary of the Investment Law following its most recent amendments:
Tax Benefits Under the 2011 Amendment
The 2011 Amendment canceled the availability of the benefits granted to Industrial Companies under the Investment Law prior to 2011 and, instead, introduced new benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in the Investment Law) as of January 1, 2011.
The definition of a Preferred Company includes a company incorporated in Israel that is not fully owned by a governmental entity, and that has, among other things, a Preferred Enterprise and is controlled and managed from Israel. Pursuant to the 2011 Amendment, beginning in 2014 and in each year thereafter until 2016, a Preferred Company may only be entitled to a reduced corporate tax rate of 16% with respect to its preferred income derived by its Preferred Enterprise, unless the Preferred Enterprise is located in a specified development zone, in which case the rate will be 9%. Pursuant to the 2017 Amendment, in 2017 and thereafter, the corporate tax rate for Preferred Enterprise which is located in a specified development zone was reduced to 7.5%, while the reduced corporate tax rate for other development zones remains 16%. Income derived by a Preferred Company from a “Special Preferred Enterprise” (as such term is defined in the Investment Law) would be entitled, during a benefit period of ten years, to further reduced tax rates of 8%, or 5% if the Special Preferred Enterprise is located in a certain development zone. As of January 1, 2017, the definition for ‘Special Preferred Enterprise’ includes less stringent conditions.
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As of January 1, 2014, dividends paid to Israeli shareholders out of income attributed to a Preferred Enterprise or to a Special Preferred Enterprise are generally subject to withholding tax at source at the rate of 20% (in the case of non-Israeli shareholders - subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, 20%, or such a lower tax rate as may be provided under an applicable tax treaty). However, if such dividends are paid to an Israeli company, no tax is required to be withheld (although, if such dividends are subsequently distributed to individuals or a non-Israeli company, the aforesaid will apply).
New Tax benefits under the 2017 Amendment
The 2017 Amendment was enacted as part of the Economic Efficiency Law that was published on December 29, 2016, and is effective as of January 1, 2017. The 2017 Amendment provides new tax benefits for two types of “Technology Enterprises”, as described below, and is in addition to the other existing tax beneficial programs under the Investment Law.
The 2017 Amendment provides that a technology company satisfying certain conditions will qualify as a “Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as “Preferred Technology Income”, as defined in the Investment Law. The tax rate is further reduced to 7.5% for a Preferred Technology Enterprise located in development zone A. In addition, a Preferred Technology Company will enjoy a reduced corporate tax rate of 12% on capital gain derived from the sale of certain “Benefitted Intangible Assets” (as defined in the Investment Law) to a related foreign company if the Benefitted Intangible Assets were acquired from a foreign company on or after January 1, 2017 for at least NIS 200 million (approximately $62.7 million), and the sale receives prior approval from the National Authority for Technological Innovation (previously known as the Israeli Office of the Chief Scientist), to which we refer as IIA.
The 2017 Amendment further provides that a technology company satisfying certain conditions will qualify as a “Special Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate of 6% on “Preferred Technology Income” regardless of the company’s geographic location within Israel. In addition, a Special Preferred Technology Enterprise will enjoy a reduced corporate tax rate of 6% on capital gain derived from the sale of certain “Benefitted Intangible Assets” to a related foreign company if the Benefitted Intangible Assets were either developed by the Special Preferred Technology Enterprise or acquired from a foreign company on or after January 1, 2017, and the sale received prior approval from IIA. A Special Preferred Technology Enterprise that acquires Benefitted Intangible Assets from a foreign company for more than NIS 500 million will be eligible for these benefits for at least ten years, subject to certain approvals as specified in the Investment Law.
Dividends distributed by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise to Israeli shareholders, paid out of Preferred Technology Income, are subject to withholding tax at source at the rate of 20% (in the case of non-Israeli shareholders - subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, 20%, or such lower rate as may be provided in an applicable tax treaty). However, if such dividends are paid to an Israeli company, no tax is required to be withheld (although, if such dividends are subsequently distributed to individuals or a non-Israeli company, the aforesaid will apply). If such dividends are distributed to a foreign parent company holding, alone or together with other foreign companies, at least 90% of the shares of the distributing company and other conditions are met, the withholding tax rate will be 4% (or a lower rate under a tax treaty, if applicable, subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate).
After examining the impact of the 2017 Amendment, we submitted a request to receive a tax ruling from the Israel Tax Authority to be recognized as a Preferred Technology Enterprise and we received a tax ruling from the Israel Tax Authority granting GRD a Preferred Technology Enterprise status, subject to terms and conditions determined in the tax ruling. The tax ruling was valid from 2018 until the tax year ending in 2022. There is no assurance that GRD will continue to meet all the terms and conditions required under the tax ruling and the Investment Law that will allow it to enjoy any tax benefits under the Investment Law.
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Taxation of Our Israeli Individual Shareholders on Receipt of Dividends
Israeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our ordinary shares (other than bonus shares or share dividends) at a rate of 25%, or 30% if the recipient of such dividend is a Substantial Shareholder (as defined below) at the time of distribution or at any time during the preceding 12-month period. However, dividends distributed from taxable income accrued from Preferred Enterprise or Preferred Technology Enterprise to Israeli individuals are subject to withholding tax at the rate of 20%. However, if such dividends are distributed to an Israeli company, no tax is imposed (although, if such dividends are subsequently distributed to individuals or a non-Israeli company, withholding tax at a rate of 20% or such lower rate as may be provided in an applicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority (“ITA”) allowing for a reduced tax rate will apply). An average rate will be set in case the dividend is distributed from mixed types of income (regular and preferred income).
A “Substantial Shareholder” is generally a person who alone, or together with his or her relative or another person who collaborates with him or her on a regular basis, holds, directly or indirectly, at least 10% of any of the “means of control” of a corporation. “Means of control” generally include the right to vote, receive profits, nominate a director or an officer, receive assets upon liquidation or instruct someone who holds any of the aforesaid rights regarding the manner in which he or she is to exercise such right(s), all regardless of the source of such right.
With respect to individuals, the term “Israeli resident” is generally defined under Israeli tax legislation as a person whose center of life is in Israel. The Israeli Tax Ordinance (as amended by Amendment Law No. 132 of 2002), states that in order to determine the center of life of an individual, consideration will be given to the individual’s family, economic and social connections, including: (i) place of permanent residence; (ii) place of residential dwelling of the individual and the individual’s immediate family; (iii) place of the individual’s regular or permanent occupation or the place of his or her permanent employment; (iv) place of the individual’s active and substantial economic interests; (v) place of the individual’s activities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (i) the individual was present in Israel for 183 days or more in the tax year; or (ii) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’s presence in Israel in that tax year and the two previous tax years is 425 days or more. Such presumption may be rebutted either by the individual or by the assessing officer.
Payers of dividends on our ordinary shares, including the Israeli stockbroker effectuating the transaction, or the financial institution through which the securities are held, are generally required, subject to any of the foregoing exemptions, reduced tax rates and the demonstration of a shareholder regarding his, her or its foreign residency, to withhold tax upon the distribution of dividend at the rate of 25% (whether the recipient is a Substantial Shareholder or not), so long as the shares are registered with a nominee company.
Taxation of Israeli Resident Corporations on Payment of Dividends
Israeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on ordinary shares of Israeli resident corporations as long as the profits out of which the dividends were paid were derived in Israel.
Capital Gains Taxes Applicable to Israeli Resident Shareholders
The income tax rate applicable to real capital gains derived by an Israeli individual resident from the sale of shares that were purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a Substantial Shareholder at the time of sale or at any time during the preceding 12 month period and/or claims a deduction for interest and linkage differences expenses in connection with the purchase and holding of such shares, such gain will be taxed at the rate of 30%.
Moreover, capital gains derived by an individual shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary business income, are taxed in Israel at their marginal rates applicable to business income (up to 47% in 2025, excluding Excess Tax as detailed below).
At the sale of securities traded on a stock exchange, a detailed return, including a computation of the tax due, must be filed and an advanced payment must be paid on January 31 and July 31 of every tax year in respect of sales of securities made within the previous six months. However, if all tax due was withheld at source according to applicable provisions of the Israeli Tax Ordinance and regulations promulgated thereunder, the aforementioned return is not required to be filed and no advance payment must be paid. Capital gain is also reportable on the annual income tax return.
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Taxation of Non-Israeli Shareholders on Receipt of Dividends
Non-Israeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25% (or 30% for individuals, if such person is a Substantial Shareholder at the time he or she receives the dividend or on any date in the 12 months preceding such date), or 20% if the dividend is distributed from income attributed to Preferred Enterprise unless a lower rate is provided under an applicable tax treaty between Israel and the shareholder’s country of residence and provided that a certificate from the Israel Tax Authority allowing for a reduced withholding tax rate is obtained in advance.
A non-Israeli resident who has dividend income derived from or accrued in Israel, from which the full amount of tax was withheld at source, is generally exempt from the duty to file tax returns in Israel in respect of such income; provided that (i) such income was not derived from a business conducted in Israel by the taxpayer, (ii) the taxpayer has no other taxable sources of income in Israel with respect to which a tax return is required to be filed, and (iii) the taxpayer is not obligated to pay excess tax (as further explained below).
For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes on Income, as amended, or the U.S.-Israel Tax Treaty, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting shares of the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the entirety of its prior taxable year (if any), the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.
Payers of dividends on our ordinary shares, including the Israeli stockbroker effectuating the transaction, or the financial institution through which the securities are held, are generally required, subject to any of the foregoing exemptions, reduced tax rates and the demonstration of a shareholder regarding his, her or its foreign residency, to withhold tax upon the distribution of dividend at the rate of 25% (whether the recipient is a Substantial Shareholder or not), so long as the shares are registered with a nominee company.
Capital Gains Income Taxes Applicable to Non-Israeli Shareholders
Non-Israeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of our ordinary shares, provided that such shareholders did not acquire their shares prior to January 1, 2009 or acquired their shares after the Company was listed for trading on NASDAQ and such gains were not derived from a permanent business or business activity of such shareholders in Israel. These provisions dealing with capital gain are not applicable to a person whose gains from selling or otherwise disposing of the shares are deemed to be business income. However, non-Israeli corporations will not be entitled to the foregoing exemptions if an Israeli resident (i) has a controlling interest of more than 25% in such non-Israeli corporation or (ii) is the beneficiary of or is entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.
In addition, a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under the U.S.-Israel Tax Treaty, the sale, exchange or disposition of our ordinary shares by a shareholder who is a U.S. resident (for purposes of the U.S.-Israel Tax Treaty) holding the ordinary shares as a capital asset and is entitled to claim the benefits afforded to such a resident by the U.S.-Israel Tax Treaty, or a Treaty U.S. Resident, is generally exempt from Israeli capital gains tax unless: (i) such Treaty U.S. Resident is an individual and was present in Israel for 183 days or more in the aggregate during the relevant taxable year; (ii) such Treaty U.S. Resident holds, directly or indirectly, shares representing 10% or more of our voting power of the Company during any part of the 12 month period preceding such sale, exchange or disposition, subject to certain conditions; (iii) the capital gains arising from such sale, exchange or disposition are attributable to a permanent establishment of the Treaty U.S. Resident maintained in Israel, subject to certain conditions; (iv) the capital gains arising from such sale, exchange or disposition is attributed to real estate located in Israel; or (v) the capital gains arising from such sale, exchange or disposition is attributed to royalties. In any such case, the sale, exchange or disposition of our ordinary shares would be subject to Israeli tax, to the extent applicable. However, under the U.S.-Israel Tax Treaty, such Treaty U.S. Resident would be permitted to claim a credit for such taxes against U.S. federal income tax imposed on any gain from such sale, exchange or disposition, under the circumstances and subject to the limitations specified in the U.S.-Israel Income Tax Treaty.
