UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _ to _ .
Commission file number 001-38556
Entera Bio Ltd.
(Exact Name of Registrant as Specified in Its Charter)
Israel
(State or Other Jurisdiction of
Incorporation or Organization)
00-0000000
(I.R.S. Employer
Identification No.)
Kiryat Hadassah
Minrav Building - Fifth Floor
Jerusalem, Israel 9112002
(Address of Principal Executive Offices) (Zip Code)
972-2-532-7151
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Ordinary shares, par value NIS 0.0000769 per share
Trading Symbol
ENTX
Name of Each Exchange on Which Registered
Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
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 such
files).
Yes ☒ No ☐
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐
☒
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☒
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial 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 whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
The aggregate market value of the outstanding voting stock held by non-affiliates of the registrant was approximately $20.7 million as of June 30,
2023.
As of March 1, 2024, the registrant had 35,481,341 ordinary shares, par value NIS 0.0000769 per share (“Ordinary Shares”) outstanding.
None.
Documents Incorporated by Reference
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Table of Contents
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
PART II
[Reserved]
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Financial Statements and Supplementary Data
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules
Item 16 Form 10-K Summary
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual Report”) contains “forward-looking statements,” as that term is defined under the Private Securities
Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Various statements in this report are “forward-looking statements” within the meaning of the
PSLRA and other U.S. Federal securities laws. In addition, historic results of scientific research and clinical and preclinical trials do not guarantee that the
conclusions of future research or trials would not be different, and historic results referred to in this Annual Report may be interpreted differently in light of
additional research and clinical and preclinical trial results. Forward-looking statements include all statements that are not historical facts. We have based
these forward-looking statements largely on our management’s current expectations and future events and financial trends that we believe may affect our
financial condition, results of operations, business strategy and financial needs. Forward-looking statements involve substantial risks and uncertainties. All
statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, projected
costs, prospects, plans and objectives of management are forward-looking statements. These statements are subject to risks and uncertainties and are based
on information currently available to our management. Words such as, but not limited to, “anticipate,” “believe,” “contemplates,” “continue,” “could,”
“design,” “estimate,” “expect,” “intend,” “likely,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “will,” “would,” “seek,” “should,” “target,”
or the negative of these terms and similar expressions or words, identify forward-looking statements. The events and circumstances reflected in our
forward-looking statements may not occur and actual results could differ materially from those projected in our forward-looking statements. These factors
include those described in “Item 1A-Risk Factors” of this Annual Report. Meaningful factors which could cause actual results to differ include, but are not
limited to, the following:
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Clinical development involves a lengthy and expensive process with uncertain outcomes. We may incur additional costs and experience delays in
developing and commercializing or be unable to develop or commercialize our current and future product candidates;
The regulatory approval processes of the U.S. Food and Drug Administration (“FDA”) and comparable foreign authorities are lengthy, time-
consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business
will be materially harmed;
Preclinical development is uncertain. Our preclinical programs may experience delays or may never advance to clinical trials, which would
adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all;
Positive results from preclinical studies and early-stage clinical trials may not be predictive of future results. Initial positive results in any of our
clinical trials may not be indicative of results obtained when the trial is completed or in later stage trials;
The scope, progress and costs of developing our product candidates such as EB613 for Osteoporosis and EB612 or other oral peptides for
Hypoparathyroidism may alter over time based on various factors such as regulatory requirements, collaboration agreements, the competitive
environment and new data from pre-clinical and clinical studies;
The accuracy of our estimates regarding expenses, capital requirements, the sufficiency of our cash resources and the need for additional
financing;
Our ability to continue as a going concern absent access to sources of liquidity;
Our ability to raise additional funds or consummate strategic partnerships to offset additional required capital to pursue our business objectives,
which may not be available on acceptable terms or at all. A failure to obtain this additional capital when needed, or failure to consummate
strategic partnerships, could delay, limit or reduce our product development, and other operations;
Even if a current or future product candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians,
patients, third-party payors and others in the medical community necessary for commercial success;
The successful commercialization of our product candidates, if approved, will depend in part on the extent to which governmental authorities and
third-party payors establish adequate coverage and reimbursement levels and pricing policies;
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Failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those
products and decrease our ability to generate revenue;
If we are unable to obtain and maintain patent protection for our product candidates, or if the scope of the patent protection obtained is not
sufficiently broad or robust, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully
commercialize our product candidates may be adversely affected;
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your
sole source of gain;
Our reliance on third parties to conduct our clinical trials and on third-party suppliers to supply or produce our product candidates;
Our interpretation of FDA feedback and guidance and how such guidance may impact our clinical development plan;
Our ability to use and expand our drug delivery technology (“N-Tab™”)to additional product candidates;
Our operation as a development stage company with limited operating history and a history of operating losses and our ability to fund our
operations going forward;
Our competitive position with respect to other products on the market or in development for the treatment of osteoporosis, hypoparathyroidism,
short bowel syndrome, obesity, metabolic conditions and other disease categories we pursue;
Our ability to establish and maintain development and commercialization collaborations;
Our ability to manufacture and supply enough material to support our clinical trials and any potential future commercial requirements;
The size of any market we may target and the adoption of our product candidates, if approved, by physicians and patients;
Our ability to obtain, maintain and protect our intellectual property and operate our business without infringing, misappropriating, or otherwise
violating any intellectual property rights of others;
Our ability to retain key personnel and recruit additional qualified personnel;
Our ability to comply with laws and regulations that currently apply or become applicable to our business in Israel, the United States and
internationally;
Our ability to manage growth; and
The duration and intensity of the ongoing Israel-Hamas War and its impact on our operations and workforce, including our research and
development and clinical trials.
All forward-looking statements contained in this Annual Report are expressly qualified in their entirety by the cautionary statements contained or referred
to in this section. We caution investors not to rely too heavily on the forward-looking statements we make or that are made on our behalf. Except as
required by applicable law, we are under no duty, and expressly disclaim any obligation, to update or revise publicly any forward-looking statements,
whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related
subjects in any annual, quarterly or current reports that we may file with the Securities and Exchange Commission (“SEC”).
We encourage you to read the discussion and analysis of our financial condition and our consolidated financial statements contained in this Annual Report.
We also encourage you to read Item 1A of this Annual Report, entitled “Risk Factors,” and Part II, Item 7 “Management’s Discussion and Analysis of
Financial Condition and Results of Operation-Liquidity and Capital Resources” of this Annual Report for additional discussion of the risks and
uncertainties associated with our business. There can be no assurance that the actual results or developments anticipated by us will be realized or, even if
substantially realized, that they will have the expected consequences to, or effects on, us. Therefore, no assurance can be given that the outcomes stated in
such forward-looking statements and estimates will be achieved.
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Unless the context otherwise requires, all references in this Annual Report to the “Company,” “Entera,” “we,” “our,” and “us” refer to Entera Bio Ltd., an
Israeli company, including its consolidated subsidiary.
PART I
ITEM 1. BUSINESS
Overview
Entera is a clinical stage company focused on developing first-in-class oral tablet formats of peptides or protein replacement therapies. We focus on
underserved, chronic medical conditions for which oral administration of a protein therapy has the potential to significantly shift a treatment paradigm.
Currently, most protein therapies are administered via frequent intravenous, subcutaneous or intramuscular injections. In chronic diseases where patients
require persistent management, these cumbersome, often painful and high-priced injections can create a major treatment gap.
From a technical standpoint, oral delivery of therapeutic proteins is challenging due to the enzymatic degradation within the gastrointestinal tract and poor
absorption into the blood stream due to the protein’s polarity and molecular weight. We leverage our N-Tab™ oral delivery technology, which is designed
to simultaneously stabilize the peptide in the gastrointestinal tract and promote its absorption into the bloodstream.
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Pipeline
The following chart summarizes the current stage of development for each of our oral peptide candidates.
Oral PTH(1-34) Programs
Our most advanced product candidate, EB613, oral PTH (1-34), is being developed as the first oral, osteoanabolic (bone building) once-daily tablet
treatment for post-menopausal women with low bone mineral density (“BMD”) and high-risk osteoporosis with no prior fracture. A placebo controlled,
dose ranging Phase 2 study of EB613 tablets (n= 161) met primary (pharmacodynamic/bone turnover biomarker) and secondary endpoints (BMD).
Following the completion of a Type C and a Type D meeting with the U.S. Food and Drug Administration’s (FDA), we announced the FDA’s concurrence
that a 2-year, placebo-controlled phase 3 (registrational) study with Total Hip BMD as primary endpoint could support a new drug application (“NDA”) for
EB613. In November 2023, we reported that the American Society for Bone and Mineral Research (ASBMR) announced that the SABRE (Strategy to
Advance BMD as a Regulatory Endpoint) project team had submitted its full qualification plan to the FDA for the use of BMD as a surrogate endpoint for
fractures in future trials of new anti-osteoporosis drugs. We believe EB613 stands as the first program to potentially avail itself of the ASBMR-SABRE
BMD endpoint.
The EB612 program is being developed as the first oral PTH(1-34) tablet peptide replacement tablet therapy for hypoparathyroidism. With respect to our
EB612 program, we are currently testing new generations of our N-Tab™ Technology with the naked PTH(1-34) peptide to assess the effectiveness of once
or twice a day dosing regimens, as well as collaborating with a third party on another peptide in this field.
To date, Entera’s proprietary PTH tablets have been safely administered to a total of 102 healthy subjects in Phase 1 studies and 153 patients in Phase 2
studies in osteoporosis and hypoparathyroidism, two diseases that remain underserved with the current standard of care and which disproportionately affect
women. We believe these product candidates, if approved, hold the potential to become standards of care for patients with osteoporosis and
hypoparathyroidism.
Our ability to deliver our oral PTH(1-34) peptide in a simple mini tablet format with reproduceable, dose dependent pharmacokinetics and rapid biological
responses across gender, age, and health status was highlighted as part of two poster sessions at the ASBMR 2023 Annual Meeting. We believe our work to
date has built the foundation for our oral PTH (1-34) tablets to potentially treat diverse patient populations, including younger men and women athletes at
risk of stress fractures. We are exploring the use of our PTH(1-34) tablets for the treatment of stress fractures in athletes and expect to collaborate with an
investigator sponsored study in this area. More details on this study are expected in the second half of 2024.
Oral GLP-2 and Oral GLP-1/Glucagon Programs in Collaboration with OPKO Biologics
In May 2023, the results from our oral GLP-2 program were published in the International Journal of Peptide Research and Therapeutics, “Oral Delivery
Technology Enabling Gastro-Mucosal Absorption of Glucagon-Like-Peptide-2 Analog (Teduglutide) - A Novel Approach for Injection-Free Treatment of
Short Bowel Syndrome.” We believe GLP-2 represents a strong candidate for our N-Tab™ Technology and warrants further development as an injection-
free alternative to patients suffering from short bowel syndrome and other gastrointestinal disorders where GLP-2 plays a role.
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In September 2023, we entered into a research collaboration agreement with OPKO Biologics, Inc., a subsidiary of OPKO Health, Inc. (“OPKO”). Under
the terms of this agreement, OPKO has agreed to supply its proprietary long-acting GLP-2 peptide and certain Oxyntomodulin analogs for the development
of oral tablet formulations using our proprietary N-Tab™ technology.
Oxyntomodulin (OXM) is a naturally occurring peptide hormone found in the colon, with glucagon-like-peptide 1 (GLP-1) and glucagon dual agonist
activity which suppresses appetite and induces weight loss. OPKO has developed several proprietary, modified OXM analogs as potential candidates for
treating obesity, including an injectable pegylated peptide which demonstrated significant reductions in weight loss and decreased plasma triglyceride
levels in over 430 patients in phase 2/2B studies.
We expect in vivo PK/PD data from both the oral GLP-2 tablet program and the oral OXM tablet program in 2024. We and OPKO have each agreed to be
responsible for specific phases of development of the two oral peptides to the point of demonstrated in vivo feasibility.
Our Strategy
Our goal is to develop first-in-class orally delivered therapies for underserved, chronic medical conditions for which a tablet peptide or peptide replacement
therapy has the potential to significantly shift a treatment paradigm. We are developing our product candidates to potentially become the first oral, daily
tablet peptide or peptide replacement therapies designed for patients to live injection-free as they actively manage their chronic diseases. We aspire to
continue to validate our platform across a variety of additional high value therapeutic proteins. Our strategy to achieve these goals includes:
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Advancing EB613, Potentially the First Daily Anabolic PTH(1-34) Tablet into Phase 3 for the Treatment of Post-Menopausal Women with
Low Bone Mass and Osteoporosis: Our six-month placebo-controlled Phase 2 double-blind, dose-ranging trial of EB613 in 161 patients with low
bone mass and osteoporosis met both primary and secondary endpoints and was selected for oral presentation at the American Society of Bone
Mineral Research (ASBMR) annual conference in 2021. Based on the outcome of our October 2022 Type C meeting with the FDA, we believe
that EB613 may be the first osteoporosis program to be permitted by FDA to pursue a placebo controlled, BMD endpoint registrational Phase 3
study to support a NDA. We view this outcome as testament to the treatment gap and unmet need for a viable alternative to treat the millions of
osteoporosis patients who, despite current guidelines and availability of highly efficacious anabolic agents, are unwilling to take daily or monthly
injections. We are preparing to initiate a Phase 3 registrational study for EB613 pursuant to the FDA’s qualification of a quantitative BMD
endpoint which is expected to occur in 2024.
Advancing the First Daily PTH(1-34) Peptide Replacement Tablet Therapy for the Treatment of Hypoparathyroidism: In 2015, we
successfully completed a Phase 2a four-month trial in 19 patients with hypoparathyroidism which demonstrated clinical benefit, including a
statistically significant reduction in calcium supplementation, maintenance of calcium levels above the lower target level for Hypoparathyroidism
patients (>7.5 mg/dL) throughout the study and statistically significant rapid decline in median serum phosphate levels two hours following the
first dose, which was maintained for the duration of the study. The FDA and the European Medicines Agency, or EMA, have granted EB612
orphan drug designation for the treatment of hypoparathyroidism. With respect to our EB612 program, we are currently testing new generations of
our N-Tab™ Technology with the naked PTH(1-34) peptide to assess the effectiveness of once or twice a day dosing regimens as well as
collaborating with a third party on another peptide in this field.
Establishing Select Global and Regional Development and Commercial Partnerships: Our N-Tab™ Technology platform and intellectual
property are designed to generate a pipeline of product candidates across various therapeutic indications. We intend to explore opportunities to
diversify and shorten the preclinical and clinical development of these candidates in a capital-efficient manner, including selectively pursuing
research and clinical development partnerships with biopharmaceutical companies with specific domain expertise as well as with
biopharmaceutical companies with proven commercial footprints to de-risk our late-stage programs.
Identifying and Developing Potentially High Value Oral Peptides in Collaboration with Strategic Partners such as our GLP-2 and
Oxyntomodulin Programs: We intend to leverage our N-Tab™ Technology platform by applying it to the development of additional, currently
approved injectable peptides and therapeutic proteins with known mechanisms of action and established safety profiles. We believe this will allow
us to advance our product candidates more efficiently and predictably through the research and clinical development cycle. For example, in
collaboration with OPKO, we are focusing on the development of the first oral OXM, a dual targeted GLP1/glucagon peptide, in tablet form for
the treatment of obesity and the first oral GLP-2 peptide tablet as an injection-free alternative for patients suffering from rare malabsorption
conditions, such as short bowel syndrome. Both these peptides have well characterized pre-clinical PK/PD and toxicology.