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Regardless of whether shareholders may be liable for Israeli income tax on the sale of our ordinary shares, the payment of the consideration may be subject to withholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale. Specifically, in transactions involving a sale of all of the shares of an Israeli resident company, in the form of a merger or otherwise, the Israel Tax Authority may require from shareholders who are not liable for Israeli tax to sign declarations in forms specified by this authority or obtain a specific exemption from the Israel Tax Authority to confirm their status as non-Israeli resident, and, in the absence of such declarations or exemptions, may require the purchaser of the shares to withhold taxes at source.
Excess Tax
Individuals who are subject to tax in Israel are also subject to an additional tax at a rate of 3% on annual income exceeding a certain threshold (NIS 721,560 for 2025), which amount is generally linked to the annual change in the Israeli consumer price index (with the exception that based on Israeli new legislation such amount, and certain other statutory amounts will not be linked to the Israeli consumer price index for the years 2025-2027), including, but not limited to, dividends, interest and capital gains.
According to new legislation, in effect as of January 1, 2025, an additional 2% excess tax is imposed on Capital-Sourced Income (defined as income from any source other than employment income, business income or income from “personal effort”), to the extent that the Individual’s Capital Sourced Income exceeds the specified threshold of NIS 721,560 (and regardless of the employment/business income amount of such individual). This new excess tax applies, among other things, to income from capital gains, dividends, interest, rental income, or the sale of real property.
Estate and Gift Tax
Israeli law presently does not impose estate or gift taxes.
Certain Material U.S. Federal Income Tax Considerations
The following is a general summary of certain material U.S. federal income tax consequences relating to the purchase, ownership and disposition of our ordinary shares by U.S. Holders (as defined below). This summary is based on the Code, the regulations of the U.S. Department of the Treasury issued pursuant to the Code, or the Treasury Regulations, the income tax treaty between the United States and Israel, or the U.S.-Israel Tax Treaty, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect, or to different interpretation. No ruling has been sought from the Internal Revenue Service, or the IRS, with respect to any U.S. federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position. This summary is no substitute for consultation by prospective investors with their own tax advisors and does not constitute tax advice. This summary applies only to U.S. Holders that hold our ordinary shares as capital assets for U.S. federal income tax purposes (generally, property held for investment) and does not address all of the tax considerations that may be relevant to specific U.S. Holders in light of their particular circumstances or to U.S. Holders subject to special treatment under U.S. federal income tax law (including, without limitation, banks, insurance companies, tax-exempt entities, retirement plans, regulated investment companies, partnerships, dealers in securities, brokers, real estate investment trusts, grantor trusts, certain former citizens or residents of the United States, persons who acquire our ordinary shares as part of a straddle, hedge, conversion transaction or other integrated investment, persons who acquire our ordinary shares through the exercise or cancellation of employee stock options or otherwise as compensation for their services, persons that have a “functional currency” other than the U.S. dollar, persons that own (or are deemed to own, indirectly, or by attribution) 10% or more of our shares (by vote or value), or persons that mark their securities to market for U.S. federal income tax purposes). This summary does not address any U.S. state or local or non-U.S. tax considerations, any U.S. federal estate, gift or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal income tax consequences.
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As used in this summary, the term “U.S. Holder” means a beneficial owner of our ordinary shares that is, for U.S. federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source, or (iv) a trust with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or that has a valid election in effect under applicable Treasury Regulations to be treated as a “United States person.”
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares, the tax treatment of such entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entity and such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal income tax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares.
Prospective investors should be aware that this summary does not address the tax consequences to investors who are not U.S. Holders. Prospective investors should consult their own tax advisors as to the particular tax considerations applicable to them relating to the purchase, ownership and disposition of our ordinary shares, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.
Taxation of U.S. Holders
Distributions. Subject to the discussion below under “Passive Foreign Investment Company,” a U.S. Holder that receives a distribution with respect to an ordinary share generally will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Israeli tax withheld from such distribution) when actually or constructively received to the extent of the U.S. Holder’s pro rata share of our current and/or accumulated earnings and profits (as determined under U.S. federal income tax principles). Any distributions in excess of our earnings and profits will be applied against and will reduce (but not below zero) the U.S. Holder’s tax basis in its ordinary shares, and, to the extent they exceed that tax basis, will be treated as gain from the sale or exchange of our ordinary shares. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will be reported as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.
As noted above, we do not anticipate paying any cash dividends in the foreseeable future. If we were to pay dividends, we expect to pay such dividends in NIS. A dividend paid in NIS, including the amount of any Israeli taxes withheld, will be includible in a U.S. Holder’s income at a U.S. dollar amount calculated by reference to the exchange rate in effect on the date such dividend is received, regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted to U.S. dollars on the date of receipt, a U.S. Holder generally will not recognize a foreign currency gain or loss. However, if the U.S. Holder converts the NIS into U.S. dollars on a later date, the U.S. Holder must include, in computing its income, any gain or loss resulting from any exchange rate fluctuations. The gain or loss will be equal to the difference between (i) the U.S. dollar value of the amount included in income when the dividend was received and (ii) the amount received on the conversion of the NIS into U.S. dollars. Such gain or loss generally will be ordinary income or loss and will be U.S. source income or loss for U.S. foreign tax credit purposes. U.S. Holders should consult their own tax advisors regarding the tax consequences to them if we pay dividends in NIS or any other non-U.S. currency.
Subject to certain significant conditions and limitations, any Israeli taxes paid on or withheld from distributions from us and not refundable to a U.S. Holder may be credited against the U.S. Holder’s U.S. federal income tax liability or, alternatively, may be deducted from the U.S. Holder’s taxable income. However, as a result of recent changes to the U.S. foreign tax credit rules, a withholding tax may need to satisfy certain additional requirements in order to be considered a creditable tax for a U.S. Holder. We have not determined whether these requirements have been met and, accordingly, no assurance can be given that any withholding tax on dividends paid by us will be creditable. The election to deduct, rather than credit, foreign taxes, is made on a year-by-year basis and applies to all foreign taxes paid by a U.S. Holder or withheld from a U.S. Holder that year. Dividends paid on our ordinary shares generally will constitute income from sources outside the United States and be categorized as “passive category income” or, in the case of some U.S. Holders, as “general category income” for U.S. foreign tax credit purposes. Because the rules governing foreign tax credits are complex, U.S. Holders should consult their own tax advisors regarding the availability of foreign tax credits in their particular circumstances.
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Dividends paid on our ordinary shares will not be eligible for the “dividends-received” deduction generally allowed to corporate U.S. Holders with respect to dividends received from U.S. corporations.
Certain distributions treated as dividends that are received by an individual U.S. Holder from a “qualified foreign corporation” may be classified as “qualified dividend income,” — which is generally taxed at the lower applicable long term capital gains rates provided certain holding period and other requirements are satisfied. A non-U.S. corporation (other than a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information program, or (ii) with respect to any dividend it pays on stock which is readily tradable on an established securities market in the United States. We will not be a qualified foreign corporation if we are a PFIC for the taxable year in which we pay a dividend or for the preceding taxable year. As discussed below under “Passive Foreign Investment Company,” we believe that we were a PFIC for our 2025 taxable year and expect to be a PFIC for the 2026 taxable year. Because the PFIC determination is highly fact intensive, there can be no assurance that we will not be a PFIC in 2026 or for any other taxable year. Our ordinary shares will generally be considered to be readily tradable on an established securities market in the United States if they are listed on the Nasdaq Capital Market, as we intend our ordinary shares will be. U.S. Holders should consult their own tax advisors regarding the availability of the lower rate for dividends paid with respect to our ordinary shares.
The additional 3.8% “net investment income tax” (described below) may apply to dividends received by certain U.S. Holders who meet certain modified adjusted gross income thresholds.
Sale, Exchange or Other Taxable Disposition of Ordinary Shares. Subject to the discussion under “Passive Foreign Investment Company” below, a U.S. Holder generally will recognize capital gain or loss upon the sale, exchange, or other taxable disposition of our ordinary shares in an amount equal to the difference between the amount realized on the sale, exchange, or other taxable disposition and the U.S. Holder’s adjusted tax basis (determined under U.S. federal income tax rules) in such ordinary shares. This capital gain or loss will be long-term capital gain or loss if the U.S. Holder’s holding period in our ordinary shares exceeds one year. Preferential tax rates for long-term capital gain (currently, with a maximum rate of 20%) will apply to individual U.S. Holders. The deductibility of capital losses is subject to limitations. The gain or loss generally will be income or loss from sources within the United States for U.S. foreign tax credit purposes, subject to certain possible exceptions under the U.S.-Israel Tax Treaty. The additional 3.8% “net investment income tax” (described below) may apply to gains recognized upon the sale, exchange, or other taxable disposition of our ordinary shares by certain U.S. Holders who meet certain modified adjusted gross income thresholds.
U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currency other than U.S. dollars upon the disposition of their ordinary shares.
Passive Foreign Investment Company. In general, a non-U.S. corporation will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (i) at least 75% of its gross income is “passive income,” or (ii) on average at least 50% of its assets by value produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including those raised in a public offering. Assets that produce or are held for the production of passive income may include cash, even if held as working capital or raised in a public offering, as well as marketable debt securities and other assets that may produce passive income. In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.
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A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend on our income, assets, and activities for such year. Based upon our review of our financial data, we believe that we were a PFIC for our 2025 taxable year and expect to be a PFIC for the 2026 taxable year. Because PFIC status is determined annually and is based on our income, assets and activities for the entire taxable year, it is not possible to determine with certainty whether we will be characterized as a PFIC for the 2026 taxable year until after the close of the year, and there can be no assurance that we will not be classified as a PFIC in any future year.
Default PFIC Rules. If we are a PFIC for any tax year in which a U.S. Holder holds our ordinary shares, a U.S. Holder who does not make a timely “qualified electing fund” election, or “QEF election” or a mark-to-market election (as described below), referred to in this summary as a “Non-Electing U.S. Holder,” will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion of any distributions received by the Non-Electing U.S. Holder on the ordinary shares in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing U.S. Holder in the three preceding taxable years, or, if shorter, the Non-Electing U.S. Holder’s holding period for the ordinary shares), and (ii) any gain realized on the sale or other disposition of such ordinary shares. Under these rules:
| ● | the excess distribution or gain would be allocated ratably over the Non-Electing U.S. Holder’s holding period for such ordinary shares; | |
| ● | the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and | |
| ● | the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. |
If a Non-Electing U.S. Holder who is an individual dies while owning our ordinary shares, the Non-Electing U.S. Holder’s successor would be ineligible to receive a step-up in tax basis of such ordinary shares. Non-Electing U.S. Holders should consult their tax advisors regarding the application of the “net investment income tax” (described below) to their specific situation.
To the extent a distribution on our ordinary shares does not constitute an excess distribution to a Non-Electing U.S. Holder, such Non-Electing U.S. Holder generally will be required to include the amount of such distribution in gross income as a dividend to the extent of our current and/or accumulated earnings and profits (as determined for U.S. federal income tax purposes) that are not allocated to excess distributions. The tax consequences of such distributions are discussed above under “Taxation of U.S. Holders—Distributions.” Each U.S. Holder is encouraged to consult its own tax advisor with respect to the appropriate U.S. federal income tax treatment of any distribution on our ordinary shares.
If we are treated as a PFIC for any taxable year during the holding period of a Non-Electing U.S. Holder, we will continue to be treated as a PFIC for all succeeding years during which the Non-Electing U.S. Holder is treated as a direct or indirect Non-Electing U.S. Holder even if we are not a PFIC for such years. A U.S. Holder is encouraged to consult its tax advisor with respect to any available elections that may be applicable in such a situation, including the “deemed sale” election of Section 1298(b)(1) of the Code (which will be taxed under the adverse tax rules described above).
A U.S. Holder that owns (or is deemed to own) shares in a PFIC during any taxable year of the U.S. Holder generally is required to file an IRS Form 8621 with such U.S. Holder’s U.S. federal income tax return and provide such other information as the IRS may require. Failure to file IRS Form 8621 for each applicable taxable year may result in substantial penalties and result in the U.S. Holder’s taxable years being open to audit by the IRS until such forms are properly filed.
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We may invest in the equity of foreign corporations that are PFICs or may own subsidiaries that are PFICs (any such entity, a “lower-tier PFIC”). If we are classified as a PFIC, under attribution rules, U.S. Holders will be subject to the PFIC rules with respect to their indirect ownership interests in such lower-tier PFICs, such that a disposition by us of the shares of the lower-tier PFIC or receipt by us of a distribution from the lower-tier PFIC generally will be treated as a deemed disposition of such shares or the deemed receipt of such distribution by the U.S. Holder, subject to taxation under the PFIC rules even though the U.S. Holder does not receive any proceeds from those dispositions or distributions. There can be no assurance that a U.S. Holder will be able to make a QEF election with respect to any lower-tier PFICs in which we invest. Each U.S. Holder is encouraged to consult its own tax advisor with respect to tax consequences of an investment by us in a lower-tier PFIC.
QEF Election. Certain adverse consequences of PFIC status can be mitigated for holders of our ordinary shares if a U.S. Holder makes a QEF election. A U.S. Holder who makes a timely QEF election, referred to in this disclosure as an “Electing U.S. Holder,” with respect to us must report for U.S. federal income tax purposes its pro rata share of our ordinary earnings and net capital gain, if any, for our taxable year that ends with or within the taxable year of the Electing U.S. Holder. The “net capital gain” of a PFIC is the excess, if any, of the PFIC’s net long-term capital gains over its net short-term capital losses. The amount so included in income generally will be treated as ordinary income to the extent of such Electing U.S. Holder’s allocable share of the PFIC’s ordinary earnings and as long-term capital gain to the extent of such Electing U.S. Holder’s allocable share of the PFIC’s net capital gains. Such Electing U.S. Holder generally will be required to translate such income into U.S. dollars based on the average exchange rate for the PFIC’s taxable year with respect to the PFIC’s functional currency. Such income generally will be treated as income from sources outside the United States for U.S. foreign tax credit purposes. Amounts previously included in income by such Electing U.S. Holder under the QEF rules generally will not be subject to tax when they are distributed to such Electing U.S. Holder. The Electing U.S. Holder’s tax basis in our ordinary shares generally will increase by any amounts so included under the QEF rules and decrease by any amounts not included in income when distributed.
An Electing U.S. Holder will be subject to U.S. federal income tax on such amounts for each taxable year in which we are a PFIC, regardless of whether such amounts are actually distributed to such Electing U.S. Holder. However, an Electing U.S. Holder may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If an Electing U.S. Holder is an individual, any such interest will be treated as non-deductible “personal interest.”
Any net operating losses or net capital losses of a PFIC will not pass through to the Electing U.S. Holder and will not offset any ordinary earnings or net capital gain of a PFIC recognized by Electing U.S. Holder in subsequent years.
So long as an Electing U.S. Holder’s QEF election with respect to us is in effect with respect to the entire holding period for our ordinary shares, any gain or loss recognized by such Electing U.S. Holder on the sale, exchange or other disposition of such shares generally will be long-term capital gain or loss if such Electing U.S. Holder has held such shares for more than one year at the time of such sale, exchange or other disposition. Preferential tax rates for long-term capital gain (currently, a maximum rate of 20%) will apply to individual U.S. Holders. The deductibility of capital losses is subject to limitations.
In general, a U.S. Holder must make a QEF election on or before the due date for filing its income tax return for the first year to which the QEF election is to apply. A U.S. Holder makes a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. Upon request, we expect to provide U.S. Holders with the information needed to complete IRS Form 8621 (which form would be required to be filed with the IRS on an annual basis by the U.S. Holder) and to make and maintain a valid QEF election for any year in which we are a PFIC. There is no assurance, however, that we will have timely knowledge of our status as a PFIC or the status of a lower-tier PFIC, or that the information that we provide will be adequate to allow U.S. Holders to make a QEF election. A QEF election will not apply to any taxable year during which we are not a PFIC, but will remain in effect with respect to any subsequent taxable year in which we become a PFIC.
Each U.S. Holder should consult its own tax advisor with respect to the advisability of, the tax consequences of, and the procedures for making a QEF election with respect to us.
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Mark-to-Market Election. Alternatively, if our ordinary shares are treated as “marketable stock,” a U.S. Holder would be allowed to make a “mark-to-market” election with respect to our ordinary shares, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the U.S. Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of our ordinary shares at the end of the taxable year over such holder’s adjusted tax basis in such ordinary shares. The U.S. Holder would also be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder’s adjusted tax basis in our ordinary shares over their fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to- market election. A U.S. Holder’s tax basis in our ordinary shares would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included in income by the U.S. Holder, and any loss in excess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains.
Generally, stock will be considered marketable stock if it is “regularly traded” on a “qualified exchange” within the meaning of applicable Treasury Regulations. A class of stock is regularly traded on an exchange during any calendar year during which such class of stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. To be marketable stock, our ordinary shares must be regularly traded on a qualifying exchange (i) in the United States that is registered with the SEC or a national market system established pursuant to the Exchange Act or (ii) outside the United States that is properly regulated and meets certain trading, listing, financial disclosure and other requirements. Our ordinary shares are expected to constitute “marketable stock” as long as they remain listed on the Nasdaq Capital Market and are regularly traded.
A mark-to-market election will not apply to our ordinary shares held by a U.S. Holder for any taxable year during which we are not a PFIC, but will remain in effect with respect to any subsequent taxable year in which we become a PFIC. Such election will not apply to any lower-tier PFIC that we own. Each U.S. Holder is encouraged to consult its own tax advisor with respect to the availability and tax consequences of a mark-to-market election with respect to our ordinary shares.
Each U.S. Holder should consult its own tax adviser with respect to the applicability of the “net investment income tax” (discussed below) where a mark-to-market election is in effect.
In addition, U.S. Holders should consult their tax advisors regarding the IRS information reporting and filing obligations that may arise as a result of the ownership of ordinary shares in a PFIC, including IRS Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund.
The U.S. federal income tax rules relating to PFICs, QEF elections, and mark-to market elections are complex. U.S. Holders are urged to consult their own tax advisors with respect to the purchase, ownership and disposition of our ordinary shares, any elections available with respect to such ordinary shares and the IRS information reporting obligations with respect to the purchase, ownership and disposition of our ordinary shares.
Certain Reporting Requirements
Certain U.S. Holders may be required to file IRS Form 926, Return by U.S. Transferor of Property to a Foreign Corporation and IRS Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, reporting transfers of cash or other property to us and information relating to the U.S. Holder and us. Substantial penalties may be imposed upon a U.S. Holder that fails to comply. See also the discussion regarding Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund, above.
In addition, certain U.S. Holders must report information on IRS Form 8938, Statement of Specified Foreign Financial Assets, with respect to their investments in certain “specified foreign financial assets,” which would include an investment in our ordinary shares, if the aggregate value of all of those assets exceeds $50,000 on the last day of the taxable year (and in some circumstances, a higher threshold). This reporting requirement applies to individuals and certain U.S. entities.
U.S. Holders who fail to report required information could become subject to substantial penalties. U.S. Holders should consult their tax advisors regarding the possible implications of these reporting requirements arising from their investment in our ordinary shares.
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Backup Withholding Tax and Information Reporting Requirements
Generally, information reporting requirements will apply to distributions on our ordinary shares or proceeds on the disposition of our ordinary shares paid within the United States (and, in certain cases, outside the United States) to U.S. Holders other than certain exempt recipients, such as corporations. Furthermore, backup withholding (currently at 24%) may apply to such amounts if the U.S. Holder fails to (i) provide a correct taxpayer identification number, (ii) report interest and dividends required to be shown on its U.S. federal income tax return, or (iii) make other appropriate certifications in the required manner. U.S. Holders who are required to establish their exempt status generally must provide such certification on IRS Form W-9.
Backup withholding is not an additional tax. Amounts withheld as backup withholding from a payment may be credited against a U.S. Holder’s U.S. federal income tax liability and such U.S. Holder may obtain a refund of any excess amounts withheld by filing the appropriate claim for refund with the IRS and furnishing any required information in a timely manner.
Medicare Tax on Investment Income
Certain U.S. persons, including individuals, estates and trusts, will be subject to an additional 3.8% Medicare tax, or “net investment income tax,” on unearned income. For individuals, the additional net investment income tax applies to the lesser of (i) “net investment income” or (ii) the excess of “modified adjusted gross income” over $200,000 ($250,000 if married and filing jointly or $125,000 if married and filing separately). “Net investment income” generally equals the taxpayer’s gross investment income reduced by the deductions that are allocable to such income. Investment income generally includes, among other things, passive income such as interest, dividends, annuities, royalties, rents, and capital gains. U.S. Holders are urged to consult their own tax advisors regarding the implications of the additional net investment income tax resulting from their ownership and disposition of our ordinary shares.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
F. Dividends and Paying Agents.
Not applicable.
G. Statements by Experts.
Not applicable.
H. Documents on Display.
The SEC maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC. You may read and copy this annual report, including the related exhibits and schedules, and any document we file with the SEC at http://www.sec.gov.
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As a “foreign private issuer,” we are subject to the information reporting requirements of the Exchange Act that are applicable to foreign private issuers, and under those requirements file reports with the SEC. Those other reports or other information may be inspected without charge at the locations described above. As a “foreign private issuer,” we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements. Section 8103 of the National Defense Authorization Act for Fiscal Year 2026, named the “Holding Foreign Insiders Accountable Act”, which was signed into law on December 18, 2025, will require directors and officers of foreign private issuers to make insider reports under Section 16(a) of the Exchange Act, effective March 18, 2026. Our principal shareholders continue to remain exempt from the reporting under Section 16(a) of the Exchange Act and our directors, officers and principal shareholders continue to remain exempt from the short-swing profit recovery provisions contained in Section 16(b) of the Exchange Act with respect to their purchases and sales of ordinary shares. Furthermore, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Additionally, as a “foreign private issuer,” we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies reduce the frequency and scope of information and protections to which you are entitled as an investor.
We maintain a corporate website at http://www.galmedpharma.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this annual report and does not constitute a part of this annual report. We have included our website address in this annual report solely as an inactive textual reference.
I. Subsidiary Information.
Not applicable.
J. Annual Report to Security Holders
Not applicable.
ITEM 11. Quantitative and Qualitative Disclosures About Market Risk.
Quantitative and Qualitative Disclosure About Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.