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PTH
Parathyroid hormone (PTH) is an 84-amino acid hormone that regulates calcium and phosphate homeostasis and bone metabolism in the body. In healthy
individuals, PTH is generally produced at very low basal levels, at a blood concentration of 15 - 25 pg/mL. On top of the basal PTH levels, there are
physiological pulses two to three times per day that result in transient increases in PTH levels reaching up to 65 pg/mL. The changes in PTH secretion are
in response to ionized calcium concentrations in the blood resulting from the entry of calcium from nutrients in the intestine and resorption of calcium from
bone.
PTH in Osteoporosis
The effects of PTH on bone depends on the duration of exposure. The physiological pulses help encourage bone turnover through activation of both
osteoblasts and osteoclasts, the two main types of cells responsible for bone remodeling. In the absence of adequate parathyroid function producing these
pulses, it is difficult for the body to regulate homeostatic processes, and osteoporosis may ensue. The synthetic analog of PTH, human parathyroid hormone
(1-34) peptide, Forteo® (teriparatide), has been approved in the United States and the EU (Forsteo®) and has been a mainstay anabolic (bone forming)
therapy for the treatment of osteoporosis patients since 2002 and 2003, respectively. Forteo® requires a daily subcutaneous injection.
EB613: First Daily Osteoanabolic Mini Tablets for the Treatment of Osteoporosis
EB613 is the first once daily tablet formulation of hPTH (1-34), (teriparatide) and has the same amino acid sequence as Forteo® (teriparatide daily
subcutaneous injection), a leading anabolic agent which achieved peak annual sales of $1.7 billion prior to patent expiration.
Osteoporosis is a disease characterized by low bone mass and structural deterioration of bone tissue, which leads to greater fragility of bones and an
increase in fracture risk. Osteoporosis is most frequently associated with menopause in women, aging in both women and men and glucocorticoid steroid
use (greater than three months). The bone remodeling cycle can be separated into two distinct processes: (i) bone resorption, where cells called osteoclasts
function in the resorption of mineralized tissue; and (ii) bone formation, where cells called osteoblasts are responsible for bone matrix synthesis and
subsequent mineralization of the bone. In healthy individuals, bone resorption is matched by new bone formation. Osteoporosis develops as the balance
between bone resorption by osteoclasts and bone formation by osteoblasts is not maintained, and not enough bone tissue is formed, leading to frail and
fracture-prone bones.
Prevalence
The Bone Health & Osteoporosis Foundation estimates that approximately 10 million Americans have osteoporosis and that an additional 44 million have
low bone mass. More than two million osteoporosis-related fractures occur annually in the United States, and more than 70% of these occur in women. In
U.S. women 55 years of age and older, the hospitalization burden, including hospital costs of osteoporotic fractures, is greater than that of myocardial
infarction, stroke, or breast cancer. Furthermore, it estimated that the number of fractures in the United States due to osteoporosis will rise to three million
by 2025, resulting in an estimated $25.3 billion in costs each year. Worldwide, osteoporosis affects an estimated 200 million women, according to the
International Osteoporosis Foundation, or IOF, and causes more than 8.9 million fractures annually, which is equivalent to an osteoporotic fracture
occurring approximately every three seconds. The IOF has estimated that 1.6 million hip fractures occur worldwide each year, and by 2050 this number
could reach between 4 to 6 million. The IOF estimates that, in Europe alone, the annual cost of osteoporotic fractures could surpass €76 billion by 2050.
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Current Osteoporosis Treatment Paradigm
The goal of pharmacological treatment of osteoporosis is to maintain or increase bone mass and strength and to prevent fractures throughout a patient’s life.
It is critical to identify patients who have significant bone loss. Pharmacologic therapy is strongly recommended for patients with a BMD T-score of -2.5 or
lower in the spine, femoral neck, total hip, or 1/3 radius.
Current osteoporosis drugs may be divided into two categories: antiresorptive and anabolic. Drugs that inhibit bone resorption (or bone degradation)
include oral and injectable options such as estrogen (for postmenopausal women), oral and intravenous bisphosphonates, selective estrogen receptor
modulators (SERMs), the RANK-ligand inhibitor (denosumab) and (salmon) calcitonin. According to the American Association of Clinical Endocrinology
(AACE) 2020 Guidelines, injectable anabolic agents, such as teriparatide, abaloparatide or romosozumab, can be considered as an initial therapy for
patients who are at very high fracture risk (which include women who have had multiple vertebral fractures or hip fractures and high-risk patients who have
very low T-scores), and who have had an inadequate response to antiresorptive therapies. For patients undergoing treatment, stable or increasing BMD at
the spine and hip indicates a satisfactory response. The three currently approved osteoanabolic drugs that stimulate bone formation all require daily or
monthly subcutaneous injections: teriparatide (hPTH[1-34]); abaloparatide (a PTH-related protein analog); and romosozumab (an antibody that inhibits
sclerostin and also inhibits bone resorption). It is estimated that less than 10% of currently treated osteoporosis patients agree to injectable osteoanabolic
treatment despite guideline recommendations, their efficacy versus the anti-resorptives and the approval of lower cost generics.
There are currently no FDA-approved oral anabolic treatments for osteoporosis. EB613 is positioned to potentially be the first, once daily osteoanabolic
mini tablet treatment for women with high-risk post-menopausal osteoporosis and no prior fractures.
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Phase 1 Safety, PK and PD Data for Oral PTH(1-34) Tablet Programs
Our Oral PTH (1-34) formulations, including EB613 and EB612, have been administered collectively to a total of 102 healthy subjects in three Phase 1
studies. In an ongoing phase 1 study evaluating the current EB613 formulation, Forteo and new formulations for EB613 and EB612, 30 healthy subjects
have been administered various doses (PTH (1-34) 1.5 mg – 2.5 mg) tablets and regimens (QD or BID) of oral PTH in the first two cohorts completed in
2023. No drug-related severe adverse events (SAEs) were reported, and four subjects reported four mild adverse events (AEs) of nausea (N=1), palpitation
(N=1), and headache (N=2). These AEs are consistent with those reported with injectable PTH analogs.
In the Phase 1 studies, the PK profile of EB613 daily tablets was characterized by a rapid increase in plasma hPTH(1-34) levels, with peak concentrations
of the drug observed within 30 minutes after dose, and a rapid decline thereafter. The blood half-life of hPTH(1-34) in humans is less than five minutes (see
Forteo® USPI). Due to this very short elimination time and a short absorption phase, hPTH(1-34) levels decrease below limit of quantitation within two
hours after drug administration. As a result, no drug accumulation is expected with once daily tablet dosing.
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EB613 Phase 2 Study in Post-Menopausal Women with Low Bone Mass and Osteoporosis
The Phase 2 clinical trial of EB613 was a dose-ranging, placebo-controlled, double-blind study in 161 postmenopausal women with osteoporosis or low
BMD conducted at four leading medical centers in Israel. The trial evaluated 0.5 mg to 2.5 mg daily tablets on BMD, pharmacodynamic bone markers,
including P1NP and Osteocalcin-bone formation markers, CTX - a bone resorption marker, and various safety endpoints.
Safety
The most common drug-related AEs reported were headache, nausea, dizziness and presyncope. There were no treatment emergent hypercalcemia adverse
events, and serial serum chemistry evaluations found no increase in group mean calcium or changes in calcium exceeding predefined limits in patients
treated with EB613 2.5 mg daily tablets.
There were no reported drug-related SAEs. All adverse events were mild or moderate in intensity.
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Bone Biomarkers (PD Effect)
The primary bone biomarker endpoint of the Phase 2 clinical study—change in P1NP at Month 3—was met. Statistically significant increases were
observed in P1NP (key anabolic marker) at Month 1 (p<0.001), Month 2 (p<0.005) and Month 3 (p<0.05) for the 2.5 mg EB613 dose group. Similar to the
increase in P1NP, a significant increase in Osteocalcin was also observed in the 2.5 mg group after 3 months (P <0.01). A statistically significant decrease
also occurred in Serum CTX (marker of resorption) from baseline to Month 6 (p<0.01).
The decrease in bone resorption (CTX) resulting from EB613 daily tablets was unanticipated based on historical results from subcutaneously daily
injectable PTH, Forteo®; and indicates a potential dual mechanism of action for the EB613 PTH (1-34) tablets which seems to induce bone formation and
decrease bone resorption, with a lower rate of bone turnover.
Bone Mineral Density
Dose-related changes in BMD were also observed at the total hip (TH), femoral neck (FN) and lumbar spine (LS) locations with a linear regression
showing a statistically significant dose response at all sites; TH (p=0.008), FN (p=0.001), and LS (p<0.0001).
Increases in TH (2.07%) and FN (2.92%) BMD in the 2.5 mg EB613 daily tablet titrated group were greater than those previously reported with Forteo® at
six months (0.1% and 0.3%) (Leder, 2015). The increases in proximal femoral BMD (TH and FN) and cortical bone after six months of EB613 daily tablet
treatment were unanticipated given that the reported subcutaneous Forteo® injection increases are typically small and not significant at six months.
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The results of the Phase 2 study supported the selection of the 2.5 mg dose with a titration regimen to be used in the proposed pivotal Phase 3 study of
EB613.
FDA End of Phase 2 Meetings (EOP2)
After successful completion of the Phase 2 dose ranging study of EB613, we held an end-of-Phase 2 meeting at the end of 2021 with the FDA to discuss
various aspects of our nonclinical and clinical development plan. The meeting focused on the potential use of a 12-month non-inferiority head-to-head
study versus Forteo® phase 3 study design to support an NDA under the 505(b)(2) regulatory pathway.
We requested an additional EOP2 meeting with the FDA to seek agreement on the specifications and control of the drug substance, drug product and
excipients to support the Phase 3 study and eventual product registration. The meeting request was granted, and we received a written response from the
FDA towards the end of the first quarter of 2022, confirming that the specifications for the drug substance, excipients and drug product appear reasonable
and that final determination on the adequacy of the proposed excipients and drug product specification will be made during the NDA review. The FDA also
provided guidance regarding the proposed process scale-up, process qualification approach and stability plan for EB613.
Early in the first quarter of 2022, Entera received additional EOP2 minutes from the FDA, suggesting that a non-inferiority head-to-head study versus
Forteo® Phase 3 design may not be favorable to the success of the study and potential approvability of EB613 oral PTH tablets given EB613’s different PK
profile, PD (biomarker) profile and BMD outcomes from the phase 2. The FDA also commented on a possible exploration of a placebo controlled phase 3
study and a potential Total Hip (TH) BMD endpoint given recently published 24-month Surrogate Threshold Effects (STEs) that are considered associated
with fracture risk reduction.
About ASBMR-FNIH SABRE
Initiated in 2013, the Foundation for the National Institutes of Health (FNIH) Biomarkers Consortium Bone Quality Project assembled data from more than
150,000 participants across more than 50 clinical trials of anti-osteoporosis drugs. The project team re-evaluated these existing data to understand which
measurements could predict the ability of the treatment to reduce fractures. The study findings identified an increase in BMD, as measured by a low-dose
X-ray imaging technique, as a strong predictor of the extent to which treatments reduce fracture risk. A change in BMD could therefore be used in future
clinical trials to determine the effectiveness of osteoporosis drugs. Through a partnership with ASBMR, the FNIH extended and continues to support the
original study, renamed SABRE, to seek FDA approval for the surrogate biomarker as a replacement to fracture outcomes.
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FDA Type C Meeting
In October 2022, we announced the successful conclusion of our Type C meeting with the FDA and the FDA’s agreement that a single Phase 3 placebo-
controlled study with a BMD endpoint could support a NDA submission of EB613 oral PTH tablets. The FDA also agreed (i) that TH BMD could serve as
the primary endpoint for the registrational study of EB613 in post-menopausal women patients diagnosed with osteoporosis, (ii) with the proposed 2:1
randomization (EB613 vs. placebo) design and (iii) that 400 patients exposed to EB613 would be sufficient to support both the safety and efficacy
assessments for the NDA. Furthermore, the FDA agreed with our proposed enrollment of post-menopausal women diagnosed with osteoporosis based on a
BMD T-score of ≤-2.5 to -3.0 and no major fracture history. This patient population is consistent with that studied during our Phase 2 six-month dose
ranging study of EB613, which met all primary and key secondary endpoints of biochemistry and BMD.
FDA Type D Meeting
In February 2023, we announced that a Type D meeting protocol review had been accepted by the FDA to provide responses by March 30th, 2023. The
pivotal, Phase 3 study protocol is entitled “A 24-Month Phase 3, Randomized, Double-Blind, Global Multicenter Study Comparing the Effects of Oral
hPTH(1-34) (EBP05[EB613]) Daily Tablets vs. Placebo on Bone Mineral Density (BMD) in Postmenopausal Women with Osteoporosis.” The objective of
the Type D meeting review was to confirm that the protocol met the FDA’s expectations, including the analysis of the primary endpoint and the population
PK evaluations, ahead of potential initiation of the Phase 3 study.
In April 2023, we reported that the FDA would not be opposed to Entera initiating the Phase 3 study under the proposed FNIH BQP pathway and that the
Company’s proposed PK sampling scheme seemed reasonable. On the same day, we announced that we plan to continue our dialogue with the FDA and
await the final qualification of the ASBMR-FNIH SABRE BQP criteria and their guidance on the statistical evaluation of our BMD endpoint before
initiating a Phase 3 study for EB613.
In November 2023, we announced that the SABRE project team has submitted to the FDA its full qualification plan to use the treatment-related change in
BMD as a surrogate endpoint for fractures in future trials of new anti-osteoporosis drugs.
BMD is the first surrogate endpoint undergoing qualification by the FDA under the 21st Century Cures Act which was signed into law on December 13,
2016, to help accelerate medical product development and bring new innovations and advances to patients who need them faster and more efficiently. An
update on the qualification of this endpoint is expected in 2024.
EB612: First Daily PTH Replacement Therapy Tablets for the Treatment of Hypoparathyroidism
Hypoparathyroidism is a rare condition in which the body either fails to produce sufficient amounts of PTH or the PTH produced lacks normal biologic
activity. Individuals with a deficiency of parathyroid hormone may exhibit hypocalcemia and hyperphosphatemia. Hypocalcemia can cause weakness,
muscle cramps, excessive nervousness, headaches and uncontrollable twitching and tetany. Hyperphosphatemia can result in soft tissue calcium deposition,
which may lead to severe issues, including damage to the circulatory and central nervous systems. In contrast to osteoporosis, longer persistence of PTH in
plasma is a desirable property for the treatment of hypoparathyroidism. Here, hormone replacement therapy is warranted.
Prevalence
It is estimated that hypoparathyroidism affects approximately 200,000 people across the United States, the European Union and Japan, with approximately
43% of cases characterized as mild, 39% characterized as moderate, and 18% characterized as severe.