Foreign Currency Exchange Risk
Our foreign currency exposures give rise to market risk associated with exchange rate movements of the Euro and NIS mainly against the U.S. dollar because a large portion of our expenses are denominated in Euros and NIS. Our Euro expenses consist principally of payments made to sub-contractors and consultants for pre-clinical studies, clinical trials and other research and development activities. Our NIS expenses consist principally of payments made to employees, subcontractors and consultants for pre-clinical studies, clinical trials, professional services, other research and development activities and general and administrative activities. We anticipate that a large portion of our expenses will continue to be denominated in currencies other than the U.S. dollar. Our financial position, results of operations and cash flow are subject to fluctuations due to changes in foreign currency exchange rates. Our results of operations and cash flow are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. Approximately 40% of our expected expenses are denominated in NIS. Changes of 5% and 10% in the U.S. dollar to NIS exchange rate will increase/decrease our operation expenses by 2% and 4%, respectively. Approximately 10% of our expected expenses are denominated in Euros. Changes of 5% and 10% in the U.S. dollar to Euro exchange rate, will increase/decrease our operation expenses by 0.5% and 1.0%, respectively. To date, fluctuations in the exchange rates have not materially affected our results of operations or financial condition for the periods under review.
To date, we have not engaged in hedging our foreign currency exchange risk. In the future, we may enter into formal currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.
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Interest Rate Risk
Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. We currently do not hedge interest rate exposure. Because of the short-term maturities of our cash equivalents and investment securities, we do not believe that an increase in market rates would have any significant impact on the realized value of our investment securities. If a 10% change in interest rates were to have occurred on December 31, 2025, this change would not have had a material effect on the fair value of our investment portfolio as of that date.
Liquidity
We do not believe that our cash and cash equivalents and available for sale investments have significant risk of default or illiquidity. While we believe our cash, cash equivalents and available for sale investments do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits.
ITEM 12. Description of Securities Other Than Equity Securities.
A. Debt Securities.
Not applicable.
B. Warrants and Rights.
Not applicable.
C. Other Securities.
Not applicable.
D. American Depositary Shares.
Not applicable.
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PART II
ITEM 13. Defaults, Dividend Arrearages and Delinquencies.
Not applicable.
ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
Not applicable.
ITEM 15. Controls and Procedures.
Disclosure Controls and Procedures
We performed an evaluation of the effectiveness of our disclosure controls and procedures that are designed to ensure that information required to be disclosed in this annual report and filed with the SEC is recorded, processed, summarized and reported timely within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act, is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons within our Company to disclose information otherwise required to be set forth in our reports. Nevertheless, our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives. Based on our evaluation, our management, including our President, Chief Executive Officer and Chairman and Chief Accounting Officer, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) of the Exchange Act) as of the end of the period covered by this annual report are effective at such reasonable assurance level.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| ● | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transaction and dispositions of the assets of the company; | |
| ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and | |
| ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on that assessment, our management concluded that as of December 31, 2025, our internal control over financial reporting was effective.
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16. [RESERVED]
ITEM 16A. Audit Committee Financial Expert.
Our Board has determined that Mr. Poshinski qualifies as an audit committee financial expert pursuant to the applicable SEC rules and that Mr. Poshinski is “independent” in accordance with the Nasdaq Capital Market corporate governance requirements. For information relating to Mr. Poshinski’s qualifications and experience, see “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management.”
ITEM 16B. Code of Ethics.
We have adopted a Code of Business Conduct and Ethics applicable to all of our directors and employees, including our President, Chief Executive Officer and Chairman, Chief Financial Officer, controller or principal accounting officer or other persons performing similar functions, which is a “code of ethics” as defined in Item 16B of Form 20-F promulgated by the SEC and as required by the Nasdaq Listing Rules, which refers to Section 406(c) of the Sarbanes-Oxley Act. Section 406(c) of the Sarbanes-Oxley Act provides that a “code of ethics” means such standards as are reasonably necessary to promote (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely and understandable disclosure in the periodic reports required to be filed by the issuer; and (iii) compliance with applicable governmental rules and regulation.
The full text of the Code of Business Conduct and Ethics is posted on our website at www.galmedpharma.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein. We will provide a copy of such code of ethics without charge upon request by mail or by telephone. If we make any amendment to the Code of Business Conduct and Ethics or grant any waivers, including any implicit waiver, from a provision of the Code of Business Conduct and Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of the SEC.
ITEM 16C. Principal Accountant Fees and Services.
Brightman Almagor Zohar & Co., a Firm in the Deloitte Global Network, an independent registered public accounting firm, served as our independent public accountants for the fiscal years ended December 31, 2025 and 2024, for which audited financial statements appear in this annual report.
The following table presents the aggregate fees for professional services rendered by such accountants to us during their respective term as our principal accountants in 2025 and 2024.
| 2025 | 2024 | |||||||
| (US$ in thousands) | (US$ in thousands) | |||||||
| Audit Fees (1) | 185 | 170 | ||||||
| Tax and incentives Fees (2) | - | 8 | ||||||
| Total | 185 | 178 | ||||||
| (1) | Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements, including consents and comfort letters for registration statement filings. |
| (2) | Tax fees consist of services related to obtaining a tax rulings. |
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Audit Committee Pre-Approval Policies and Procedures
One of our audit committee’s main roles is to assist the board of directors in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and reporting practices of the Company. The audit committee oversees the appointment, compensation, and oversight of the public accounting firm engaged to prepare or issue an audit report on the financial statements of the Company. Our Board has delegated to the audit committee the power to pre-approve non-auditing services rendered by the Company’s independent auditors without the need for further approval by the board of directors. As such, our audit committee has adopted a pre-approval policy for the engagement of our independent registered public accounting firm to perform certain audit and non-audit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee pre-approves annually a list of specific audit and non-audit services in the categories of audit services, audit-related services, tax services and other services that may be performed by our independent registered public accounting firm. The last pre-approval policy was adopted by our audit committee on April 2, 2024 for a period of twelve months. Since its establishment in May 2014, the audit committee has approved all of the audit-related fees, tax fees and all other fees. If a type of service that is to be provided by our auditors has not received such general pre-approval, it will require specific pre-approval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to perform the prohibited non-audit functions defined in applicable SEC rules.
ITEM 16D. Exemptions from the Listing Standards for Audit Committees.
Not applicable.
ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
Not applicable.
ITEM 16F. Change in Registrant’s Certifying Accountant.
Not applicable.
ITEM 16G. Corporate Governance.
Our shares are listed on the Nasdaq Capital Market under the symbol “GLMD.” In addition to the corporate governance requirements of the Sarbanes-Oxley Act and the related rules implemented by the SEC, we must comply with the Nasdaq Listing Rules. Under those Nasdaq Listing Rules, we may elect to follow certain corporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwise imposed by the Nasdaq Listing Rules for U.S. domestic issuers.
In accordance with Israeli law and practice, and subject to the exemption set forth in Rule 5615 of the Nasdaq Listing Rules, we follow the provisions of the Companies Law, rather than the Nasdaq Listing Rules, with respect to the following requirements:
| ● | Distribution of certain reports to shareholders. As opposed to the Nasdaq Listing Rules, which require listed issuers to make certain reports, such as annual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distribute periodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make such reports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statements available to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt from the SEC’s proxy solicitation rules. See “Item 10. Additional Information—Documents on Display” for a description of our Exchange Act reporting obligations. |
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| ● | Quorum. While the Nasdaq Listing Rules require that the quorum for purposes of any meeting of the holders of a listed company’s common voting stock be no less than 33.33% of the company’s outstanding common voting stock, under Israeli law, a company is entitled to determine in its articles of association the number of shareholders and percentage of holdings required for a quorum at a shareholders meeting. Our articles of association provide that a quorum of two or more shareholders holding at least 33.33% of the voting rights in person or by proxy is required for commencement of business at a general meeting. However, the quorum set forth in our articles of association with respect to an adjourned meeting consists of any two shareholders present in person or by proxy even if, between them, they represent shares conferring 33.33% or less of the voting rights of the Company. | |
| ● | Nomination of directors. With the exception of directors elected by our Board due to vacancy, our directors are elected by an annual meeting of our shareholders to hold office until the next annual meeting following three years from his or her election. See “Item 6. Directors, Senior Management and Employees—C. Board Practices.” The nominations for directors, which are presented to our shareholders by our Board, are made by the nominating committee itself, in accordance with the provisions of Nasdaq Capital Market Listing Rule 5605(e), our Articles and the Companies Law. |
| ● | Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilities of our remuneration committee, Office Holder compensation and any required approval by the shareholders of such compensation. Israeli law and our Articles do not require that the independent members of our Board, or a remuneration committee composed solely of independent members of our Board, determine an executive officer’s compensation, as is generally required under the Nasdaq Listing Rules with respect to the Chief Executive Officer and all other executive officers of a company. Instead, remuneration of Office Holders is determined and approved by our remuneration committee, and in general, by our Board as well, and in certain circumstances, by our shareholders, as detailed above. The requirements for shareholder approval of any Office Holder compensation, and the relevant majority or Special Majority for such approval, are all as set forth in the Companies Law. Thus, we seek shareholder approval for all corporate actions with respect to Office Holder compensation requiring such approval under the requirements of the Companies Law, including for our Compensation Policy and for certain Office Holder Compensation, rather than seeking approval for such corporate actions in accordance with Nasdaq Listing Rules. All members of our remuneration committee are independent directors under applicable Nasdaq Capital Market and SEC rules, as affirmatively determined by our Board. See “Item 6. Directors, Senior Management and Employees—B. Compensation.” |
| ● | Independent directors. Although Israeli law does not require that a majority of the directors serving on our Board be “independent,” as defined under Nasdaq Capital Market Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described above under “Item 6. Directors, Senior Management and Employees—C. Board Practices—External Directors.”, following our “opt-out” of the requirement to appoint external directors, a majority of our Board is independent based on the Nasdaq Capital Market rules. We are required, however, to ensure that all members of our audit committee are “independent” under the applicable Nasdaq Capital Market and SEC criteria for independence (as we cannot exempt ourselves from compliance with that SEC independence requirement, despite our status as a foreign private issuer). Our independent directors’ conduct regularly scheduled meetings at which only such independent directors are present, as required by the Nasdaq Listing Rules. Our Board has affirmatively determined that each of Mr. Nir, Mr. Poshinski, Dr. Sidransky and Dr. Brosgart qualifies as “independent” under the Nasdaq Capital Market independence standards. |
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| ● | Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under requirements of the Companies Law, rather than seeking approval for corporate actions in accordance with Nasdaq Capital Market Listing Rule 5635. In particular, under this Nasdaq Capital Market rule, shareholder approval is generally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rights or if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leading to a change of control; (iii) adoption or amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights (including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) if such equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is required for, among other things: (i) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for any other position that they may hold at a company), for which approvals of the remuneration committee, board of directors and shareholders are all required, (ii) Extraordinary Transactions with controlling shareholders of publicly held companies, which require the special approval described under “Item 6. Directors, Senior Management and Employees—C. Board Practices—Approval of Related Party Transactions under Israeli Law— Transactions with Controlling Shareholders,” and (iii) terms of office and employment or other engagement of the controlling shareholder of the Company or such controlling shareholder’s relative, which require the special approval described under “Item 6. Directors, Senior Management and Employees—B. Compensation” and “Item 6. Directors, Senior Management and Employees—C. Board Practices— Approval of Related Party Transactions under Israeli Law.” In addition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies. See also “Compensation of officers” above. |
ITEM 16H. Mine Safety Disclosure.
Not applicable.
ITEM 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
ITEM 16J. Insider Trading Policies.
We
have
ITEM 16K. Cybersecurity.
As
of the date of this report, we are
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PART III
ITEM 17. Financial Statements.