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Limitations of current treatments for hypoparathyroidism
Historically, the treatments for hypoparathyroidism have been calcium supplements, vitamin D supplements and phosphate binders. Although calcium and
vitamin D can help alleviate hypocalcemia, their chronic use can result in many serious side effects. Hypoparathyroid patients often need to take large
doses of calcium throughout the day in order to maintain serum calcium near the lower limit of the normal range. Moreover, ordinary vitamin D is
generally insufficient, as the body cannot produce adequate quantities of 1,25-dihydroxy vitamin D, the active hormone derived from vitamin D. Drugs like
calcitriol and alfacalcitol must often be prescribed to stimulate calcium absorption. If excess calcium is absorbed, it then falls upon the kidneys to dispose
of excess calcium. Endogenous PTH normally regulates renal calcium excretion, but this regulation is defective in patients with hypoparathyroidism. Over
many years of treatment, kidney stones may develop, and kidney failure may ultimately occur due to either kidney stones or deposition of calcium
phosphate in kidney tissue (called nephrocalcinosis). Despite the use of calcium and vitamin D supplements and other medications, many patients with
hypoparathyroidism continue to experience physical and cognitive symptoms.
An injectable form of full length human PTH (1-84) marketed under the name Natpara®, was approved for the treatment of hypoparathyroidism in 2015.
However, it was recalled in 2019 due to a plastic particulate and will be permanently phased out globally by the end of 2024. There are two injectable PTH
candidates for hypoparathyroidism undergoing late-stage clinical development: TransCon™ PTH, developed by Ascendis Pharma and Eneboparatide, a
parathyroid hormone receptor 1 (PTHR1) agonist, developed by Amolyt Pharma. Both TransCon™ PTH and eneboparatide require a daily subcutaneous
injection.
EB612
Our product candidate for hypoparathyroidism, EB612, is the first oral formulation of PTH (1-34, teriparatide) hormone replacement treatment developed
in a tablet form. The FDA and the EMA have granted EB612 orphan drug designation for the treatment of hypoparathyroidism. We believe that EB612
may have inherent advantages compared to injectable forms because this is a protein replacement therapy requiring long term use, and we believe that
patients have a preference for oral medication, and our tablets may enable more flexibility for titration and more individualized treatment.
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Phase 2a Clinical Trial
In 2015, we successfully completed a multicenter Phase 2a clinical trial of EB612 in hypoparathyroidism patients. This study demonstrated the safety and
tolerability of EB612 administered four times daily for 16 weeks to patients with hypoparathyroidism. In this study, patients were titrated up to a maximum
of 12 EB612 0.75 mg tablets a day (total daily dose of 9 mg) according to each subject’s albumin-adjusted serum calcium (ACa), and supplement treatment
regimen. Of the 19 enrolled patients, 17 completed the trial. No drug-related serious adverse events were reported and most of the adverse events were not
considered study drug-related. The study achieved its primary and secondary endpoints, including a reduction in calcium supplements, reductions in serum
phosphate and 24-hour urine calcium excretion, maintenance of ACa within the reference range, and an improvement in quality of life. Specific results of
this trial included:
Phase 2 PK/PD Clinical Trial
We initiated a two-part Phase 2 PK/PD trial in 2014. This trial was designed to provide a bridge from our completed Phase 2a trials, which was conducted
prior to the marketing approval of Natpara, and our planned future clinical trials, and to also allow us to better understand the relative strength and dose of
our product as compared to the then marketed product, Natpara. The relevant endpoints for the PK/PD trial included an examination of levels of PTH (1-
34), PTH (1-84) (Natpara), serum calcium, serum phosphate, urinary calcium and urinary phosphate.
In November 2018, we announced the completion of part I of this Phase 2 PK/PD trial which showed (i) an increase in the serum calcium by an average of
approximately 0.3 mg/dL over baseline, with such increase maintained over a 24-hour period; (ii) a decrease in serum phosphate by an average of 0.5
mg/dL below baseline with such decrease maintained over a 24-hour period; (iii) an increase in average levels of serum active vitamin D of approximately
90% on the day of treatment as compared to baseline; and (iv) a decrease in average levels of 24-hour urinary calcium of approximately 30% on the day of
treatment as compared to baseline. The concentration of PTH (1-34) in blood after administration of Oral PTH (1-34) in the trial was sufficient to produce
the observed pharmacodynamic effects and did not induce hypercalcemia. No serious adverse events were reported.
The second part of the PK/PD trial evaluated a variety of dosing treatment regimens with a high and low dose of EB612 as well as Natpara with patients
also receiving calcium supplements and either alfacalcidol or calcitriol. There were no treatment-emergent adverse events of hypercalcemia, as well as no
treatment-emergent serious adverse events reported in the trial. In September 2019, we presented the results of Part 2 at the American Society for Bone and
Mineral Research (ASBMR) Annual Meeting.
Planned Additional Clinical Development and Regulatory Pathway
We have since developed an improved formulation of EB612 based on new intellectual property of our N-Tab™ Technology, which we have designed to
optimize its PK profile and the potential for reduced daily dosing. We initiated a PK study in May 2023, which is testing various potential drug candidates
based on our new platform, including several which could be developed for the treatment of hypoparathyroidism. Additionally, we are also collaborating
with a third party to combine our N-Tab™ Technology with another peptide for hypoparathyroidism.
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Intellectual Property
Our success depends in part on our ability to protect the proprietary nature of our product candidates, technology, and know-how; operate without
infringing on the proprietary rights of others and preventing others from infringing on our proprietary rights. We seek to protect our proprietary position by,
among other methods, seeking patent protection in the United States and in certain other jurisdictions for our product candidates and other technology that
we consider important to the development of our business, where such protection is available. We believe that our success will depend in part on our ability
to obtain patent protection for our intellectual property. We also intend to rely on trade secret protection, know-how and the exploitation of in-licensing
opportunities to develop our proprietary position.
Patent Rights
As of March 1, 2024, our global patent portfolio included the following patents and patent applications:
Patents claiming compositions comprising a protein, an absorption enhancer and a protease inhibitor as well as methods for oral administration of a protein
with an enzymatic activity, which compositions cover EB612 and EB613, have been issued in the United States, Australia, Japan, Hong Kong, Israel,
Canada, New Zealand and Russia and have been granted by the European Patent Office (EPO) and validated accordingly in Belgium, France, Germany,
Great Britain, Ireland, Italy, Liechtenstein, Luxembourg, Netherlands, Spain, Sweden, and Switzerland. Related patent applications are pending before the
European Patent Office (EPO) and in the United States, Hong Kong, Brazil and India. Patents specifically covering PTH have already been granted in the
United States, Hong Kong, Israel, Australia, Russia and Japan, and have been granted by the EPO and validated in Belgium, France, Germany, Great
Britain, Ireland, Italy, Liechtenstein, Luxembourg, Netherlands, Spain, Sweden, and Switzerland. In addition, patent applications which specifically cover
PTH are currently pending in Hong Kong, Brazil and India. This issued patent and any patent that may issue from the pending patent applications are
currently expected to expire in August 2029, assuming all annuity and maintenance payments are paid thereon. Rights to these patents and patent
applications were assigned to us pursuant to the Patent Transfer Agreement with Oramed.
Three patent families filed in various jurisdictions, which we believe, if issued as patents containing substantially the same claims as those in the
applications, would cover certain oral administration technologies. The mentioned technologies include compositions which utilize an absorption enhancer
to enable the absorption of a therapeutically active agent in a controlled manner. We believe that certain of the pending claims contained in these patent
applications, if issued in substantially the same form, would cover the formulations of EB612 and EB613. Patent applications covering certain formulations
with a controlled absorption profile were filed with the EPO and in the United States, Canada, Hong Kong, Israel and Mexico (the application filed in Israel
has matured into a patent and a divisional application has been filed therein). Other patent applications covering certain formulations for co-administration
and/or co-formulation with an antacid and/or protease inhibitor were filed with the EPO and in the United States, Canada and Hong Kong (the application
in the United States has matured into a patent, and a divisional application has been filed therein). Any patents that issue from these patent applications are
expected to expire in February 2036, assuming all annuity and maintenance payments are paid thereon. Patent applications covering certain formulations
and regimens were filed with the EPO and in the United States, Australia, Brazil, Canada, China, Hong Kong, India, Israel, Japan, Mexico, New Zealand,
Singapore, South Africa and South Korea (the applications filed in New Zealand and India have matured into a patent; the application filed in Israel has
recently been allowed). Any patents that issue from this patent application are expected to expire in August 2037, assuming all annuity and maintenance
payments are paid thereon.
Three patent families were filed in various jurisdictions, which we believe, if issued as patents containing substantially the same claims as those in the
applications, would contain method of treatment claims covering the use of orally administered PTH for the treatment of osteoporosis (filed with the EPO
and in the United States, Canada, China, Hong Kong, Israel and Japan; the applications in Japan, Canada, China and Israel have matured into patents, and
divisional applications have been filed in Japan, Israel and China), hypoparathyroidism (filed with the EPO and in the United States, Brazil, Canada, Hong
Kong, Israel and Japan; the applications in Japan, Brazil and Israel have matured into patents and bone fractures and related conditions (filed with the EPO
and in the United States, Canada and Hong Kong). Any patents that issue from these patent applications are expected to expire in February 2036, assuming
all annuity and maintenance payments are paid thereon, and while not considering patent term extension when applicable.
Seven international PCT patent applications were filed in February 2023, which we believe, if issued as patents containing substantially the same claims as
those in the applications, would cover new discoveries for the oral delivery of large molecules. Any patents that issue from these patent applications are
expected to expire in February 2043, assuming all annuity and maintenance payments are paid thereon and while not considering patent term extension
when applicable.
Two U.S. provisional patent applications have been filed in August 2023, which, if issued as patents containing substantially the same claims as those in the
applications, we believe would cover additional new discoveries for the oral delivery of large molecules. Any patents that issue from these patent
applications are expected to expire in August 2043, assuming all annuity and maintenance payments are paid thereon and while not considering patent term
extension when applicable.
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Two U.S. provisional patent applications have been filed in November 2023, which, if issued as patents containing substantially the same claims as those in
the applications, we believe would cover features uncovered during the clinical studies conducted with EB613. Any patents that issue from these patent
applications are expected to expire in November 2043, assuming all annuity and maintenance payments are paid thereon and while not considering patent
term extension when applicable.
The term of individual patents depends upon the legal term for patents in the countries in which they are granted. In most countries, including the United
States, the patent term is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. In the
United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by
the United States Patent and Trademark Office, or USPTO, in examining and granting a patent or may be shortened if a patent is terminally disclaimed over
a commonly owned patent or a patent naming a common inventor and having an earlier expiration date. The Drug Price Competition and Patent Term
Restoration Act, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration date of a U.S. patent as partial
compensation for the useful patent term lost, if any, during the FDA regulatory review process. However, a patent term extension cannot extend the
remaining term of a patent beyond a total of 14 years from the date of the product’s approval by the FDA. The patent term extension period is generally
one-half the time between the effective date of the IND and the submission date of the NDA for the product, plus the time between the submission date of
the NDA and the approval of the application. Only one patent applicable to an approved drug is eligible for the extension and the application for the
extension must be submitted prior to the expiration of the patent. Only those claims covering the approved drug, a method for using it or a method for
manufacturing it may be extended. Moreover, we may not receive an extension because of, for example, failing to apply within applicable deadlines, failing
to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Similar provisions are available in the EU and certain
other foreign jurisdictions to extend the term of a patent that covers an approved drug. However, the length of any extension, if granted, could be less than
we request.
Trade Secrets
In addition to patent rights, we also rely on unpatented trade secrets and know-how to protect our proprietary technology. However, trade secrets can be
difficult to protect. We seek to protect our proprietary technology, in part, by entering into confidentiality agreements with our employees, consultants,
contractors, manufacturers, outside scientific collaborators and sponsored researchers, members of our board of directors (the “Board”), technical review
board and other advisors upon their engagement. These agreements generally provide that all confidential information developed or made known to the
individual during the individual’s relationship with us is to be kept confidential and not to be disclosed to third parties except in specific limited
circumstances. We also generally require signed confidentiality or material transfer agreements from any company that is to receive our confidential
information. In the case of employees, consultants, and contractors, the agreements also generally provide that all inventions conceived by the individual
while rendering services to us shall be assigned to us as our exclusive property. There can be no assurance, however, that we have entered into agreements
with all applicable parties, that all persons who we desire to sign such agreements will sign, or if they do, that such agreements will not be breached, that
we would have adequate remedies for any breach, or that our unpatented trade secrets or know-how will not otherwise become known or be independently
developed by competitors. Additionally, to the extent that our commercial partners, collaborators, employees, and consultants use intellectual property
owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. For this and a more
comprehensive discussion of risks related to our intellectual property, see “Item 1A.-Risk Factors-Risks Related to Our Intellectual Property.”
Commercialization Strategy
We hold global rights to all of our internally developed product candidates (including EB613 and EB612), which provide us the optionality to grow our
internal pipeline independently or license selected rights to our product candidates in different geographies or throughout the world. We aim to maximize
the value of our product candidates by either independently commercializing our products in one or more major geographies by building an internal sales
and marketing organization, or by seeking collaborations with third parties with commercialization infrastructure, in either case subject to applicable
regulatory approval.
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Competition
The medical and pharmaceutical industries in which we operate are highly competitive and subject to rapid and significant technological change and
changes in practice. While we believe that our technology, knowledge, experience and scientific resources provide us with competitive advantages, we face
competition from many different sources, including large pharmaceutical, specialty pharmaceutical, biotechnology, and generic drug companies and
academic and government institutions. We believe that the key competitive factors that will affect the development and commercial success of our oral
PTH product candidates for osteoporosis, hypoparathyroidism and any other product candidates that we develop, are the efficacy, safety and tolerability
profile, convenience in dosing, product labeling, price and availability of reimbursement from the government and other third-parties. Our commercial
opportunity could be reduced or eliminated if our competitors have products that are better in one or more of these categories.
We expect that, if approved, our oral PTH product candidates for osteoporosis, hypoparathyroidism and other product candidates that we develop, would
compete with a number of existing products. Furthermore, we believe that we face competition in relation to our oral drug delivery platform, N-Tab™, as
we believe that other non-invasive medical drug delivery technologies, including alternative oral delivery systems as well as transdermal patches, are being
developed by other parties. Many of our potential competitors have substantially greater financial, technical, commercial and human resources than we do
and significantly more experience in the discovery, development and regulatory approvals of product candidates, and the commercialization of those
products. Accordingly, our competitors may be more successful than us in obtaining FDA approval for product candidates and achieving widespread
market acceptance. See “Item 1A.-Risk Factors-Risks Related to Commercialization of Our Product Candidates.”
The Israeli Innovation Authority (IIA) Grants
We have received grants of approximately $0.5 million from the IIA to partially fund our research and development. The grants are subject to certain
requirements and restrictions under Encouragement of Industrial Research, Development and Technological Innovation in Industry Law 5744-1984 and the
IIA regulations, which we refer to collectively as the “Research Law”. In general, until the grants are repaid with interest, royalties are payable to the Israeli
government in the amount of 3% on revenues derived from sales of products or services developed in whole or in part using the IIA grants, including
EB613, EB612 and any other oral PTH product candidates we may develop. The royalty rate may increase to 5%, with respect to approved applications
filed following any year in which we achieve sales of over $70 million.
The amount that must be repaid may be increased up to six times the amount of the grant received plus interest. The rate of royalties may be accelerated,
and the royalty liability may increase (up to three times the amount of the grant amount and the interest) if manufacturing of the products developed with
the grant money is transferred outside of the State of Israel. As of December 31, 2023, the total royalty amount that would be payable by the Company to
the IIA, before interest and payments as described above, is approximately $460 thousand. As of December 31, 2023, we had paid royalties to the IIA in
the amount of $83,000 related to a collaboration agreement and other material transfer agreements (“MTAs”). As of December 31, 2023, we owed $13,000
to the IIA, which was paid in February 2024.
In addition to paying any royalties due, we must abide by other restrictions associated with receiving such grants under the Research Law that continue to
apply even following repayment to the IIA. These restrictions may impair our ability to outsource manufacturing, engage in change of control transactions
or otherwise transfer our “know-how” (in its meaning under the Research Law) in or outside of Israel, and may require us to obtain the approval of the IIA
for certain actions and transactions and pay additional royalties and other amounts to the IIA. We may not receive the required approvals for any proposed
transfer and, even if received, we may be required to pay the IIA a portion of the consideration that we receive upon any transfer of such technology to a
non-Israeli entity up to 600% of the grant amounts and the interest. In addition, as disclosed under “Manufacturing”, we have signed a contract with a U.K.-
based contract manufacturing organization to produce and supply tablets for trials performed worldwide. We believe that, because production is not being
done for commercial purposes, the entry into the production agreement in the U.K. will not affect the royalty rates to be paid to the IIA. Should it turn out
that this position is not acceptable to the IIA, the maximum royalties to be paid to the IIA will be three times the amount of the grants and the interest. In
addition, any change of control and any change of ownership of our Ordinary Shares that would cause a non-Israeli citizen or resident to become an
interested party as defined in the Research Law (which includes any person who holds 5% or more of our outstanding shares) requires written notice to the
IIA. Such a non-Israeli interested party is required to sign an undertaking towards the IIA in which it undertakes to comply with the Research Law. If we
fail to comply with the Research Law, we may be forced to return the grants and/or be subject to other payments to the IIA, monetary fines and/or criminal
charges.
Oramed Patent Transfer Agreement
In 2010, in connection with our establishment as a joint venture between D.N.A Biomedical Solutions Ltd. (“D.N.A Biomedical”) and Oramed Ltd.
(“Oramed”), a subsidiary of Oramed Pharmaceuticals, Inc., we entered into a patent license agreement with Oramed pursuant to which Oramed granted us a
worldwide, royalty-bearing, exclusive, irrevocable, perpetual and sub-licensable license under certain Oramed patent rights, to develop, manufacture and
commercialize products for certain indications to be specified by us and Oramed, other than diabetes, obesity and influenza. In February 2011, D.N.A
Biomedical and Oramed entered into a share purchase agreement for the sale by Oramed to D.N.A Biomedical of 47% of our Ordinary Shares at the time of
the transaction in February 2011. In connection with this transaction, in February 2011 we entered into a Patent Transfer Agreement with Oramed to
replace the original 2010 license agreement.
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Pursuant to the terms of the Patent Transfer Agreement, Oramed assigned to us all of its right, title and interest in the previously licensed patent rights, and,
in return, we granted to Oramed a worldwide, royalty-free, exclusive, irrevocable, perpetual and sublicensable license under the assigned patent rights to
develop, manufacture and commercialize products or otherwise exploit such patent rights in the fields of diabetes and influenza. Additionally, we agreed
not to engage, directly or indirectly, in any activities in the fields of diabetes and influenza. In consideration for such assignment, we agreed to pay Oramed
royalties equal to 3% of our net revenues generated, directly or indirectly, from exploitation of the assigned patent rights, including the sale, lease or
transfer of the assigned patent rights or sales of products or services covered by the assigned patent rights. Either party may terminate the Patent Transfer
Agreement for the other party’s uncured material breach upon 45 days’ written notice (and immediately upon written notice in the event of an incurable
breach), or if the other party undergoes certain insolvency-related events. The royalty obligations imposed on us will survive termination of the Patent
Transfer Agreement.
Manufacturing
We do not own or operate facilities for large scale product manufacturing, storage and distribution, or testing, nor do we expect to in the future. Our current
facility is limited to small-mid scale manufacturing, storage and distribution of materials and oral drug formulations for clinical studies. Our facility has
ISO:9001:2015 quality management systems accreditation from The Standards Institution of Israel for the production and development of functional
excipients and oral drug formulations to be used in clinical trials. The facility includes a dedicated Class D clean room for tablet production and a dedicated
chemical synthesis room designed to meet ISO 8 specifications.
Our manufacturing activities include the chemical synthesis of one of our non-active but functional drug components in our facility. In addition, we have a
contract with a contract manufacturing organization, to produce and supply tablets for trials performed worldwide, including formulation and production of
the final drug, packaging, storage and distribution. The manufacturer’s facility is an FDA/EMA inspected-GMP site and we expect future clinical studies
with our oral PTH (1-34) tablets, as well as the potential commercial supply, if approved, will be provided by the same subcontractor. This contract is not
exclusive and we may enter into additional contracts. Our research and development team supports the manufacturing activities and develops/optimizes
analytical methods used by the contract manufacturer in order to meet regulatory requirements for our clinical trials. Various materials included in the drug
formulation and materials procured for the chemical synthesis are commercially available from various accredited suppliers. We do not have supply
contracts with all such vendors and are not bound to any specific vendor at this point in time. However, it is our intention to complete such contracts in
anticipation of commercial manufacturing activities, so that if approved, we will have such contracts in place.
Government Regulation and Product Approval
Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the EU, extensively
regulate, among other things, the research, development, testing, manufacture, pricing, quality control, approval, packaging, storage, recordkeeping,
labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The
processes for obtaining regulatory approvals in the United States and in other countries and jurisdictions, along with subsequent compliance with applicable
statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.
Review and Approval of Drugs in the United States
In the United States, our product candidates are regulated by the FDA as drugs under the Federal Food, Drug, and Cosmetic Act, or the FDCA, the Public
Health Service Act, or the PHSA, and regulations implemented by the FDA. The failure to comply with the applicable requirements at any time during the
product development process, including preclinical testing, clinical testing, the approval process or post-approval process, may subject an applicant to
delays in the conduct of clinical trials, regulatory review and approval, and/or administrative or judicial sanctions. These sanctions may include, but are not
limited to, the FDA’s refusal to allow an applicant to proceed with clinical testing, refusal to approve pending applications, license suspension or
revocation, withdrawal of an approval, warning letters, adverse publicity, customer notifications, product recalls, product seizures, refusal to grant export or
import approval total or partial suspension of production or distribution, consent decrees, injunctions, fines, and civil or criminal investigations and
penalties brought by the FDA or Department of Justice, or other governmental entities.
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The process required by the FDA before a new drug or biologic may be marketed in the United States generally involves satisfactorily completing each of
the following steps:
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preclinical laboratory tests, animal studies and formulation studies all performed in accordance with the FDA’s Good Laboratory Practice
regulations;
submission to the FDA of an initial new drug, or IND, application for human clinical testing, which must become effective before human clinical
trials may begin;
approval by an independent review board, or IRB, representing each clinical site before each clinical trial may be initiated;
performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the product candidate for each proposed
indication for use and conducted in accordance with Good Clinical Practice, or GCP, requirements;
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;
preparation and submission to the FDA of a New Drug Application, or an NDA, or Biologics License Application, or BLA;
review of the product by an FDA advisory committee, where appropriate or if applicable;
satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities, including those of third parties, at which the
product, or components thereof, are produced to assess compliance with current Good Manufacturing Practice, or cGMP, standards and to assure
that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity;
satisfactory completion of any FDA audits of the non-clinical and clinical trial sites to assure compliance with GCP requirements and the integrity
of clinical data in support of the NDA or BLA;
payment of user fees and securing FDA approval of the NDA or BLA for the proposed indication; and
compliance with any post-approval requirements, including risk evaluation and mitigation strategies, or REMS, and any post-approval studies
required by the FDA.
Preclinical Studies and Investigational New Drug Application
Preclinical tests include laboratory evaluations of product chemistry, formulation and stability, as well as animal studies to evaluate the potential for
efficacy and toxicity. The conduct of the preclinical tests and formulation of the compounds for testing must comply with federal regulations and
requirements. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an
Investigational New Drug (“IND”) application. Some preclinical tests may continue even after submission of the IND application. The IND automatically
becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about the product or conduct of the
proposed clinical trial, including concerns that human research volunteers will be exposed to unreasonable health risks. In that case, the IND sponsor and
the FDA must resolve any outstanding FDA concerns before the clinical trial can begin.
As a result, submission of the IND may result in the FDA not allowing the clinical trials to commence or allowing the clinical trial to commence on the
terms originally specified by the sponsor in the IND. If the FDA raises concerns or questions either during this initial 30-day period, or at any time during
the IND process, it may choose to impose a partial or complete clinical hold. This order issued by the FDA would delay a proposed clinical trial until all
outstanding concerns have been adequately addressed and the FDA has notified the company that investigations may proceed. This could cause significant
delays or difficulties in completing planned clinical trials in a timely manner.
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Clinical Trials
Clinical trials involve the administration of the investigational product candidate to healthy volunteers or patients with the disease to be treated under the
supervision of a qualified principal investigator in accordance with GCP requirements. Clinical trials are conducted under trial protocols detailing, among
other things, the objectives of the clinical trial, inclusion and exclusion criteria, the parameters to be used in monitoring safety and the effectiveness criteria
to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.
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 consistent 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.
Further, each clinical trial must be reviewed and approved by an IRB either centrally or individually at each institution at which the clinical trial will be
conducted. The IRB will consider, among other things, clinical trial design, patient informed consent, ethical factors, the safety of human subjects and,
where appropriate, the protection of privacy of the human subjects. An IRB must operate in compliance with the FDA regulations. The FDA, IRB, the
clinical trial sponsor, or the principal investigator may suspend or discontinue a clinical trial at any time for various reasons, including a finding that the
clinical trial is not being conducted in accordance with FDA requirements or the subjects or patients are being exposed to an unacceptable health risk.
Clinical testing also must satisfy extensive GCP rules and the requirements for informed consent. Additionally, some clinical trials are overseen by an
independent group of qualified experts organized by the clinical trial sponsor, known as a data and safety monitoring board or committee. This group may
recommend continuing the clinical trial as planned, make changes in clinical trial conduct, or cessation of the clinical trial at designated check points based
on access to certain data from the clinical trial.
Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Annual progress reports detailing the results
of the clinical trials must be submitted to the FDA. Additional studies may be required after approval.
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Phase 1 clinical trials are initially conducted in a limited population to test the product candidate for safety, including adverse effects, dose
tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics in healthy humans. For some products for severe or life-
threatening diseases, especially if the product may be too toxic to administer to healthy humans, the initial clinical trials may be conducted in
individuals having a specific disease for which use the tested product is indicated.
Phase 2 clinical trials are generally conducted in a limited patient population to identify possible adverse effects and safety risks, evaluate the
efficacy of the product candidate for specific targeted indications and determine dose tolerance and optimal dosage. Multiple Phase 2 clinical trials
may be conducted by the sponsor to obtain information prior to beginning larger and more costly Phase 3 clinical trials.
Phase 3 clinical trials proceed if the Phase 2 clinical trials demonstrate that a dose range of the product candidate is potentially effective and has
an acceptable safety profile. Phase 3 clinical trials are undertaken to further evaluate, in a larger number of patients, dosage, provide substantial
evidence of clinical efficacy and further test for safety in an expanded and diverse patient population at multiple, geographically dispersed clinical
trial sites. A well-controlled, statistically robust Phase 3 trial may be designed to deliver the data that regulatory authorities will use to decide
whether or not to approve, and, if approved, how to appropriately label a drug: such Phase 3 studies are referred to as “pivotal.”
In some cases, the FDA may approve an NDA or a BLA for a product candidate but require the sponsor to conduct additional clinical trials to further assess
the drug’s safety and effectiveness after NDA or BLA approval. Such post-approval trials are typically referred to as Phase 4 clinical trials. These studies
are used to gain additional data from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of drugs
approved under accelerated approval regulations. If the FDA approves a product while a company has ongoing clinical trials that were not necessary for
approval, a company may be able to use the data from these clinical trials to meet all or part of any Phase 4 clinical trial requirement or to request a change
in the product labeling. Failure to exhibit due diligence with regard to conducting Phase 4 clinical trials could result in withdrawal of approval for products.
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Compliance with Current Good Manufacturing Practice Requirements
Before approving an NDA or a BLA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve
an application unless it determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and able to assure
consistent production of the product within required specifications. The PHSA emphasizes the importance of manufacturing control for products like
biologics whose attributes cannot be precisely defined.
Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain state
regulatory bodies. Both U.S. and non-U.S. manufacturing establishments must register and provide additional information to the FDA upon their initial
participation in the manufacturing process. Any product manufactured by or imported from a facility that has not registered, whether U.S. or non-U.S., is
deemed misbranded under the FDCA. Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance
with cGMPs and other laws. Inspections must follow a “risk-based schedule” that may result in certain establishments being inspected more frequently.
Manufacturers may also have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing
inspection by the FDA may lead to a product being deemed to be adulterated.
Review and Approval of a New Drug Application and Biologics License Application
The results of product candidate development, preclinical testing and clinical trials, including negative or ambiguous results as well as positive findings, are
submitted to the FDA as part of an NDA or a BLA requesting approval to market the product. The NDA or BLA also must contain extensive
manufacturing information and detailed information on the composition of the product and proposed labeling as well as payment of a user fee.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each NDA or BLA must be accompanied by a user fee, which the FDA adjusts on an
annual basis. Fee waivers or reductions are available in certain instances, such as a waiver of the application fee for an initial application filed by a small
business. Moreover, no user fees are assessed on NDAs or BLAs for products designated as orphan drugs, unless the product has a non-orphan indication
for use.
The FDA has 60 days after submission of the application to conduct an initial review to determine whether it is sufficient to accept for filing based on the
agency’s threshold determination that it is sufficiently complete to permit substantive review. Once the submission has been accepted for filing, the FDA
begins an in-depth review of the application. Under the goals and policies under the PDUFA, the FDA has ten months from the filing date in which to
complete its initial review of a standard application and respond to the applicant, and six months for a priority review of the application. The FDA does not
always meet its PDUFA goal dates for standard and priority applications. The review process may often be significantly extended by FDA requests for
additional information or clarification. The review process and the PDUFA goal date may be extended by three months if the FDA requests, or the
applicant otherwise provides additional information or clarification regarding information already provided in the submission within the last three months
before the PDUFA goal date.
Under the FDCA and the PHSA, the FDA may approve an NDA or a BLA if it determines that the product is safe, pure and potent and the facility where
the product will be manufactured meets standards designed to ensure that it continues to be safe, pure and potent.