We have responded to Item 18 in lieu of responding to this item.
ITEM 18. Financial Statements.
Please refer to the financial statements beginning on page F-1. The following financial statements, financial statement schedules and related notes are filed as part of this annual report, together with the report of the independent registered public accounting firm.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Galmed Pharmaceuticals Ltd.
Opinion on the Financial Statements
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Marketable Debt Securities Classified as Available-for-Sale– Refer to Note 3 to the consolidated financial statements
Critical Audit Matter Description
The Company invests its excess cash primarily in available-for-sale marketable debt securities. Investments in marketable debt securities classified as available-for-sale are reported at fair value in the financial statements. The investments totaled approximately $7 million on December 31, 2025.
We identified the investments in marketable debt securities classified as available-for-sale as a critical audit matter because of the magnitude of these investments and due to the increased extent of audit effort in relation to our audit as a whole.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s investments in marketable debt securities classified as available-for-sale included the following, among others:
| ● | We assessed the accuracy and completeness of the quantities of marketable debt securities held by the Company as of December 31, 2025 by comparing the Company’s investment report to the custodians’ balance confirmations. | |
| ● | We obtained independent estimates of the fair value of the investments in marketable debt securities classified as available-for-sale held by the Company as of December 31, 2025 and compared our estimates to the Company’s estimates. | |
| ● | We agreed the recorded values of investments in marketable debt securities classified as available-for-sale to the fair values indicated in the custodians’ balance confirmations. |
/s/
Certified Public Accountants
A Firm in the Deloitte Global Network
March 31, 2026
We have served as the Company’s auditor since 2013.
| F-1 |
GALMED PHARMACEUTICALS LTD.
Consolidated Balance Sheets
U.S. Dollars in thousands, except share data and per share data
| Note | 2025 | 2024 | ||||||||
| As of December 31, | ||||||||||
| Note | 2025 | 2024 | ||||||||
| Assets | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | $ | $ | ||||||||
| Restricted cash | ||||||||||
| Short-term deposits | ||||||||||
| Marketable debt securities | 3 | |||||||||
| Other receivables | 4 | |||||||||
| Total current assets | ||||||||||
| Investment in associate at fair value | 5 | |||||||||
| Loan to associate | 5 | |||||||||
| Total non-current assets | ||||||||||
| Total assets | $ | $ | ||||||||
| Liabilities and stockholders’ equity | ||||||||||
| Current liabilities | ||||||||||
| Trade payables | $ | $ | ||||||||
| Other payables | 6 | |||||||||
| Total current liabilities | ||||||||||
| Commitments and contingencies liabilities | 8 | |||||||||
| Stockholders’ equity | ||||||||||
| Ordinary shares, par value NIS per share; Authorized shares; Issued and outstanding: and shares as of December 31, 2025 and December 31, 2024, respectively | 9 | |||||||||
| Additional paid-in capital | ||||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Total stockholders’ equity | ||||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||||
Accompanying notes are an integral part of the consolidated financial statements.
| F-2 |
GALMED PHARMACEUTICALS LTD.
Consolidated Statements of Operations
U.S. Dollars in thousands, except share data and per share data
| 2025 | 2024 | 2023 | ||||||||||||
| Year ended December 31, | ||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||
| Research and development expenses | 10 | |||||||||||||
| General and administrative expenses | 11 | |||||||||||||
| Total operating loss | ||||||||||||||
| Financial income, net | 12 | ( | ) | ( | ) | ( | ) | |||||||
| Financial expenses related to SEPA | 9 | |||||||||||||
| Impairment on associate and associated loan | 5 | |||||||||||||
| Net loss | $ | $ | $ | |||||||||||
| Basic and diluted net loss per share | $ | $ | $ | ( | *) | |||||||||
| Weighted-average number of shares outstanding used in computing basic and diluted net loss per share | ( | *) | ||||||||||||
| (*) |
Accompanying notes are an integral part of the consolidated financial statements.
| F-3 |
GALMED PHARMACEUTICALS LTD.
Consolidated Statements of Comprehensive Loss
U.S. Dollars in thousands, except share data and per share data
| 2025 | 2024 | 2023 | ||||||||||
| Year ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Net loss | $ | $ | $ | |||||||||
| Other comprehensive loss: | ||||||||||||
| Net unrealized gain on available for sale securities | ( | ) | ( | ) | ( | ) | ||||||
| Comprehensive loss | $ | $ | $ | |||||||||
Accompanying notes are an integral part of the consolidated financial statements.
| F-4 |
GALMED PHARMACEUTICALS LTD.
Statements of Changes in Stockholders’ Equity
U.S. Dollars in thousands, except share data and per share data
| Shares | Amount(*) | capital | income (loss) | deficit | Total | |||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||
| Additional | other | |||||||||||||||||||||||
| Ordinary shares (*) | paid-in | comprehensive | Accumulated | |||||||||||||||||||||
| Shares | Amount | capital | income (loss) | deficit | Total | |||||||||||||||||||
| Balance - December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Issuance of ordinary shares, pre-funded warrants, and warrants net of issuance costs of $ | ||||||||||||||||||||||||
| Exercise of Pre-funded warrants (**) | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Unrealized gain on marketable debt securities | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance - December 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||
| Issuance of ordinary shares in relation to SEPA (***) | ||||||||||||||||||||||||
| Issuance of SEPA Commitment Shares (***) | ||||||||||||||||||||||||
| Exercise of Pre-funded warrants (**) | ( | ) | ||||||||||||||||||||||
| Exercise of RSUs | ( | ) | ||||||||||||||||||||||
| Exercise of Warrants (**) | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Unrealized gain from marketable debt securities | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance - December 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||
| Issuance of ordinary shares in relation to SEPA (***) | ||||||||||||||||||||||||
| Issuance of SEPA Commitment Shares (***) | ||||||||||||||||||||||||
| Exercise of RSUs | ( | ) | ||||||||||||||||||||||
| Share issuance (ATM) (****) | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Unrealized gain from marketable debt securities | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance - December 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||
| (*) | |
| (**) | |
| (***) | |
| (****) |
Accompanying notes are an integral part of the consolidated financial statements.
| F-5 |
GALMED PHARMACEUTICALS LTD.
Consolidated Statements of Cash Flows
U.S. Dollars in thousands, except share data and per share data
2025 | 2024 | 2023 | ||||||||||
| Year ended December 31, | ||||||||||||
2025 | 2024 | 2023 | ||||||||||
| Cash flow from operating activities | ||||||||||||
| Net loss | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation | ||||||||||||
| Amortization of discount (premium) on marketable debt securities | ( | ) | ||||||||||
| Loss on sale of marketable debt securities | ||||||||||||
| Interest income and translation differences from short-term deposits | ( | ) | ( | ) | ||||||||
| Financial expenses related to SEPA (**) | ||||||||||||
| Finance expenses | ||||||||||||
| Interest income from loan to associate (*) | ( | ) | ||||||||||
| Stock-based compensation expense | ||||||||||||
| Impairment of Associate and associated loan (*) | ||||||||||||
| Change in fair value convertible note | ( | ) | ||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Decrease (increase) in other receivables | ( | ) | ||||||||||
| Increase (decrease) in trade payables | ( | ) | ( | ) | ||||||||
| Increase (decrease) in other payables | ( | ) | ||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ( | ) | ||||||
| Cash flow from investing activities | ||||||||||||
| Investment in marketable debt securities, | ( | ) | ( | ) | ( | ) | ||||||
| Loan to associate (*) | ( | ) | ||||||||||
| Investment in Associate (*) | ( | ) | ||||||||||
| Proceeds from sale of marketable debt securities | ||||||||||||
| Investment in short-term deposits, net | ( | ) | ( | ) | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||||||
| Cash flow from financing activities | ||||||||||||
| Proceeds from issuance of ordinary shares in relation to SEPA (**) | ||||||||||||
| Proceeds from issuance of ordinary shares in relation to ATM (***) | ||||||||||||
| Proceeds from issuance of ordinary shares, pre-funded warrants, and warrants net of issuance costs (****) | ||||||||||||
| Net cash provided by financing activities | ||||||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | ( | ) | ||||||||||
| Cash and cash equivalents and restricted cash at the beginning of | ||||||||||||
| the year | ||||||||||||
| Cash, cash equivalents and restricted cash at the end of the year | $ | $ | ||||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||
| Cash received from interest | $ | $ | ||||||||||
| Non-cash investing and financing activities: | ||||||||||||
| Conversion of convertible note into investment in associate | ||||||||||||
| (*) | |
| (**) | |
| (***) | |
| (****) |
The accompanying notes are an integral part of the consolidated financial statements.
| F-6 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 1 – General
Galmed
Pharmaceuticals Ltd. (the “Company”) was incorporated in Israel on
The Company holds three wholly-owned subsidiaries, Galmed International Ltd., which is incorporated in Malta, and Galmed Research and Development Ltd. (“GRD”) and Galtopa Therapeutics Ltd., both of which are incorporated in Israel. In July 2023, GRD established a new wholly-owned subsidiary incorporated under the laws of England and Wales called Galmed Therapeutics UK Limited.
The Company is a biopharmaceutical company focused on the development of Aramchol. The Company has focused almost exclusively on developing Aramchol for the treatment of liver disease and previously was developing Aramchol for Primary Sclerosing Cholangitis, or PSC. The Company is currently seeking to advance the development of Aramchol for oncological indications outside of NASH and fibrosis. In addition, as part of the Company’s growth strategy, the Company is actively pursuing opportunities to expand and diversify its product pipeline specifically targeting cardiometabolic indications and other innovative product candidates that align with the Company’s core expertise in drug development. The Company has an operating history limited to pre-clinical and clinical drug development.
The
Company funded its research and development programs and operations to date primarily through proceeds from private placements and public
offerings. The Company currently has no products approved for marketing and has not generated any revenue from product sales to date.
As of December 31, 2025, the Company had cash and cash equivalents of $
The
Company has incurred operating losses in each year since inception. The Company’s loss attributable to holders of its ordinary
shares for the years ended December 31, 2023, 2024, and 2025 was approximately $
The Company will need to raise substantial, additional capital to fund its operations and to develop Aramchol for, and beyond its current development stage and any future commercialization, as well as any additional indications.
Based on the Company’s current operating plan, the Company’s management currently estimates that its cash position will support its current operations as currently conducted for more than 12 months from the date of issuance of these financial statements.
Note 2 – Significant Accounting Policies
A. Basis of presentation
The consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”).
B. Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
| F-7 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 2 – Significant Accounting Policies (Cont.)
C. Financial statement in U.S. dollars
The functional currency of the Company and its subsidiaries is the U.S dollar (the “dollar”), because the dollar is the currency of the primary economic environment in which the Company and its subsidiaries operate and expect to continue operating in the foreseeable future. Transactions and balances denominated in dollars are presented in their original amounts. Non-dollar denominated transactions and balances have been re-measured to dollars in accordance with the provisions of ASC 830, “Foreign Currency Matters.” All transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations as financial income or expenses, as appropriate.
D. Principles of consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: Galmed Research and Development Ltd., Galmed International Ltd., Galtopa Therapeutics Ltd and Galmed Therapeutics UK Limited. All intercompany balances and transactions have been eliminated upon consolidation.
E. Cash and cash equivalents
Cash equivalents are short-term, highly liquid investments that are readily convertible into cash with maturities of three months or less as of the date acquired.
F. Restricted Cash
Cash that is held for a specific purpose and is not available for immediate or general business use due to external restrictions is classified in the Company’s consolidated balance sheets as restricted cash.
G. Short-term deposits
Bank
deposits with maturities of more than three months but less than one year are included in short-term bank deposits. Such short-term deposits
are stated at cost which approximates their fair market value. Interest rates on the Company’s short-term deposits were between
H. Marketable debt securities
The Company invests most of its excess cash primarily in debt securities.
The Company accounts for its investments in investment grade debt securities in accordance with ASC 320 “Investments - Debt and Equity Securities”. Management determines the appropriate classification of its investments in debt securities at the time of purchase and re-evaluates such determinations at each balance sheet date.
Marketable debt securities are considered to be available for sale and are carried at fair value on the consolidated balance sheet. Unrealized gains and losses net of tax, if any, are reported in a separate component of stockholders’ equity in accumulated other comprehensive income (“OCI”). Gains and losses are recognized when realized, on a specific identification basis, in the Company’s consolidated statements of operations.
Following the adoption of ASC 326, current expected credit losses on the Company’s marketable grade debt securities are recorded, if expected, through an allowance for current expected credit losses. The amount of allowance for current expected credit losses is limited to the amount that the fair value is less than the amortized cost basis. Any remaining unrealized losses are included in accumulated other comprehensive loss in stockholders’ equity.
If the Company intends to sell the debt security (that is, it has decided to sell the security), or more likely than not will be required to sell the security before recovery of its amortized cost basis, any allowance for current expected credit losses is written off and the amortized cost basis shall be written down to the debt security’s fair value at the reporting date with any incremental impairment reported in earnings. Based on management’s assessment, the Company does not intend to sell its securities for less than amortized cost; therefore, an allowance for current expected credit losses has not been recorded as of December 31, 2025 and 2024.
| F-8 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 2 – Significant Accounting Policies (Cont.)
I. Concentrations of credit risk
Financial instruments which potentially subject the Company to credit risk consist primarily of cash, cash equivalents, marketable debt securities and short-term deposits. The Company hold these investments in highly-rated financial institutions, and, by policy, limit the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured limits. The Company has not experienced any credit losses in such accounts and does not believe we are exposed to any significant credit risk on these funds. The Company has no off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts, or other hedging arrangements.
J. Severance pay
The
Company employees are included under section 14 of the Severance Compensation Act, 1963 (“Section 14”) in Israel for a portion
of their salaries. According to Section 14, these employees are entitled to monthly deposits at a rate of
| F-9 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 2 – Significant Accounting Policies (Cont.)
K. Fair value of financial instruments
The estimated fair value of financial instruments was determined by the Company using available market information and valuation methodologies. Considerable judgment is required in estimating fair values. Accordingly, the estimates may not be indicative of the amounts the Company could realize in a current market exchange.
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:
The carrying amounts of cash and cash equivalents, short-term deposits, other accounts receivables, trade payables and other trade payables approximate their fair value due to the short-term maturity of such instruments.
Fair value is an exit price representing the amount that would be received upon selling an asset or that would be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions used by market participants in pricing an asset or a liability.
A three-tier fair-value hierarchy was established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
| ● | Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets | |
| ● | Level 2 - Other inputs that are directly or indirectly observable in the marketplace; and | |
| ● | Level 3 - Unobservable inputs that are supported by little or no market activity |
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The fair value of the Company’s assets measured at fair value on a recurring basis by level within the fair value hierarchy are as follows (in thousands):
Schedule of Assets Measured at Fair Value on Recurring Basis
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| December 31, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| Corporate bonds | $ | $ | $ | $ | ||||||||||||
| Mutual funds | ||||||||||||||||
| Total | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| December 31, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| Corporate bonds | $ | $ | $ | $ | ||||||||||||
| Treasury bills | ||||||||||||||||
| Mutual funds | ||||||||||||||||
| Investment in associate | ||||||||||||||||
| Total | ||||||||||||||||
Derivative instrument
Under ASC 815-40, contracts that are not indexed to the Company’s own equity are classified as liabilities recorded at fair value, as such, the Company classifies the SEPA Agreement entered into (see Note 9A(4)) as a derivative instrument measured at fair value at each reporting period, as settlement provisions under this agreement are not indexed to the Company’s own equity.
The Company accounts for share-based compensation under ASC 718, Compensation - Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based payment awards made to employees, non-employee consultants and directors, including options and restricted share units (“RSUs”) based on the fair value of the awards on the date of grant. ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The expense for share-based compensation cost is recognized over the requisite service period of each individual grant using the straight-line method for service-based awards. Forfeitures are accounted for as they occur.
| F-10 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 2 – Significant Accounting Policies (Cont.)
L. Accounting for stock-based compensation (Cont.)
The Company calculates the fair value of RSUs based on the fair value on the closing trading price of the underlying shares at the date of grant and estimates the fair value of stock options granted using a Black-Scholes option-pricing model. The option-pricing model requires a number of assumptions, the most significant of which are the expected stock-price volatility and the expected option term (the time from the grant date until the options are exercised or expire).
The Company’s calculations of the expected volatility were based upon actual historical stock-price movements over the period, which was equal to the expected option term. The expected option term was calculated for options granted to employees and directors in accordance with ASC-718-10-S99, using the “simplified” method, and grants to non-employees were based on the contractual term. Historically, the Company has not paid dividends, and has no foreseeable plans to do so. The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term.
M. Research and development expenses
Research and development expenses are charged to the statements of operations as incurred.
N. Income taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), using the liability method whereby deferred tax assets and liability account balances are determined based on the differences between financial reporting and the tax basis for assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to the amounts that are more likely-than-not to be realized. As of December 31, 2025 and 2024, the Company recorded a full valuation allowance against its deferred tax assets.
The Company applies a more-likely-than-not recognition threshold to uncertain tax positions based on the technical merits of the income tax positions taken. The Company does not recognize a tax benefit unless it is more likely than not that the tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit that is recorded for these positions is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. As of December 31, 2025 and 2024, no liability for unrecognized tax benefits was recorded due to immateriality.
Basic net loss per share is computed based on the weighted-average number of shares outstanding during each year. Diluted net loss per share is computed based on the weighted-average number of shares outstanding during each year, plus the dilutive potential of the ordinary shares considered outstanding during the year, in accordance with ASC 260-10, “Earnings Per Share.”
All outstanding stock options, RSUs, prefunded-warrants and warrants were excluded from the calculation of the diluted loss per share for the years ended December 31, 2025, 2024 and 2023, because all such securities have an anti-dilutive effect.
| F-11 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 2 – Significant Accounting Policies (Cont.)
P. Investment in Associate at Fair Value
The Company holds an equity investment of a privately-owned company, Onkai Inc. (“Onkai”), over which it has the ability to exercise significant influence, but not control. The investment was included as a non-current asset in the balance sheet as of December 31, 2024. The Company has elected the fair value option allowed by ASC 825, Financial Instruments, with respect to this investment because management believes this approach will better reflect the economics of its equity interest. Under the fair value option, the investment is remeasured at fair value (level 3) at each reporting period with changes in fair value, if any, recorded in the statement of operations.
On
December 29, 2025, OnKai filed a certificate of dissolution with the Secretary of State of the State of Delaware for winding up its affairs
and dissolving as an entity. As of December 31, 2025, we determined that our investment and related balances in OnKai, including a long-term
loan, were not recoverable and recorded a full write-off of such amounts, resulting in an aggregate impairment loss of approximately
$
Q. Recently adopted accounting pronouncements
From time to time, new accounting pronouncements are issued by FASB, or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
The FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), to require disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information on income taxes paid. The new requirements should be applied on a prospective basis, with an option to apply them retrospectively. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company has adopted ASU 2023-09 for the year ended December 31, 2025 using the prospective method.
R. Accounting pronouncements not yet effective
In November 2024, the FASB issued ASU 2024-03, “Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”), which requires the disaggregation of certain expenses in the financial statements notes, to provide enhanced transparency into the expense captions presented on the face of the consolidated statement of operations. ASU 2024-03 is effective for annual reporting periods beginning January 1, 2027 and interim periods beginning January 1, 2028 and may be applied either prospectively or retrospectively. The Company is currently evaluating the impact that ASU 2024-03 will have on its related disclosures, and the transition method.
| F-12 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 3 – Marketable debt securities
The following table summarizes the Company’s marketable debt securities as of December 31, 2025 and 2024:
Schedule of Marketable Debt Securities
| As of December 31, 2025 | ||||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
| Cost | Gains | Losses | Fair Value | |||||||||||||
| (in thousands) | ||||||||||||||||
| Corporate bonds | $ | | ( | ) | ||||||||||||
| Mutual funds | ( | ) | ||||||||||||||
| Total short-term investments | $ | ( | ) | |||||||||||||
| As of December 31, 2024 | ||||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
| Cost | Gains | Losses | Fair Value | |||||||||||||
| (in thousands) | ||||||||||||||||
| Corporate bonds | $ | $ | $ | ( | ) | $ | ||||||||||
| Treasury bills | ||||||||||||||||
| Mutual funds | | ( | ) | |||||||||||||
| Total short-term investments | $ | $ | $ | ( | ) | $ | ||||||||||
The contractual maturities of the aforementioned corporate bonds and treasury bills are less than one year for the year ended December 31, 2025 and one year and a half of the aforementioned corporate bonds for the year ended December 31, 2024.
Note 4– Other Receivables
Schedule of Other Receivables
| 2025 | 2024 | |||||||
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Prepaid expenses | $ | $ | ||||||
| Government institutions | ||||||||
| Other receivables | ||||||||
| Total | $ | $ | ||||||
| F-13 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 5 – Investment in an Associate
On
May 4, 2023, the Company entered into a definitive agreement (the “Agreement”) for a $
Previously,
in November, 2022 the Company invested $
The
Company’s investment in OnKai was part of an approximately $
Under the terms of the Agreement, during the three-year period following the closing of the Investment Round the Company will have the right to merge with OnKai subject to the approval of the boards of directors of each of the Company and OnKai. The Company was granted certain customary pre-emptive rights as well as registration rights, first refusal rights, co-sale, a board seat, and certain customary protective provisions.