On the basis of the FDA’s evaluation of the application and accompanying information, including the results of the inspection of the manufacturing
facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with
specific prescribing information for specific indications. If the application is not approved, the FDA will issue a complete response letter, which will
contain the conditions that must be met in order to secure final approval of the application, and, when possible, will outline recommended actions the
sponsor might take to obtain approval of the application. Sponsors that receive a complete response letter may submit to the FDA information that
represents a complete response to the issues identified by the FDA. Such resubmissions are classified under PDUFA as either Class 1 or Class 2. The
classification of a resubmission is based on the information submitted by an applicant in response to an action letter. Under the goals and policies agreed to
by the FDA under PDUFA, the FDA has two months to review a Class 1 resubmission and six months to review a Class 2 resubmission from the date of
receipt. The FDA will not approve an application until issues identified in the complete response letter have been addressed.
The FDA may also refer the application to an advisory committee for review, evaluation and recommendation as to whether the application should be
approved. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and
provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations
of an advisory committee, but it considers such recommendations carefully when making decisions.
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If the FDA approves a new product, it may limit the approved indications for use of the product. It may also require that contraindications, warnings or
precautions be included in the product labeling. In addition, the FDA may call for post-approval studies, including Phase 4 clinical trials, to further assess
the product’s safety after approval. The agency may also require testing and surveillance programs to monitor the product after commercialization, or
impose other conditions, including distribution restrictions or other risk management mechanisms, including a REMS, to help ensure that the benefits of the
product outweigh the potential risks. A REMS can include medication guides, communication plans for healthcare professionals, and elements to assure
safe use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain
circumstances, special monitoring, and the use of patent registries. The FDA may prevent or limit further marketing of a product based on the results of
post-market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding new indications,
manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.
The Hatch-Waxman Act added Section 505(b)(2) to the FDCA, allowing a company to submit an NDA application that relies on clinical trial data not
conducted by or for the application, such as previously published scientific literature and prior FDA findings of safety and efficacy of another company’s
drug. An NDA application under Section 505(b)(2) is typically used when the applicant product modifies or improves a predicate drug leading to a new
drug product. Because an application under Section 505(b)(2) can rely on prior clinical trial data and published scientific literature, FDA approval is
generally quicker than a normal NDA application. However, an application under Section 505(b)(2) can also be delayed if the predicate drug is still under
patent or exclusivity protections.
Post-Approval Regulation
Once regulatory approval for marketing of a product or new indication for an existing product is obtained, the sponsor will be required to comply with
post-approval regulatory requirements, including any post-approval requirements that the FDA may have imposed as a condition of approval. The sponsor
will be required to report certain adverse reactions and production problems to the FDA, provide updated safety and efficacy information and comply with
requirements concerning advertising and promotional labeling requirements. Drug manufacturers and certain of their subcontractors are required to register
their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for
compliance with ongoing regulatory requirements, including cGMP regulations, which impose certain procedural and documentation requirements upon
drug manufacturers. Accordingly, the sponsor and its third-party manufacturers must continue to spend time, money and effort in the areas of production
and quality control to maintain compliance with cGMP regulations and other regulatory requirements.
A product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the product before it is
released for distribution. If the product is subject to official release, the manufacturer must submit samples of each lot, together with a release protocol
showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA
may in addition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct
laboratory research related to the safety, purity, potency, and effectiveness of pharmaceutical products.
After an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if
problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of
unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the
approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution
or other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
fines, warning letters or holds on post-approval clinical trials;
refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs and biologics may be promoted
only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and
regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to
significant liability.
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Orphan Drug Designation
Orphan drug designation in the United States is designed to encourage sponsors to develop drugs intended for rare diseases or conditions. In the United
States, a rare disease or condition is statutorily defined as a condition that affects fewer than 200,000 individuals in the United States, or that affects more
than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available the drug for
the disease or condition will be recovered from sales of the drug in the United States.
Orphan drug designation qualifies a company for tax credits, waiver of the NDA user fee and may confer market exclusivity for seven years following the
date of the drug’s marketing approval, if granted by the FDA, if a product that has orphan designation subsequently receives the first FDA approval of that
drug for the disease for which it has such designation. This means that the FDA may not approve any other applications, including an NDA to market the
same drugs or even in a different formulation for the same indication for seven years, except in limited circumstances such as a showing of clinical
superiority over the product with orphan drug exclusivity or where the manufacturer is unable to assure sufficient product quantity. An application for
designation as an orphan product can be made any time prior to the filing of an application for approval to market the product. A product becomes an
orphan product when it receives orphan drug designation from the Office of Orphan Products Development, or OOPD, at the FDA based on acceptable
confidential requests made under the regulatory provisions. The product must then go through the review and approval process like any other product.
A sponsor may request orphan drug designation of a previously unapproved product or new orphan indication for an already marketed product. In addition,
a sponsor of a product that is otherwise the same product as an already approved orphan drug may seek and obtain orphan drug designation for the
subsequent product for the same rare disease or condition if it can present a plausible hypothesis that its product may be clinically superior to the first,
approved product. More than one sponsor may receive orphan drug designation for the same product for the same rare disease or condition, but each
sponsor seeking orphan drug designation must file a complete request for designation, and only the first sponsor that obtains approval for that drug for the
orphan indication will obtain market exclusivity, effectively preventing the FDA from approving products under development by competitors for the same
drug and same indication, unless the competitor is able to demonstrate that the product under development is clinically superior to the approved product or
the approved product is not available in sufficient quantities. To permit the FDA to end another manufacturer’s orphan exclusivity period, the FDA must
determine that the manufacturer has demonstrated clinical superiority by showing the later drug is safer, more effective, or otherwise makes a major
contribution to patient care.
The period of exclusivity begins on the date that the marketing application is approved by the FDA and applies only to the indication for which the product
has been designated. The FDA may approve a second application for the same product for a different use or a subsequent application for a different drug
for the same indication. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any
advantage in the regulatory review or approval process.
Regulation Outside the United States
In order to market any product outside of the United States, a company must also comply with numerous and varying regulatory requirements of other
countries and jurisdictions regarding quality, safety and efficacy that govern, among other things, clinical trials, marketing authorization, commercial sales
and distribution of drug products. Whether or not it obtains FDA approval for a product, the company would need to obtain the necessary approvals by the
comparable non-U.S. regulatory authorities before it can commence clinical trials or marketing of the product in those countries or jurisdictions. The
approval process ultimately varies between countries and jurisdictions and can involve additional product testing and additional administrative review
periods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA
approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory
approval in one country or jurisdiction may negatively impact the regulatory process in others.
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Regulation and Marketing Authorization in the European Union
The EMA is the scientific agency of the European Union, or the EU, that coordinates the evaluation and monitoring of new and approved medicinal
products such as drugs and biologics. It is responsible for the scientific evaluation of applications for EU marketing authorizations, as well as the
development of technical guidance and the provision of scientific advice to sponsors.
The process regarding approval of medicinal products in the EU follows roughly the same lines as in the United States and likewise generally involves
satisfactorily completing each of the following:
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preclinical laboratory tests, animal studies and formulation studies all performed in accordance with the applicable EU Good Laboratory Practice
regulations;
submission to the relevant regulatory agencies in EU member states, or national authorities, of a clinical trial application, or CTA, for each clinical
trial, which must be approved before human clinical trials may begin;
performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the product for each proposed indication;
submission to the relevant national authorities of a Marketing Authorisation Application, or MAA, which includes the data supporting safety and
efficacy as well as detailed information on the manufacture and composition of the product in clinical development and proposed labeling;
satisfactory completion of an inspection by the relevant national authorities of the manufacturing facility or facilities, including those of third
parties, at which the product is produced to assess compliance with cGMP;
potential audits of the non-clinical and clinical trial sites that generated the data in support of the MAA; and
review and approval by the relevant national authority of the MAA before any commercial marketing, sale or shipment of the product.
Preclinical Studies
Preclinical tests include laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate the potential efficacy and
toxicity in animals. The conduct of the preclinical tests and formulation of the compounds for testing must comply with the relevant EU regulations and
requirements. The results of the preclinical tests, together with relevant manufacturing information and analytical data, are submitted as part of the CTA
when seeking approval to start a clinical trial, and with the MAA when seeking marketing authorization.
Clinical Trial Approval
Requirements for the conduct of clinical trials in the EU including cGCP, are implemented in the current Clinical Trials Directive 2001/20/EC and the GCP
Directive 2005/28/EC. Pursuant to Directive 2001/20/EC and Directive 2005/28/EC, as amended, a system for the approval of clinical trials in the EU has
been implemented through national legislation of the EU member states. Under this system, approval must be obtained from the competent national
authority in which a trial is planned to be conducted, or in multiple member states if the clinical trial is to be conducted in a number of member states. To
this end, a CTA is submitted, which must be supported by an investigational medicinal product dossier, or IMPD, and further supporting information
prescribed by Directive 2001/20/EC and Directive 2005/28/EC and other applicable guidance documents. Furthermore, a clinical trial may only be started
after a competent ethics committee has issued a favorable opinion on the clinical trial application in that country.
On January 31, 2022, the Clinical Trials Regulation (EU) No. 536/2014 replaced the current Clinical Trials Directive 2001/20/EC. To ensure that the rules
for clinical trials are identical throughout the EU, the Clinical Trials Regulation (EU) No. 536/2014 was passed as a regulation which is directly applicable
in all EU member states. The Clinical Trials Directive 2001/20/EC will, however, still apply three years from the date of entry into application of the
Clinical Trials Regulation to (i) clinical trials applications submitted before the entry into application and (ii) clinical trials applications submitted within
one year after the entry into application if the sponsor opts for the old system.
Regulation (EU) No 536/2014 aims to simplify and streamline the approval of clinical trial in the EU. The main characteristics of the regulation include:
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A streamlined application procedure via a single entry point, known as the Clinical Trials Information System;
A single set of documents to be prepared and submitted for the application as well as simplified reporting procedures which will spare sponsors
from submitting broadly identical information separately to various and different national authorities;
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A harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts;
Strictly defined deadlines for the assessment of clinical trial application; and
The involvement of the ethics committees in the assessment procedure in accordance with the national law of the member state concerned but
within the overall timelines defined by the Regulation (EU) No 536/2014.
Marketing Authorization
Authorization to market a product in the member states of the EU proceeds under one of four procedures: a centralized procedure, a mutual recognition
procedure, a decentralized procedure or a national procedure.
Centralized Procedure
The centralized procedure enables applicants to obtain a marketing authorization that is valid in all EU member states based on a single application. Certain
medicinal products, including products developed by means of biotechnological processes must undergo the centralized authorization procedure for
marketing authorization, which, if granted by the European Commission, based on the opinion of the EMA, is automatically valid in all EU member states.
Sponsors may elect to file an MAA through the centralized procedures for other classes of products.
The centralized procedure is mandatory for certain types of products such as, medicines derived from biotechnology processes such as genetic engineering,
advanced-therapy medicines such as gene-therapy or tissue engineered medicine, orphan medicines, and medicinal products containing a new active
substance indicated for the treatment of HIV, AIDS, cancer, diabetes, neurodegenerative disorders, autoimmune and other immune dysfunctions, and viral
diseases. The centralized authorization procedure is optional for other medicinal products if they contain a new active substance, if the applicant shows that
the medicinal product concerned constitutes a significant therapeutic, scientific or technical innovation, or that the granting of authorization is in the public
interest of the EU.
Administrative Procedure
Under the centralized procedure, the EMA’s Committee for Human Medicinal Products, or CHMP serves as the scientific committee that renders opinions
about the safety, efficacy and quality of medicinal products for human use on behalf of the EMA. The CHMP is composed of experts nominated by each
member state’s national authority for medicinal products, with one of them appointed to act as Rapporteur for the coordination of the evaluation with the
possible assistance of a further member of the Committee acting as a Co-Rapporteur. After approval, the Rapporteur(s) continue to monitor the product
throughout its life cycle. The CHMP has 210 active days to adopt an opinion as to whether a marketing authorization should be granted. The process
usually takes longer in case additional information is requested, which triggers clock-stops in the procedural timelines. The process is complex and
involves extensive consultation with the regulatory authorities of member states and a number of experts. When an application is submitted for a marketing
authorization in respect of a drug which is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic
innovation, the applicant may, pursuant to Article 14(9) Regulation (EC) No 726/2004, request an accelerated assessment procedure. If the CHMP accepts
such request, the time-limit of 210 days will be reduced to 150 days but it is possible that the CHMP can revert to the standard time-limit for the centralized
procedure if it considers that it is no longer appropriate to conduct an accelerated assessment. Once the procedure is completed, a European Public
Assessment Report, or EPAR, is produced. If the opinion is negative, information is given as to the grounds on which this conclusion was reached. After
the adoption of the CHMP opinion, a decision on the MAA must be adopted by the European Commission, after consulting the EU member states, which
in total can take more than 60 days. After a drug has been authorized and launched, it is a condition of maintaining the marketing authorization that all
aspects relating to its quality, safety and efficacy must be kept under review.
Conditional Approval
In specific circumstances, EU legislation (Article 14(7) Regulation (EC) No 726/2004 and Regulation (EC) No 507/2006 on Conditional Marketing
Authorisations for Medicinal Products for Human Use) enables applicants to obtain a conditional marketing authorization prior to obtaining the
comprehensive clinical data required for an application for a full marketing authorization. Such conditional approvals may be granted for products
(including medicines designated as orphan medicinal products), if (1) the risk-benefit balance of the product is positive, (2) it is likely that the applicant
will be in a position to provide the required comprehensive clinical trial data, (3) the product fulfills unmet medical needs, and (4) the benefit to public
health of the immediate availability on the market of the medicinal product concerned outweighs the risk inherent in the fact that additional data are still
required. A conditional marketing authorization may contain specific obligations to be fulfilled by the marketing authorization holder, including obligations
with respect to the completion of ongoing or new studies, and with respect to the collection of pharmacovigilance data. Conditional marketing
authorizations are valid for one year, and may be renewed annually, if the risk-benefit balance remains positive, and after an assessment of the need for
additional or modified conditions and/or specific obligations. The timelines for the centralized procedure described above also apply with respect to the
review by the CHMP of applications for a conditional marketing authorization.
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Period of Authorization and Renewals
A marketing authorization will be valid for five years in principle, and the marketing authorization may be renewed after five years on the basis of a re-
evaluation of the risk-benefit balance by the EMA or by a national authority. To this end, the marketing authorization holder must provide the EMA or the
competent authority with a consolidated version of the file in respect of quality, safety and efficacy, including all variations introduced since the marketing
authorization was granted, at least nine months before the marketing authorization ceases to be valid. Once renewed, the marketing authorization will be
valid for an unlimited period, unless the European Commission or the national authority decides, on justified grounds relating to pharmacovigilance, to
proceed with one additional five-year renewal. Any authorization that is not followed by the actual placing of the drug on the EU market (in case of
centralized procedure) or on the market of the authorizing member state within three years after authorization will cease to be valid, the so-called “sunset
clause.”