On
October 15, 2024, the Company entered into a bridge loan agreement with OnKai pursuant to which the Company made a loan in an aggregate
amount of $
In
September 2025, the Company’s Chief Executive Officer and director, Allen Baharaff, resigned from the OnKai board. On December
29, 2025, OnKai filed a certificate of dissolution with the Secretary of State of the State of Delaware for winding up its affairs and
dissolving as an entity. As of December 31, 2025, we determined that our investment and related balances in OnKai, including a long-term
loan, were not recoverable and recorded a full write-off of such amounts, resulting in an aggregate loss of approximately $
| F-14 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 6 – Other Payables
Schedule of Other Payables
| 2025 | 2024 | |||||||
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Employees and related | $ | $ | ||||||
| Accrued Vacation | ||||||||
| Other | ||||||||
| Other Payables | $ | |||||||
Note 7 – Related Parties
| 1. | As
of December 31, 2025, and 2024, the Company had an accrual in the amount of approximately
$ | |
| 2. | During
2025, 2024 and 2023, the Company recorded salary expenses, stock-based compensation expenses
and directors’ fees to its related parties in the amount of $ |
Note 8 – Commitments and Contingencies
| 1. | As
of December 31, 2025, the Company recorded a pledge on its short-term deposit in favor of
its bank in the amount of approximately $ | |
| 2. | The Company enters into contracts in the ordinary course of business with contract research organizations for clinical trials and clinical supply manufacturing and with vendors for non-clinical research studies and other services and products for operating purposes, which generally provide for termination upon 30 to 90 days’ notice or less, and therefore are cancelable contracts and not considered as commitment or purchase obligations. | |
| 3. | On
June 28, 2021, the Company entered into a license agreement with Yissum Research Development
Company of the Hebrew University of Jerusalem (“Yissum”) pursuant to which Yissum
granted to the Company a worldwide, exclusive and irrevocable license to develop and commercialize
Amilo-5Mer. Under the license agreement, the Company is responsible for carrying out the
development and commercialization of Amilo-5Mer and the prosecution and maintenance of the
licensed patents under the license agreement. In consideration for the grant of the license,
the Company paid Yissum an upfront license fee of $ |
| F-15 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
A. Ordinary shares
| 1. | Ordinary shares confer upon the holders the right to receive notice to participate and vote in general meetings of the Company and the right to receive dividends, if declared. | |
| 2. | On
August 29, 2024, the Company effected an additional reverse share split of the Company’s
ordinary shares at the ratio of | |
| 3. | On
July 14, 2023, the Company sold to investors in a public offering (i) ordinary shares, (ii)
The
Investor Warrants have an exercise price of $
|
| 4. | On
August 30, 2024, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”)
with YA II PN, LTD., a Cayman Islands exempt limited partnership (“YA”). Pursuant
to the SEPA, the Company have the right, but not the obligation, to sell to YA from time
to time, each such occurrence, an Advance, up to $ |
As
consideration for YA’s irrevocable commitment to purchase the Company’s ordinary shares up to the Commitment Amount, the
Company agreed to issue ordinary shares (the “Commitment Shares”) to YA and also paid a $
The Company evaluated the contract that includes the right to require YA to purchase shares of common stock in the future (“put right”) considering the guidance in ASC 815-40, “Derivatives and Hedging — Contracts on an Entity’s Own Equity” and concluded that it is an equity-linked contract that does not qualify for equity classification, and therefore requires fair value accounting and thus meet the definition of a derivative liability. Accordingly, the put right will be measured at fair value at each reporting period, and changes in its fair value will be recognized in the consolidated statement of operations. The Put right is measured under level 2 of the Fair Value hierarchy. The Company analyzed the terms of the freestanding put right and concluded that it has an immaterial value as of December 31, 2025 and December 31, 2024.
During
the year ended December 31, 2025, the Company issued an aggregate of ordinary shares to YA as Advance Shares for aggregate
gross proceeds of approximately $
As
of December 31, 2025, the Company has issued an aggregate of ordinary shares to YA for aggregate gross proceeds of approximately
$
| 5. | On
November 14, 2024, the Company entered into a Capital on Demand Sales Agreement (the “2024
Sales Agreement”) with JonesTrading Institutional Serviecs LLC, (“JonesTrading).
Pursuant to the 2024 Sales Agreement, the Company may offer and sell ordinary shares having
an aggregate offering price of up to $ million, from time to time through JonesTrading.
During the year ended December 31, 2025, the Company sold of its ordinary shares
for aggregate gross proceeds of approximately $ |
| F-16 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 9 – Stockholders’ equity (Cont.)
B. Stock-based compensation
| 1. | The Company has an equity-based incentive plan, the 2013 Incentive Share Option Plan (the “2013 Plan”). As of December 31, 2025, based on the latest amendment to the plan from August 26, 2025, a total of ordinary shares were reserved for issuance under the 2013 Plan, of which a total of ordinary shares remain reserved, but unallocated for future equity awards. The 2013 Plan, which was adopted by the Board on September 2, 2013, and approved by the Company’s shareholders on December 30, 2013 (as was amended by the Board and the Company’s shareholders on March 30, 2015, May 11, 2015, August 30, 2018, August 7, 2023, November 12, 2024 and August 26, 2025 respectively), provides for the grant of options to purchase the ordinary shares and the issuance of RSUs to the Company’s officers, directors, employees, service providers and consultants. The 2013 Plan provides for such equity-based compensation under various and different tax regimes. | |
| 2. | On
March 23, 2023, the Company received a ruling from the Israel Tax Authority (“ITA”)
confirming the repricing of certain stock options. This repricing was accounted for as a
modification of a share-based payment award. The incremental compensation expense recognized
as a result of the modification during the year ended December 31, 2023 was approximately
$ | |
| 3. | In August 2023, the Company granted RSUs and options to purchase ordinary shares of the Company to its officers and directors. The options are exercisable at $ per share and have a -year term. The options and RSUs vest over a period of . The aggregate grant date fair value of such RSUs and options was approximately $ million. | |
| 4. | In
September 2023, the Company extended the exercise period of options with an exercise
price of NIS previously granted to the Company’s Chief Executive Officer (and
director), by approximately five years to December 31, 2028. The exercise period represented
a modification in accordance with ASC 718. The Incremental compensation expense on the modification
date was less than $ | |
| 5. | On November 12, 2024, the Company’s board of directors approved the grant of RSUs and options to purchase ordinary shares of the Company to its officers and directors. On October 29, 2025, the Company’s shareholders approved such grants at the Company’s annual general meeting of shareholders. The grants were made pursuant to the Plan. The options are exercisable at $ per share and have a -year term. The options and RSUs vest over a period of . The aggregate grant date fair value of such RSUs and options was approximately $ million. | |
| 6. | On August 26, 2025, the Company’s board of directors approved the grant of an aggregate of RSUs and options to purchase ordinary shares to the Company’s executive officers and members of the board of directors. On October 29, 2025, the Company’s shareholders approved such grants at the Company’s annual general meeting of shareholders. The options have an exercise price of $ per ordinary share. The options and RSUs granted to non-management directors will vest over one year from the date of the shareholders’ approval, while the grants of RSUs granted to the Company’s executive officers will vest over three years from the date of the board of directors’ approval. The aggregate grant date fair value of such RSUs and options was approximately $ million. |
| F-17 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 9 – Stockholders’ equity (Cont.)
B. Stock-based compensation (Cont.)
7. A summary of the status of the Company’s outstanding options as of December 31, 2025 and 2024 and changes during the years then ended are presented below:
| 2025 | 2024(*) | |||||||||||||||
| Weighted | Weighted | |||||||||||||||
| Number of | average | Number of | average | |||||||||||||
| share | exercise | share | exercise | |||||||||||||
| options | price | options | price | |||||||||||||
| Options outstanding at beginning of year | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Forfeited | ( | ) | ( | ) | ( | ) | $ | ( | ) | |||||||
| Outstanding at end of year | $ | |||||||||||||||
| Options exercisable at year end | $ | $ | ||||||||||||||
options were granted during the year ended December 31, 2024. The following assumptions were used for the years ended December 31, 2025 and 2023:
| - | dividend yield of % for all periods. | |
| - | risk-free interest rate of % for the fiscal year 2025 and % for the fiscal year 2023. | |
| - | an expected life of and years for the fiscal year 2025 and for the fiscal year 2023. | |
| - | and a volatility rate of % for the fiscal year 2025 and % for the fiscal year 2023. |
As of December 31, 2025, and 2024, the weighted-average remaining contractual term of the outstanding options, excluding the options granted in 2002 that have no expiration date, is and years, respectively.
The weighted average grant date fair value of the options granted during the years ended December 31, 2025 and 2023 is $, $ respectively.
As of December 31, 2025, a total of outstanding and exercisable options are “in the money” with aggregate intrinsic value of $ thousand; while as of December 31, 2024 a total of outstanding and exercisable options were “in the money” with aggregate intrinsic value of $ thousand.
The unrecognized compensation expense calculated under the fair-value method for stock options expected to vest as of December 31, 2025, 2024 and 2023 is approximately $ million, $ million, and $ million, respectively, and is expected to be recognized over a weighted-average period of years, years and years, respectively.
For the years 2025, 2024 and 2023, the Company recorded a total of $ million, $ million, and $ million of stock-based compensation expenses, in connection with the above-mentioned options.
| F-18 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 9 – Stockholders’ equity (Cont.)
B. Stock-based compensation (Cont.)
During the years 2023, 2024, 2025 the Company granted a total of , and respectively RSUs. Upon vesting, each RSU will settle for the issuance of one ordinary share. The RSUs granted during the years 2023 and 2024 vest over period of while the RSU’s granted during the years 2025 vest over periods that varies between one and .
As of December 31, 2025, 2024 and 2023, a total of , and of the RSUs were vested, respectively. With respect to the above-mentioned RSUs, the Company recorded stock-based compensation expenses in the amount of $ million, $ million and $ million for the years ended December 31, 2025 ,2024, and 2023 respectively.
The weighted average grant date fair value of the RSUs granted during the year ended December 31, 2025, 2024 and 2023 was $, $ and $, respectively
The unrecognized compensation expense calculated for RSUs expected to vest as of December 31, 2025 and 2024 is approximately $ million and $ million, respectively and is expected to be recognized over a weighted-average period of years and years, respectively.
Note 10 – Research and Development Expenses
Schedule of Research and Development Expenses
| Year ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| (in thousands) | ||||||||||||
| Chemistry and formulation studies | $ | $ | $ | |||||||||
| Salaries | ||||||||||||
| Stock-based compensation | ||||||||||||
| Research and preclinical studies | ||||||||||||
| Clinical studies | ||||||||||||
| Regulatory and other expenses | ||||||||||||
| $ | $ | $ | ||||||||||
Note 11 – General and Administrative Expenses
Schedule of General and Administrative Expenses
| Year ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| (in thousands) | ||||||||||||
| Stock-based compensation | $ | $ | $ | |||||||||
| Professional fees | ||||||||||||
| Salaries and benefits | ||||||||||||
| Rent and office-maintenance fees | ||||||||||||
| Insurance and other expenses | ||||||||||||
| $ | $ | $ | ||||||||||
| F-19 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 12 – Financial income, net
Schedule of Financial Income, Net
| 2025 | 2024 | 2023 | ||||||||||
| Year ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| (in thousands) | ||||||||||||
| Bank fees | $ | $ | $ | |||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ||||||
| Loss from sale of marketable debt securities | ||||||||||||
| Change in fair value of convertible note | ( | ) | ||||||||||
| Foreign currency (gains) losses | ( | ) | ||||||||||
| Financial income net | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Note 13 – Income Taxes
A. General
The Company is assessed for tax purposes on an unconsolidated basis. Each of the Company’s subsidiaries is subject to the tax rules prevailing in its country of incorporation.
B. Corporate Taxation
Israeli Companies:
The
Israeli corporate income tax rate is
On
February 7, 2018, the Israeli Tax Authority issued a ruling granting the Company’s Israeli subsidiary, Galmed Research and Development
Ltd, a “Preferred Technological Enterprise” status as defined under the Encouragement of Capital Investment Law -1959 (the
“Approval”). The grant of the status means that the Company’s Israeli subsidiary will be subject to a reduced Israeli
corporate tax rate that will range between
Maltese subsidiary:
Taxable
income of Maltese companies was subject to tax at the rate of
No taxes were paid by the Company for the years 2023, 2024 and 2025.
C. Net Operating Loss Carry forward
As
of December 31, 2025, the Company had approximately $
| F-20 |
GALMED PHARMACEUTICALS LTD.
Notes to Consolidated Financial Statements
Note 13 – Income Taxes (Cont.)
D. Deferred income taxes
As
of December 31, 2025, the significant components of the Company’s deferred tax assets are net operating loss carryforward in the
amount of $
Significant components of the Company’s deferred tax assets are as follows
Schedule of Components of the Deferred Tax Assets
| 2025 | 2024 | |||||||
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Deferred tax assets | ||||||||
| Israeli companies net-operating-loss carry forward | $ | $ | ||||||
| Maltese subsidiary net-operating-loss carry forward | ||||||||
| Israeli subsidiary capital-loss carry forward | ||||||||
| Research and Development expenses | ||||||||
| Impairment of associate | ||||||||
| Other reserves and allowances | ||||||||
| Total deferred-tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred-tax assets | $ | $ | ||||||
E. Tax assessments
As of December 31, 2025, the Company and the Israeli Subsidiaries had a final tax assessments for tax years prior to and including the tax year ended December 31, 2019.
F. Effective tax expense
A reconciliation of the Company’s effective tax benefit to the Company’s theoretical statutory tax benefit is as follows:
Schedule of Effective Income Tax Rate Reconciliation
| Amount | Percentage | |||||||
| For the year ended | ||||||||
| December 31, | ||||||||
| 2025 | ||||||||
| Amount | Percentage | |||||||
| Israel tax benefit at statutory tax rate | $ | % | ||||||
| Impairment of associate | ( | ) | ( | )% | ||||
| Stock-based compensation | ( | )% | ||||||
| Change in valuation allowance | ( | )% | ||||||
| Other | ( | )% | ||||||
| Total | % | |||||||
| 2024 | 2023 | |||||||
| Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Loss before taxes on income, as reported in the consolidated statements of operations | $ | $ | ||||||
| Statutory tax rate | % | % | ||||||
| Theoretical tax benefit | ||||||||
| Losses and other items for which a valuation allowance was provided or benefit from loss carry forwards | ( | ) | ( | ) | ||||
| Actual tax expense | $ | $ | ||||||
Note 14 – Segment Reporting
ASC
280, “Segment Reporting”, establishes standards for reporting information about operating segments. Operating segments are
defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief
operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company manages
its business on the basis of
The CODM assesses the performance of the Company and decides how to allocate resources based on the operating loss available that is also reported within the Consolidated Statements of Operations. The measure of segment assets that is reviewed by the CODM is reported within the Balance Sheet as Total assets.
The significant expense categories regularly reviewed by the CODM for the years ended December 31, 2025, 2024 and 2023 are presented within the Note 10 and 11.
| F-21 |
ITEM 19. Exhibits.
| 141 |
| (1) | Incorporated herein by reference to Amendment No. 1 to the Registration Statement on Form F-1, filed with the SEC on February 28, 2014. | |
| (2) | Incorporated herein by reference to the Registration Statement on Form F-1, filed with the SEC on February 6, 2014. | |
| (3) | Incorporated herein by reference to the Company’s Report on Form 6-K filed with the SEC on June 1, 2016. | |
| (4) | Incorporated herein by reference to Exhibit A to the Company’s Report on Form 6-K filed with the SEC on April 2, 2015. | |
| (5) | Incorporated herein by reference to Exhibit 10.8 to the Company’s Registration Statement on Form F-1 filed with the SEC on June 16, 2023. |
| 142 |
| (6) | Incorporated herein by reference to the Company’s Annual Report on Form 20-F filed with the SEC on March 31, 2015. |
| (7) | Incorporated herein by reference to the Company’s Annual Report on Form 20-F filed with the SEC on March 22, 2016. | |
| (8) | Incorporated herein by reference to the Company’s Annual Report on Form 20-F filed with the SEC on March 23, 2017. | |
| (9) | Incorporated herein by reference to the Company’s Annual Report on Form 20-F filed with the SEC on April 2, 2025. | |
| (10) | Incorporated herein by reference to the Company’s Annual Report on Form 20-F filed with the SEC on March 13, 2018. | |
| (11) | Incorporated herein by reference to the Company’s Annual Report on Form 20-F filed with the SEC on March 13, 2019. | |
| (12) | Incorporated herein by reference to the Company’s Annual Report on Form 20-F filed with the SEC on March 18, 2021. | |
| (13) | Incorporated herein by reference to the Company’s Annual Report on Form 20-F filed with the SEC on May 2, 2022. | |
| (14) | Incorporated herein by reference to Exhibit 10.1 to the Company’s Report on Form 6-K filed with the SEC on July 18, 2023. | |
| (15) | Incorporated herein by reference to Exhibit 10.2 to the Company’s Report on Form 6-K filed with the SEC on July 18, 2023. | |
| (16) | Incorporated herein by reference to Exhibit 10.3 to the Company’s Report on Form 6-K filed with the SEC on July 18, 2023. | |
| (17) | Incorporated herein by reference to Exhibit 10.4 to the Company’s Report on Form 6-K filed with the SEC on July 18, 2023. | |
| (18) | Incorporated herein by reference to Exhibit 10.5 to the Company’s Report on Form 6-K filed with the SEC on July 18, 2023. | |
| (19) | Incorporated herein by reference to the Company’s Report on Form 6-K filed with the SEC on August 15, 2025. | |
| (20) | Incorporated herein by reference to Exhibit 10.1 to the Company’s Report on Form 6-K filed with the SEC on August 30, 2024. | |
| (21) | Incorporated herein by reference to Exhibit 10.1 to the Company’s Report on Form 6-K filed with the SEC on October 21, 2024. | |
| (22) | Incorporated herein by reference to Exhibit 10.1 to the Company’s Report on Form 6-K filed with the SEC on November 14, 2024. | |
| (23) | Incorporated herein by reference to the Company’s Annual Report on Form 20-F filed with the SEC on April 4, 2024. |
*Filed herewith.
| 143 |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| GALMED PHARMACEUTICALS LTD. | ||
| By: | /s/ Allen Baharaff | |
| Allen Baharaff | ||
| President, Chief Executive Officer and Chairman | ||
Date: March 31, 2026
| 144 |
Exhibit 4.8
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT (the “Amendment”) to the Employment Agreement dated December 23, 2013 by and between Galmed Research and Development Ltd., having its place of business at c/o Meitar Law Offices, 16 Abba Hillel Silver Rd., Ramat Gan, 525060816, Israel (the “Company”), and Allen Baharaff, I.D. No 059100818, residing at 7 Hayotman St., Tel Aviv, Israel (the “Executive”) (the “Employment Agreement”) is entered into as of this 13th day of November, 2025 (the “Effective Date”).
| WHEREAS, | the Company and the Executive are parties to the Employment Agreement; and |
| WHEREAS, | the board of directors (the “Board”) of Galmed Pharmaceuticals Ltd., the Company’s parent (the “Parent”), has resolved to approve certain amendments to the Employment Agreement, subject to the approval of the shareholders of the Parent, which was obtained on October 29, 2025; |
NOW, THEREFORE, in consideration of the premises and mutual agreement hereinafter contained, the parties agree as follows:
| 1. | Except as provided explicitly herein, all other provisions of the Employment Agreement (including its exhibits and amendments) shall continue in full force and effect, mutatis mutandis. All capitalized terms used in this Amendment and not defined herein shall have the meanings ascribed to them in the Employment Agreement. |
| 2. | Section 2.2 of the Employment Agreement is hereby replaced in its entirety by the following: |
| “During
the term of this Agreement, and unless and until otherwise agreed, Executive shall be employed on an 80% | |
| 3. | Section 2.3 of the Employment Agreement is hereby replaced in its entirety by the following: |
| “As of the Employment Starting Date and through completion of his employment hereunder, Executive shall not engage in any other business activities, whether or not such activities are conducted outside of normal business hours and whether or not such activities are pursued for gain or profit, unless specifically approved in advance by the Board. Notwithstanding the above, the Executive may devote up to 20% of his working hours to other activities that do not conflict with his duties and responsibilities to the Company hereunder.” | |
| For the purpose hereof, a conflict means solely a situation in which the Executive’s Outside Activity (as defined below) is: (a) in direct competition with an Active Company Program (as defined below); or (b) would reasonably be expected to divert a Material Company Opportunity (as defined below) from the Company in favor of the Executive or his affiliate. For purposes hereof: (i) “Outside Activity” means any business, advisory, investment, or professional or commercial activity conducted by the Executive outside the scope of his duties to the Company; (ii) “Active Company Program” means any drug, therapeutic candidate, product, or platform that the Company or any subsidiary is, at the relevant time, actively researching, developing, in-licensing, out-licensing, manufacturing, commercializing, or funding, or with respect to which the Company is then party to a binding agreement to do so within the ensuing twelve (12) months; and (iii) “Material Company Opportunity” means a bona fide transaction, asset, program, collaboration, or financing opportunity that the Executive becomes aware of in his capacity as Chief Executive Officer of the Company that is reasonably likely to be pursued by the Company and is expected to have a material strategic or financial impact on the Company, in light of its then-current business plan and resources. | |
| For the avoidance of doubt: (A) the Executive’s participation in pharmaceutical businesses, programs, or products that are similar in field or modality to programs historically pursued by the Company, but which are not in direct competition with an Active Company Program and would not reasonably be expected to divert a Material Company Opportunity, shall not constitute a conflict; and (B) differing therapeutic areas, indications, patient populations, mechanisms of action, or stages of development that avoid direct competition as defined above shall not constitute a conflict. | |
| 4. | This Amendment supersedes all prior agreements, written or oral, between the Parties relating to the subject matter of this Amendment. This Amendment may be executed in two or more counterparts, each of which shall constitute an original and all of which shall be deemed a single agreement. Except as amended hereby, the Employment Agreement remains in effect and unmodified. In the event of any conflict or inconsistency between the provisions of the Employment Agreement and this Amendment, the provisions of this Amendment shall prevail. |
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.
| GALMED RESEARCH AND DEVELOPMENT LTD. | Executive | |||
| /s/ Amir Poshinsky | /s/ Allen Baharaff | |||
| Name: | Amir Poshinsky | Name: | Allen Baharaff | |
| Title: | Director of the Parent | Title: | CEO | |
Exhibit 12.1
CERTIFICATION
I, Allen Baharaff, certify that:
1. I have reviewed this annual report on Form 20-F of Galmed Pharmaceuticals Ltd. (the “Company”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
| By: | /s/ Allen Baharaff | |
| Allen Baharaff | ||
| President and Chief Executive Officer |
Date: March 31, 2026
Exhibit 12.2
CERTIFICATION
I, Yohai Stenzler, certify that:
1. I have reviewed this annual report on Form 20-F of Galmed Pharmaceuticals Ltd. (the “Company”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
| By: | /s/ Yohai Stenzler | |
| Yohai Stenzler | ||
| Chief Accounting Officer |
Date: March 31, 2026
Exhibit 13.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Galmed Pharmaceuticals Ltd. (the “Company”) on Form 20-F for the period ending December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify that to the best of our knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
| By: | /s/ Allen Baharaff | |
| Allen Baharaff | ||
| President and Chief Executive Officer |
| By: | /s/ Yohai Stenzler | |
| Yohai Stenzler | ||
| Chief Accounting Officer |
Date: March 31, 2026
The certification set forth above is being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the annual report on Form 20-F for the period ended December 31, 2025, or as a separate disclosure document of the Company or the certifying officers.
Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements Nos. 333-206292, 333-227441, 333-284163 and 333-290399 on Form S-8 and Registration Statements No. 333-272722 and No. 333-283241 on Form F-3 of our report dated March 31, 2026, relating to the consolidated financial statements of Galmed Pharmaceuticals Ltd., appearing in this Annual Report on Form 20-F for the year ended December 31, 2025.
| /s/ Brightman Almagor Zohar & Co. | |
Brightman Almagor Zohar & Co. Certified Public Accountants |
|
| A Firm in the Deloitte Global Network | |
| Tel Aviv, Israel | |
| March 31, 2026 |