Orphan Drug Designation and Exclusivity
The European Commission can grant orphan medicinal product designation to products for which the sponsor can establish that it is intended for the
diagnosis, prevention, or treatment of (1) a life-threatening or chronically debilitating condition affecting not more than five in 10,000 people in the EU, or
(2) a life threatening, seriously debilitating or serious and chronic condition in the EU and that without incentives it is unlikely that sales of the drug in the
EU would generate a sufficient return to justify the necessary investment. In addition, the sponsor must establish that there is no other satisfactory method
approved in the EU of diagnosing, preventing or treating the condition, or if such a method exists, the proposed orphan drug will be of significant benefit to
patients.
Orphan drug designation provides a number of benefits, including fee reductions, regulatory assistance, and the possibility to apply for a centralized EU
marketing authorization (see “Government Regulation and Product Approval-Regulation Outside the United States-Centralized Authorization Procedure”),
as well as 10 years of market exclusivity following a marketing authorization. During this market exclusivity period, neither the EMA, nor the European
Commission nor the Member States can accept an application or grant a marketing authorization for a medicinal product containing a similar active
substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. The market
exclusivity period for the authorized therapeutic indication may be reduced to six years if, at the end of the fifth year, it is established that the orphan drug
designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market
exclusivity. In addition, a competing similar medicinal product may be authorized prior to the expiration of the market exclusivity period, including if it is
shown to be safer, more effective or otherwise clinically superior to the already approved orphan drug or if the holder of the marketing authorization for the
already approved orphan drug is unable to supply sufficient quantities of the product.
If the MAA of a medicinal product designated as an orphan drug includes the results of all studies conducted in compliance with an agreed PIP, and a
corresponding statement is subsequently included in the marketing authorization granted, the ten-year period of market exclusivity will be extended to
twelve years.
Regulatory Data Protection
EU legislation also provides for a system of regulatory data and market exclusivity. Upon receiving marketing authorization, new chemical entities
approved on the basis of complete independent data package benefit from eight years of data exclusivity and an additional two years of market exclusivity.
Data exclusivity prevents regulatory authorities in the EU from referencing the innovator’s data to assess a generic or biosimilar (abbreviated) application.
During the additional two-year period of market exclusivity, a generic or biosimilar marketing authorization can be submitted, and the innovator’s data may
be referenced, but no generic or biosimilar medicinal product can be marketed until the expiration of the market exclusivity. The overall ten-year period
will be extended to a maximum of eleven years if, during the first eight years of those 10 years, the marketing authorization holder obtains an authorization
for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit
in comparison with existing therapies. Even if a compound is considered to be a new chemical entity and the innovator is able to gain the period of data
exclusivity, another company nevertheless could also market another version of the drug if such company obtained marketing authorization based on an
MAA with a complete independent data package of pharmaceutical test, pre-clinical tests and clinical trials. However, products designated as orphan
medicinal products enjoy, upon receiving marketing authorization, a period of 10 years of orphan market exclusivity (see also “Government Regulation and
Product Approval-Regulation and Marketing Authorization in the European Union-Orphan Drug Designation and Exclusivity”). Depending upon the
timing and duration of the EU marketing authorization process, products may be eligible for up to five-year supplementary protection certificates, or SPCs.
Such SPCs extend the rights under the basic patent for the drug.
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Regulatory Requirements After a Marketing Authorization Has Been Obtained
If we obtain authorization for a medicinal product in the EU, we will be required to comply with a range of requirements applicable to the manufacturing,
marketing, promotion and sale of medicinal products:
Pharmacovigilance and Other Requirements
We will, for example, have to comply with the EU’s stringent pharmacovigilance or safety reporting rules, pursuant to which post-authorization studies and
additional monitoring obligations can be imposed.
Other requirements relate to, for example, the manufacturing of products and active pharmaceutical ingredients (“APIs”) in accordance with good
manufacturing practice standards. EU regulators may conduct inspections to verify our compliance with applicable requirements, and we will have to
continue to expend time, money and effort to remain compliant. Non-compliance with EU requirements regarding safety monitoring or pharmacovigilance,
and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties in the EU.
Similarly, failure to comply with the EU’s requirements regarding the protection of individual personal data can also lead to significant penalties and
sanctions. Individual EU member states may also impose various sanctions and penalties in case we do not comply with locally applicable requirements.
Manufacturing
The manufacturing of authorized drugs, for which a separate manufacturer’s license is mandatory, must be conducted in compliance with the EMA’s cGMP
requirements and comparable requirements of other national authorities, which mandate the methods, facilities and controls used in manufacturing,
processing and packing of drugs to assure their safety and identity. The EMA enforces its cGMP requirements through mandatory registration of facilities
and inspections of those facilities. The EMA may have a coordinating role for these inspections while the responsibility for carrying them out rests with the
member states competent authority under whose responsibility the manufacturer falls. Failure to comply with these requirements could interrupt supply and
result in delays, unanticipated costs and lost revenues, and could subject the applicant to potential legal or regulatory action, including but not limited to
warning letters, suspension of manufacturing, seizure of product, injunctive action or possible civil and criminal penalties.
Marketing and Promotion
The marketing and promotion of authorized drugs, including industry-sponsored continuing medical education and advertising directed toward the
prescribers of drugs and/or the general public, are strictly regulated in the EU. The applicable regulations aim to ensure that information provided by
holders of marketing authorizations regarding their products is truthful, balanced and accurately reflects the safety and efficacy claims authorized by the
EMA or by the national authority of the authorizing member state. Failure to comply with these requirements can result in adverse publicity, warning
letters, corrective advertising and potential civil and criminal penalties.
Clinical Testing in Israel
In order to conduct clinical trials on humans in Israel, prior authorization must be obtained from the medical director of the institution (i.e., the Director of
Hospital) in which the clinical trials are scheduled to be conducted. All clinical trials must first be approved by the Institutional Review Board /
Independent Ethics Committee which may request additional prior approval from the Israeli Ministry of Health (IMOH), as required under the Guidelines
for Clinical Trials in Human Subjects implemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), 5740-1980, as
amended from time to time. Pursuant to the Israeli Public Health Regulations, such authorization generally cannot be granted unless, among other things,
the relevant institutions ethics committee has provided its prior approval of the testing and that the trial complies with the standards set forth by the
Declaration of Helsinki.
The Institutional Review Board / Independent Ethics Committee and IMOH prioritizes the safety, rights and the wellbeing of the participants are addressed,
as well as among other things, evaluating the anticipated benefits that are likely to be derived from the project to determine if it justifies the risks and
inconvenience to be inflicted on the participating human subjects. The institution may also conduct audits to insure that all international GCP and IMOH
guidelines are being adhered to in order to maintain the proper conduct and accuracy of the information gathered in the course of the clinical testing.
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Other Healthcare Laws
Health care providers, physicians and third-party payers play a primary role in the recommendation and prescription of drug products that are granted
marketing approval. Arrangements with third-party payers and customers are subject to broadly applicable fraud and abuse and other health care laws and
regulations. In the United States, such restrictions under applicable federal and state healthcare laws and regulations, include the following:
•
•
•
•
•
•
•
•
the federal Anti-Kickback Statute prohibits, among other things, the knowing and willful offer, payment, solicitation or receipt of any form of
remuneration in return for, or to induce, (i) the referral of a person, (ii) the furnishing or arranging for the furnishing of items or services
reimbursable under the Medicare, Medicaid or other governmental programs, or (iii) the purchase, lease or order or arranging or recommending
purchasing, leasing or ordering of any item or service reimbursable under the Medicare, Medicaid or other governmental programs. A person or
entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation; in
addition, items or services resulting from a violation of the federal Anti-Kickback Statute may constitute a false or fraudulent claim for purposes
of the False Claims Act;
the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for
knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false
statement to avoid, decrease or conceal an obligation to pay money to the federal government;
the Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud
any health care benefit program or making false statements relating to health care matters. 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 to have committed a violation;
the federal false statements statute prohibits 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 health care benefits, items or services;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic
healthcare transactions and protects the security and privacy of protected health information that is stored or transmitted electronically;
the Physician Payments Sunshine Act, created under the Affordable Care Act, and its implementing regulations, which require specified
manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s
Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information
related to payments or other “transfers of value” made to physicians. All such reported information is publicly available;
analogous state and non-U.S. laws and regulations, such as state anti-kickback and false claims laws which may apply to items or services
reimbursed by any payer, including commercial insurers; state 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; state laws that require pharmaceutical manufacturers to report information
related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing
the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not
have the same effect, thus complicating compliance efforts; and
regulation by the Centers for Medicare and Medicaid Services and enforcement by the U.S. Department of Health and Human Services Office of
Inspector General or the U.S. Department of Justice.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our future
business activities could be subject to challenge under one or more of such laws. Efforts to ensure that our business arrangements with third parties will
comply with applicable laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business
practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other health care laws and
regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be
subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded health care programs, such as
Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect
to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including
exclusions from government funded health care programs.
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Environmental, Health and Safety
We are further subject to various foreign, national, federal, state and local laws and regulations relating to environmental, health and safety matters, in a
number of jurisdictions, governing, inter alia, (i) the use, storage, registration, handling, emission and disposal of chemicals, waste materials and sewage;
and (ii) chemical, air, water and ground contamination, air emissions and the cleanup of contaminated sites, including any contamination that results from
spills due to our failure to properly dispose of chemicals, waste materials and sewage. Our operations at our Jerusalem research and development facility
use chemicals and produce waste materials and sewage. Our activities require permits from various governmental authorities including, local municipal
authorities, the Ministry of Environmental Protection and the Ministry of Health. The Ministry of Environmental Protection and the Ministry of Health,
local authorities and the municipal water and sewage company may conduct periodic inspections in order to review and ensure our compliance with the
various regulations.
Although we do not believe that we will be required to make material operating or capital expenditures in connection with such laws and regulations, we
may be required to incur significant costs to comply with these laws and regulations in the future, and complying with these laws and regulations may
result in a material adverse effect upon our business, financial condition and results of operations. Further, our failure to comply with such laws and
regulations could have a material adverse effect on our business and reputation, result in an interruption or delay in the development or manufacture of our
products, or increase the costs for the development or manufacture of our products.
In addition, laws and regulations relating to environmental, health and safety matters are often subject to change. In the event of any changes or new laws
or regulations, we could be subject to new compliance measures or to penalties for activities which were previously permitted. For instance, Israeli
regulations were promulgated in 2011 relating to the discharge of industrial sewage into the sewer system. These regulations establish new and potentially
significant fees for discharging forbidden or irregular sewage into the sewage system.
Pharmaceutical Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any drug products for which we plan to seek regulatory approval. Sales of any
of our product candidates, if approved, will depend, in part, on the extent to which the costs of the products will be covered by third-party payors, including
government health programs such as Medicare and Medicaid, commercial health insurers and managed care organizations. Concerns about drug pricing
have been expressed by both members of the United States Congress and the administration. The process for determining whether a payer will provide
coverage for a drug product may be separate from the process for setting the price or reimbursement rate that the payer will pay for the drug product once
coverage is approved. Third-party payers may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the
approved drugs for a particular indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomic
studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA, EMA or other
comparable regulatory approvals. Our product candidates may not be considered medically necessary or cost-effective. A payer’s decision to provide
coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Third-party reimbursement may not be sufficient to
enable us to maintain price levels high enough to realize an appropriate return on our investment in product development.
The containment of healthcare costs has become a priority of governments, and the prices of drugs have been a focus in this effort. Third-party payers are
increasingly challenging the prices charged for medical products and services and examining the medical necessity and cost effectiveness of medical
products in addition to their safety and efficacy. If these third-party payors do not consider our products to be cost-effective compared to other available
therapies, they may not cover our products if approved under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our
products at a profit. The U.S. government, state legislatures and non-U.S. governments have shown significant interest in implementing cost containment
programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements for
substitution of generic products for branded prescription drugs. Adoption of such controls and measures, and tightening of restrictive policies in
jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the product candidates that we are developing and
could adversely affect our net revenue and results.
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Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after a
reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular
product candidate to currently available therapies. The conduct of such studies could be expensive and result in delays in our commercializing efforts. The
EU provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement
and to control the prices of medicinal products for human use. EU member states may approve a specific price for a drug product or may instead adopt a
system of direct or indirect controls on the profitability of the company placing the drug product on the market. Other member states allow companies to
fix their own prices for drug products, but monitor and control company profits. The downward pressure on health care costs in general, particularly
prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some
countries, cross-border imports from low-priced markets exert competitive pressure that may reduce pricing within a country. There can be no assurance
that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricing arrangements for
any of our products.
The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to
provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect that it will
continue to increase the pressure on drug pricing. Coverage policies, third-party reimbursement rates and drug pricing regulation may change at any time.
Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable
coverage policies and reimbursement rates may be implemented in the future.
Health Care Reform
In the United States, there have been and continue to be a number of significant legislative initiatives to contain healthcare costs. The Affordable Care Act
was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of drug products, including, for example,
increased rebates for drugs subject to the Medicaid Drug Rebate Program, extension of Medicaid rebates to Medicaid managed care plans, mandatory
discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies’ share of sales to federal health care programs.
In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. These changes included aggregate
reductions to Medicare payments to providers of 2% per fiscal year, effective April 1, 2013 and, due to subsequent legislative amendments to the statute,
will stay in effect through 2027, unless additional Congressional action is taken; however, pursuant to the CARES Act, and subsequent legislation, these
reductions were suspended from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic. 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. These laws may result in additional reductions in Medicare and
other healthcare funding, which could have a material adverse effect on customers for our drugs, if approved, and, accordingly, our financial operations.
Moreover, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their 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, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare,
and reform government program reimbursement methodologies for drugs. The FDA released a final rule on September 24, 2020, effective November 30,
2020, providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of
Health and Human Services, or HHS, finalized a regulation removing 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. The rule also creates a new
safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit
managers and manufacturers. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control
pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and
marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
Although a number of these, and other proposed measures may require authorization through additional legislation to become effective, Congress has
indicated that it will continue to seek new legislative measures to control drug costs.
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Additionally, 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 advertisements that are in violation of these requirements will be included on a public list.
Any adopted health reform measure could reduce the ultimate demand for our products, if approved, or put pressure on our product pricing. Individual
states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical
product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and
transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare
authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be
included in their prescription drug and other healthcare programs. We expect that additional state and federal healthcare reform measures will be adopted in
the future.
We expect that additional state and federal healthcare reform measures, as well as legal changes by foreign governments, will be adopted in the future, any
of which could limit the amounts that governments will pay for healthcare products and services, which could result in reduced demand for our product
candidates or additional pricing pressures.
Employees
As of December 31, 2023, we had a total of 19 employees, of whom 17 are full-time employees all based in Israel (including our Chief Executive Officer
and Chief Operating Officer), and one part-time consultant based in Israel who serves as our Chief Financial Officer. In addition, we employ a number of
specialized outside advisors and expert consultants based in the United States, the United Kingdom and Europe, including our Chief Medical Officer, key
clinical advisors and our regulatory team. The distribution of our full-time employees according to main areas of activity is set forth in the following table:
Area of Activity:
Research and Development
General and Administrative
Total
Employees
15
2
17
Israeli labor laws govern the length of the workday and workweek, minimum wages for employees, procedures for hiring and dismissing employees,
determination of severance pay, annual leave, sick days, advance notice of termination, payments to the National Insurance Institute, and other conditions
of employment and include equal opportunity and anti-discrimination laws. While we are not, and none of our employees is, party to any collective
bargaining agreements, certain provisions of the 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 in Israel by order of the Israeli
Ministry of the Economy. These provisions primarily concern pension fund benefits for all employees, insurance for work-related accidents, recuperation
pay and travel expenses. 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 relationships with our employees are good.
Facilities
For more information regarding our facilities, see “Item 2—Properties” contained in this Annual Report.
Legal Proceedings
For more information regarding legal proceedings, see “Item 3—Legal Proceedings” contained in this Annual Report.
Additional Information
Our website is at www.enterabio.com. We make available, free of charge, on our “Investor Relations” section under the heading “SEC Filings”, our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed with or furnished to the
SEC pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it
to, the SEC. Our website address is included in this report only as an inactive textual reference. Information contained on, or available through, our website
is not incorporated by reference in, or made a part of, this report.
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ITEM 1A. RISK FACTORS
You should carefully consider the risks described below, as well as other information contained in this Annual Report, including the consolidated
financial statements and the notes thereto and “Item 7-Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The
occurrence of any of the events discussed below could significantly and adversely affect our business, prospects, results of operations, financial condition,
and cash flows.
Any investment in our securities involves a high degree of risk. You should consider carefully the following factors and all other information
contained in this Annual Report before you make a decision to invest in our Ordinary Shares. If any of the negative events referred to below occur, our
business, prospects, financial condition and results of operations could be materially and adversely affected. In any such case, the trading price of our
Ordinary Shares could decline, and you could lose all or part of your investment.
Risk Factor Summary
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our
business, financial condition, results of operations, cash flows and prospects. These risks are discussed more fully later in this Item 1A, and include, but are
not limited to, the following:
• We have incurred significant losses since our inception and anticipate that we will continue to incur substantial losses for the next several years;
• Management has performed an analysis of our ability to continue as a going concern and our independent registered public accounting firm has
raised substantial doubt as to our ability to continue as a going concern;
•
•
•
•
•
•
All of our product candidates, including EB613 and EB612, are in preclinical or clinical development and we have not yet successfully completed
the development of any product candidates;
If serious adverse, undesirable or unacceptable side effects are identified during the development of our product candidates, marketing approval
may be delayed or we may need to abandon our development of such product candidates, and if such side effects are identified following
regulatory approval, any approved product label may be limited or we may be subject to other significant negative consequences;
The commencement and completion of clinical trials can be delayed or prevented for a number of reasons;
The results of previous clinical trials may not be predictive of future results, our progress in trials for one product candidate may not be indicative
of progress in trials for other product candidates, and our trials may not be designed so as to support regulatory approval;
Even if regulatory approvals are obtained for our product candidates, we will be subject to ongoing government regulation. If we fail to comply
with applicable current and future laws and government regulations, it could delay or prevent the promotion, marketing or sale of our products;
Healthcare legislative changes may harm our business and future prospects;
• We are subject to manufacturing risks that could substantially increase our costs and limit supply of our products;
• We are highly dependent upon our ability to raise additional capital or enter into agreements with collaborators to develop, commercialize and
market our products;
• We may fail to establish, maintain, defend and enforce intellectual property rights with respect to our technology;
•
•
•
The price of our Ordinary Shares may be volatile, and holders of our Ordinary Shares could lose all or part of their investment;
Your rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and
responsibilities of shareholders of U.S. corporations; and
Security, political and economic instability in the Middle East may harm our business, including the duration and intensity of the ongoing Israel-
Hamas War and its impact on our operations and workforce.
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Risks Related to Our Financial Position
We have incurred significant losses since our inception and anticipate that we will continue to incur substantial losses for the next several years.
We have incurred net losses in each year since our inception, including net losses of $8.9 Million in 2023 and $13.1 million in 2022. As of December 31,
2023 we had an accumulated deficit of $104.4 million. We expect to continue to incur substantial losses for the next several years, and we expect these
losses to increase as we continue our development of and potentially seek regulatory approval for, EB613 and EB612 and potentially develop future
product candidates, including our GLP-2 and OXM candidates with OPKO. We anticipate that our net losses and accumulated deficit for the next several
years will be significant as we conduct our planned operations. Given our current plans, we anticipate that our existing cash and cash equivalents will be
sufficient to fund our operations through the second quarter of 2025. This assumes capital required to fund our ongoing operations, including R&D and the
completion of the Phase 1 study related to the new generation platform and the GLP-2/OXM collaborative research we are conducting with OPKO. This
does not include the capital required to fund our proposed Phase 3 pivotal study for EB613 in osteoporosis. Delays in securing additional capital or entering
into strategic collaborations to capitalize the EB613 Phase 3 program will result in delays in this program. Accordingly, these factors, among others, raise
substantial doubt about our ability to continue as a going concern. Our expectations are based on management’s current assumptions, clinical development
plans and regulatory submission timelines, which may prove to be wrong, and we could spend our available financial resources much faster than we
currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we
are unable to accurately predict the timing or amount of the development and clinical expenses or when, or if we will be able to achieve, or maintain,
profitability. In addition, our expenses could increase if we are required by the FDA or comparable foreign regulatory authorities to perform preclinical or
clinical studies or trials in addition to those currently expected, or if there are any delays in completing our clinical trials or the development and potential
commercialization of EB613 or any other product candidates. The amount of our future net losses will depend, in part, on the amount and timing of our
expenses, our ability to generate revenue and our ability to raise additional capital. These net losses have had, and will continue to have, an adverse effect
on our stockholders’ equity and working capital.
Management has performed an analysis of our ability to continue as a going concern. In addition, our independent registered public accounting firm
has raised substantial doubt as to our ability to continue as a going concern.
Based on its assessment, management has raised substantial doubt about our ability to continue as a going concern. In addition, our independent registered
public accounting firm expressed substantial doubt as to our ability to continue as a going concern in their report accompanying our audited consolidated
financial statements. As of March 1, 2024, we had cash and cash equivalents of approximately $9.8 million. Given our current plans, we anticipate that our
existing cash and cash equivalents will be sufficient to fund our operations through the second quarter of 2025. This assumes capital required to fund our
ongoing operations, including R&D, the completion of the Phase 1 study related to the new generation platform and the GLP-2/OXM collaborative
research we are conducting with OPKO. This does not include the capital required to fund our proposed Phase 3 pivotal study for EB613 in osteoporosis.
Our expectations are based on management’s current assumptions, clinical development plans and regulatory submission timelines, which may prove to be
wrong, and we could spend our available financial resources much faster than we currently expect. Our ability to continue as a going concern will depend
on our ability to obtain additional financing. The Company constantly evaluates options with respect to various financing alternatives including public or
private equity offerings, debt financings and strategic collaborations to finance future clinical trials, including the Phase 3 pivotal study for EB613 in
osteoporosis, research and development activities and general and administrative expenses. A going concern opinion could impair our ability to finance our
operations through public or private equity offerings, or debt financings, or a combination of one or more of these funding sources. Any additional equity
or debt financing could be extremely dilutive to our current shareholders. Additional capital may not be available on reasonable terms, or at all, and we may
be required to delay, terminate or significantly curtail our operations, or enter into arrangements with collaborative partners or others that may require us to
relinquish rights to certain aspects of our product candidates, or potential markets that we would not otherwise relinquish. If we are unable to obtain capital,
our business, including our ability to conduct studies and develop our product candidates, would be jeopardized and we may not be able to continue
operations.
Due to our limited resources and access to capital, we must and have in the past decided to prioritize development of certain product candidates; these
decisions may prove to have been wrong and may adversely affect our current and any potential future revenues.
Because we have limited resources and access to capital to fund our operations, we must decide which product candidates to pursue and the amount of
resources to allocate to each product candidate. As such, we are currently focused on the development of five differentiated, first-in-class oral peptide
programs, expected to enter the into various stages of clinical development by 2025, including two programs under the collaboration agreement with
OPKO. Our most advanced programs are EB613 and EB612 for the treatment of osteoporosis and hypoparathyroidism, respectively. Our decisions
concerning the allocation of research, collaboration, management and financial resources toward particular compounds, product candidates or therapeutic
areas may not lead to the development of viable commercial products and may divert resources away from better opportunities. Similarly, our current or
potential decisions to delay, terminate or collaborate with third parties with respect to certain product development programs may also be sub-optimal and
could cause us to miss valuable opportunities. If we make incorrect determinations regarding the market potential of our product candidates or misread
trends in the biopharmaceutical industry, our business, financial condition and results of operations could be materially adversely affected.
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We will require substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not available, may require us to
delay, reduce or cease our product development activities and operations.
We are currently advancing our most advanced product candidate, EB613, through clinical development. Developing therapeutics, including conducting
preclinical studies and clinical trials, is expensive. We will require substantial additional capital in order to complete research and development, clinical
trials, file with the regulatory agencies, including the FDA and EMA, secure commercial manufacturing supply for and commercialize our product
candidates. If the FDA or comparable foreign regulatory authorities require that we perform additional preclinical studies or clinical trials at any point, our
expenses would further increase beyond what we currently expect, and the anticipated timing of any future clinical development activities and potential
regulatory approvals may be delayed depending upon our allocation of resources and available funding. Additional funds may not be available when we
need them on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, or on acceptable terms, we may be
required to delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities for one or more of our product candidates or
delay, limit, reduce or terminate our establishment of manufacturing, sales and marketing capabilities or other activities that may be necessary to
commercialize our product candidates.
We expect that we would need to raise additional funds to support the execution of our long-term growth strategy, including for a potential Phase 3 trial of
EB613, additional non-clinical and clinical studies for EB612, and further development of our N-Tab™ technology platform and pre-clinical product
candidates. We can provide no assurance that additional funding will be available on a timely basis, on terms acceptable to us, or at all. Because successful
development of our product candidates is uncertain, we are unable to estimate the actual amount of financing we will require to complete research and
development and to commercialize our product candidates. The amount and timing of our funding requirements will depend on many factors, including but
not limited to:
•
•
•
•
•
•
•
•
•
•
the scope, progress, timing, cost and results of research, preclinical development, and clinical trials;
the costs, timing and outcome of seeking and obtaining approvals from the FDA, EMA or other regulatory agencies in relation to registrational
strategies and potential NDA or BLA approvals for our product candidates;
the costs associated with manufacturing our product candidates and potentially establishing sales, marketing, and distribution capabilities in the
absence of commercial partnerships;
the costs associated with obtaining, maintaining, expanding, defending and enforcing the scope of our intellectual property portfolio, including the
amount and timing of any payments we may be required to make in connection with the licensing, filing, defense and enforcement of any patents
or other intellectual property rights;
the extent to which we acquire or in-license other products or technologies;
the economic and other terms, timing of and success of any collaboration, licensing, or other arrangements into which we entered or may enter in
the future, including the timing of achievement of milestones and receipt of any milestone or royalty payments under these agreements;
our need and ability to hire additional management, scientific, and medical personnel;
the effect of competing products that may limit market penetration of our product candidates;
the amount and timing of revenues, if any, we receive from commercial sales of any product candidates for which we receive marketing approval
in the future; and
our need to implement additional internal systems and infrastructure, including financial and reporting systems to support our current operations as
a public company.
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Many of these factors are outside of our control. Based upon our currently expected level of operating expenditures, we believe that we will be able to fund
our operations through the second quarter of 2025. This assumes capital required to fund our ongoing operations, including R&D, the completion of the
Phase 1 study related to the new generation platform and the GLP-2/OXM collaborative research we are conducting with OPKO. This does not include the
capital required to fund our proposed Phase 3 pivotal study for EB613 in osteoporosis. Delays in securing additional capital or entering into strategic
collaborations to capitalize the EB613 Phase 3 program will result in delays in this program. Our expectations are based on management’s current
assumptions, clinical development plans and regulatory submission timelines, which may prove to be wrong, and we could spend our available financial
resources much faster than we currently expect. This period could be shortened if there are any unanticipated increases in spending on development
programs or other unanticipated increases in spending related to circumstances outside of our control, including, without limitation, costs associated with
litigation or other legal proceedings, hiring of additional consultants and personnel or procurement of additional raw materials. Our existing cash and cash
equivalents will not be sufficient to obtain regulatory approval for any of our product candidates. Accordingly, we continue to require substantial additional
capital. In order to fund our future capital needs, we may seek additional funding through equity or debt financings, development partnering arrangements,
lines of credit or other sources. These conditions raise substantial doubt about our ability to continue as a going concern, and we will be required to raise
additional funds, seek alternative means of financial support, including strategic partnerships, or both, in order to continue operations. The accompanying
financial statements have been prepared assuming that we will continue as a going concern and do not include adjustments that might result from the
outcome of this uncertainty. If we are unable to raise the requisite funds, we will need to delay the initiation of core activities, curtail or cease operations.
Our fundraising efforts in the future to secure additional financing will divert our management from our day-to-day activities, which may adversely affect
our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient
amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to
significantly delay, reduce or discontinue the development or commercialization of one or more of our product candidates or curtail our operations, which
will have an adverse effect on our business, operating results and prospects.
We have a limited operating history and no history of late stage clinical studies and commercializing pharmaceutical products, which may make it
difficult to evaluate the prospects for our future viability and making an investment in our Ordinary Shares unsuitable for many investors.
We began operations in 2010. Our operations to date have been limited to financing and staffing our company, developing our drug delivery technology, N-
Tab™, and early clinical development of our product candidates. We have not yet demonstrated an ability successfully to complete a large-scale, pivotal
clinical trial, obtain marketing approval, manufacture a commercial scale product or conduct sales and marketing activities necessary for successful product
commercialization. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a history of
successfully developing and commercializing pharmaceutical products.
Raising additional capital may cause dilution to our shareholders, and these financings, or disputes with shareholders in connection therewith, may
restrict our operations or require us to relinquish substantial rights or result in unanticipated legal or other costs.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of public or private
equity offerings, debt financings and strategic collaborations. We do not have any committed external sources of funds and we will need to raise additional
capital. 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 of these new securities may include liquidation or other preferences that adversely affect the rights of a holder of our Ordinary Shares. Debt
financing, if available at all, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring
additional debt, making capital expenditures, or declaring dividends, and may be secured by all or a portion of our assets. Further, we may incur substantial
costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and
other costs and such efforts may divert our management from their day-to-day activities, which may compromise our ability to develop and market our
product candidates. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes
and warrants, which could cause our operating results to fluctuate on a quarterly basis.
If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable
rights to our technologies, product candidates, or future revenue streams, or grant licenses on terms that are not favorable to us. We cannot assure you that
we will be able to obtain additional funding if and when necessary. If we are unable to obtain adequate financing on a timely basis, we could be required to
delay, scale back or eliminate one or more of our development programs or grant rights to develop and market product candidates that we would otherwise
prefer to develop and market ourselves.
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The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our
business, particularly after we are no longer a non-accelerated filer.
As a public company, we are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with
these reporting and regulatory requirements are time consuming, result in increased costs to us and could have a negative effect on our business, results of
operations and financial condition.
We are subject to the reporting requirements of the Exchange Act, and the requirements of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-
Oxley Act. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual and current reports with
respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal
control over financial reporting. We are implementing procedures and processes for the purpose of addressing the standards and requirements applicable to
public companies. Complying with these requirements is costly and time consuming. In the event that we are unable to demonstrate compliance with our
obligations as a public company in a timely manner, or are unable to produce timely or accurate financial statements, we may be subject to sanctions or
investigations by regulatory authorities, such as the SEC or Nasdaq, investors may lose confidence in our operating results and the price of our Ordinary
Shares could decline. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our
business, financial condition, results of operations and cash flows.
As a non-accelerated filer, we have been able to take advantage of certain temporary exemptions from various reporting requirements including, but not
limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and the rules and regulations of
the SEC thereunder. We cannot predict or estimate the amount of additional costs we may incur as a result of no longer being a non-accelerated filer or the
timing of such costs.
Our Ordinary Shares are listed on Nasdaq. As a public company listed on Nasdaq, we incur significant legal, accounting and other expenses. In addition,
changing laws, regulations and standards, in the United States or Israel, relating to corporate governance and public disclosure and other matters, may be
implemented in the future, which may increase our legal and financial compliance costs, make some activities more time consuming and divert
management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and
standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate
legal proceedings against us and our business may be harmed. Furthermore, because we are a publicly traded company in the United States and subject to
U.S. rules and regulations, it is more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage
or incur substantially higher costs to obtain coverage. These factors may also make it more difficult for us to attract and retain qualified members of the
Board, particularly to serve on our Audit Committee, and qualified executive officers.
Risks Related to Our Business and the Development of Our Product Candidates
All of our product candidates are in preclinical or clinical development and we have not yet successfully completed the development of any product
candidates.
We are a clinical-stage company focused on the development of orally delivered peptide and protein therapeutics to treat unmet medical needs. We
commenced operations in 2010 and have a limited operating history. Since inception, we have devoted substantially all of our resources to the development
of our N-Tab™ Technology platform, the clinical and preclinical advancement of our product candidates, the creation, licensing and protection of related
intellectual property rights and the provision of general and administrative support for these operations. We have not yet obtained regulatory approval for
any product candidates in any jurisdiction or generated any revenues from any product sales. If any of our current or future product candidates fails in
clinical trials or preclinical development, or does not gain regulatory approval, or if our product candidates following regulatory approval, if any, do not
achieve market acceptance, we may never become profitable or sustain profitability.
We commenced our first clinical trials with our oral PTH candidates in osteoporosis and hypoparathyroidism, and we have a limited operating history of
developing products upon which our business and prospects can be evaluated. In addition, our Phase 2 clinical trial for EB613 for osteoporosis was the
largest clinical trial we have conducted to date, and we have never conducted clinical trials of a size required for regulatory approvals. Furthermore, we
have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in rapidly evolving
fields, such as the oral delivery of protein therapeutics.
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To become and remain profitable, we must succeed in developing and commercializing products that generate significant revenues. This will require us to
be successful in a range of challenging activities for which we are only in the preliminary stages, including developing product candidates, completing pre-
clinical and clinical trials for such product candidates, obtaining regulatory approval for them, and manufacturing, marketing and selling those products for
which we may obtain regulatory approval. We may never succeed in these activities and, even if we do, we may never generate revenue from product sales
that is significant enough to achieve profitability. Our ability to generate future revenue from product sales depends heavily on our success in many areas,
including but not limited to:
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the completion of future development efforts for EB613, EB612 or other product candidates;
securing additional funding as may be needed to continue the development of EB613 or any other product candidates;
obtaining required regulatory and marketing approvals for the clinical development, manufacturing and commercialization of EB613, EB612 and
any other product candidates we may develop;
obtaining adequate reimbursement from third-party payors for any product that may be commercialized, if approved;
• managing our spending as costs and expenses increase due to the preparation of regulatory filings, potential regulatory approvals, manufacturing
scale-up and potential commercialization;
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continuing to build and maintain our intellectual property portfolio;
recruiting and retaining qualified executive management and other personnel;
building and maintaining appropriate research and development, clinical, regulatory, sales, manufacturing, financial reporting, distribution, and
marketing capabilities on our own or through third parties;
gaining market acceptance for our product candidates;
developing and maintaining successful strategic relationships and collaborations;
developing a sustainable and scalable manufacturing process for any approved product candidates and maintaining supply and manufacturing
relationships with third parties that can support clinical development and market demand for our product candidates, if approved;
establishing sales, marketing, and distribution capabilities in the United States and the EU independently or in collaboration with strategic
partners;
obtaining market acceptance for any of our product candidates that receive marketing approval, if any, as viable treatment options;
addressing any competing technological and market developments;
negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter; and
attracting, hiring and retaining qualified personnel.
If we are unsuccessful in accomplishing any of these objectives, we may not be able to develop product candidates, raise capital, expand our business or
continue our operations. Because of the numerous risks and uncertainties with pharmaceutical product development, we are unable to accurately predict the
timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we achieve profitability in the future, we may not be
able to sustain profitability in subsequent periods. Our failure to become or remain profitable would depress our market value and could impair our ability
to raise capital, expand our business, develop other product candidates, or continue our operations. A decline in the value of our company could also cause
you to lose all or part of your investment.
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We depend on enrollment of patients in our clinical trials for our product candidates. If we are unable to enroll an adequate number of volunteers or
patients in our clinical trials, our research and development efforts could be materially adversely affected.
Successful and timely completion of clinical trials will require that we enroll enough volunteers in early studies, or patients with a specific disease in later
trials. Trials may be subject to delays as a result of enrollment taking longer than anticipated or subject withdrawal. Enrollment depends on many factors,
including the size and nature of the patient population, eligibility criteria for the trial, the proximity of patients to clinical sites, the design of the clinical
protocol, the number of competing clinical trials, the availability of drugs approved for the indication the clinical trial is investigating, and clinicians’ and
patients’ perceptions as to the potential advantages of the product being studied in relation to other available therapies. Our most advanced programs,
EB613 and EB612 may compete with marketed drugs, such as Forteo®, Tymlos®, Evenity®, and osteoanabolic drugs in clinical development for
osteoporosis and drugs in clinical development for hypoparathyroidism such as TransCon™ PTH or Eneboparatide. Furthermore, EB612 has orphan drug
designation in the United States and in the EU, which means that the potential patient population is limited. These factors may make it difficult for us to
enroll enough subjects to complete our clinical trials in a timely and cost-effective manner. Delays in the completion of any clinical trial of our product
candidates will increase our costs, slow down development of our product candidates and any potential approvals and delay or potentially jeopardize our
ability to commence product sales and generate revenue. In addition, some of the factors that cause, or lead to, a delay in the commencement or completion
of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
We may not be successful in our efforts to use and expand our drug delivery technology, N-Tab™ , to other product candidates.
An element of our strategy is to combine our N-Tab™ technology platform with a variety of peptides and therapeutic proteins to build a pipeline of product
candidates and progress these product candidates through clinical development for the treatment of a variety of different types of diseases. We intend to use
N-Tab™ technology in combination with known APIs, to validate our platform and potentially minimize risk and development timelines.
Our initial product candidates combine our oral drug delivery technology, N-Tab™, with PTH, a hormone that has been used in injectable form for many
years for the treatment of osteoporosis and hypoparathyroidism. Our business is substantially dependent on our ability to complete the development of,
obtain regulatory approval for, and successfully commercialize our oral PTH product candidates in a timely manner. If we are unable to validate N-Tab™
technology with our PTH product candidates, in particular our lead candidate EB613, we may be unsuccessful in leveraging our N-Tab™ technology for
use with other APIs. In addition, we have modified the formulation of oral PTH to develop new formulations for applications in hypoparathyroidism and
other indications. If we are not successful in optimizing the formation of our PTH product candidates for additional indications, or if we are not otherwise
able to obtain regulatory approval for them or successfully commercialize them, our business and prospects may be severely limited.
In addition, our technology makes use of synthetically bioengineered ingredients. Although our product candidates utilize a synthesized PTH molecule with
a known mechanism of action, they may cause patients to exhibit safety or immune responses that do not match the biological effect of a human protein
produced by the parathyroid gland. Such responses could result in increased regulatory scrutiny, delays or other impediments to our planned development
or the public acceptance and commercialization of our products. Even if we are successful in expanding our drug delivery technology to other APIs for
other indications, the potential product candidates that we identify may not be suitable for clinical development, to the extent they are shown to have
harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market
acceptance. We may never successfully develop or commercialize our technology with other APIs, which could limit our business and prospects.
If serious adverse, undesirable or unacceptable side effects are identified during the development of our product candidates, marketing approval may
be delayed or we may need to abandon our development of such product candidates, and if such side effects are identified following regulatory
approval, any approved product label may be limited or we may be subject to other significant negative consequences.
All of our product candidates are still in clinical or non-clinical development and although our product candidates have undergone or will undergo safety
testing, not all adverse effects of drugs can be predicted or anticipated. Unforeseen side effects from any of our product candidates could be recognized
either during clinical development or, if such side effects are rare, after our product candidates have been approved by regulatory authorities and the
approved product has been marketed, resulting in the exposure of additional patients. While our oral PTH programs have exhibited no serious drug related
adverse events in our clinical trials to date, the results of future clinical trials may show that our product candidates cause undesirable or unacceptable side
effects, which could interrupt, delay or halt clinical trials, and result in delay of, or failure to obtain, marketing approval from the FDA, the EMA and other
regulatory authorities, or result in marketing approval from the FDA, the EMA and other regulatory authorities with restrictive label warnings or potential
product liability claims.
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Additionally, the FDA and foreign regulatory agency regulations 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 we become aware of within the prescribed timeframe. We may
also fail to appreciate that we have 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 or a foreign
regulatory agency could take action including criminal prosecution, the imposition of civil monetary penalties or seizure of our products.
If any of our product candidates receives marketing approval and we or others later identify undesirable or unacceptable side effects caused by such
products:
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regulatory authorities may require us to take these products off the market;
regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and
pharmacies;
we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product;
we may be subject to limitations on how we may promote the product;
sales of the product may decrease significantly;
we may be subject to litigation or product liability claims; and
our reputation may suffer.
Any of these events could prevent us or any potential collaborators from achieving or maintaining market acceptance of the affected product or could
substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenue from the sale of
our products.
We manage our business and develop our technology with a small number of employees and key advisors with deep functional domain expertise, and,
in the event of their loss or unavailability, we may not be able to grow our business or develop and commercialize our products.
We are highly dependent on the biopharmaceutical research and development, clinical, regulatory, CMC and strategic expertise of our core executive team
and key advisors across these domains, including Miranda Toledano, our Chief Executive Officer, Hillel Galitzer, our Chief Operating Officer and Gregory
Bushtein, our Head of Research and Development. Our success depends upon the continued contributions of these senior executives, employees and
advisors, many of whom have substantial scientific and technical experience with, and have been instrumental to our regulatory, clinical development and
technology platform. Furthermore, recruiting and retaining new executive talent and qualified scientific personnel to perform future research and clinical
development work will be critical to our success. Competition for skilled personnel is intense and turnover rates are high, and our ability to attract and
retain qualified personnel may be limited. The loss or unavailability of the services of any of our key employees and consultants for any significant period
of time or our inability to attract and retain qualified skilled personnel could have a material adverse effect on our business, technology, prospects, financial
condition and results of operations. We do not maintain “key man” life insurance policies for any of our employees.
We expect to grow our organization to supplement and expand our senior management, clinical development and regulatory capabilities and marketing
infrastructure, and we may experience difficulties in managing these changes and this growth, which could disrupt our operations.
As our strategic, clinical development and R&D plans evolve, we expect to supplement and expand our employee base, for clinical development,
regulatory, operational, business development, financial and other capabilities and with senior managers who are either based in the United States or who
have significant U.S. public company experience. These changes may result in significant shifting of responsibilities or replacement of key personnel. The
need to identify, recruit, maintain, motivate and integrate additional employees and senior members of management, including senior executives, is
expected to impose significant responsibilities on our senior executives and may divert a disproportionate amount of their attention away from our day-to-
day activities. The addition of such employees and managers may have an impact on the decisions that we make over time.
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In conjunction with the addition of these employees and senior members of management, we intend to grow our company. Due to our limited financial
resources and the limited size of our management team, it is possible that our management, finance, development personnel, systems and facilities currently
in place may not be adequate to support this future growth. We may not be able to effectively manage the expansion of our operations, which may result in
weaknesses in our infrastructure, give rise to operational errors, loss of business opportunities, loss of employees and reduced productivity among
remaining employees. Our expected growth could require significant expenditures and may divert financial resources from other projects, such as the
development of existing and additional product candidates. If we are unable to effectively manage our expected growth, our expenses may increase more
than expected, our ability to generate or grow revenue could be reduced and we may not be able to implement our strategy. Our future financial
performance and our ability to develop our product candidates and compete effectively with others in our industry will depend, in part, on our ability to
effectively manage any future growth. In addition, pursuant to both Israeli law and Nasdaq rules, we have appointed independent directors, which may
result in a change in the company’s direction over time.
We are increasingly dependent on information technology systems, infrastructure and data, and our internal computer systems, or those of our
collaborators, third-party clinical research organizations or other contractors or consultants, may fail or suffer security breaches, which could result in
a material disruption of our product development programs.
We are increasingly dependent upon information technology systems, infrastructure and data. Despite the implementation of security measures, our internal
computer systems and those of our development partners, third-party clinical research organizations, data management organizations and other contractors
and consultants are vulnerable to damage from service interruption or destruction, computer viruses, unauthorized access, natural disasters, terrorism, war
and telecommunication and electrical failures. In addition, such systems are subject to compromise from internal threats, such as theft, misuse,
unauthorized access or other improper actions by employees, third-party service providers and other third parties with otherwise legitimate access to our
systems. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks could
include the deployment of harmful malware, denial-of service, social engineering and other means to affect service reliability and threaten data
confidentiality, integrity and availability. It is possible that we may not be able to anticipate, detect, appropriately react and respond to, or implement
effective preventative measures against all cybersecurity incidents. Our key business partners face similar risks, and a security breach of their systems
could adversely affect our security posture.
While we have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our
operations, it could cause damage or destroy assets, compromise business systems, or otherwise result in a material disruption of our programs and business
operations. Security breaches further pose a risk that sensitive data, including intellectual property, clinical data, trade secrets or personal information may
be exposed to unauthorized persons or to the public, altered or lost. For example, the loss of clinical trial data for any of our product candidates could delay
our ability to report such data, 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 or other data or applications relating to our technology
or product candidates, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities, damages or damage to our
reputation and the further development of our product candidates could be delayed. We do not currently maintain a cyber insurance policy and therefore the
successful assertion of one or more large claims against us in connection with a breach or other cybersecurity-related matter could materially adversely
affect our business, financial condition and operating results.
We rely on email and other messaging services in connection with our operations. We may be targeted by parties using fraudulent spoofing and phishing
emails to misappropriate passwords, payment information or other personal information or to introduce viruses through Trojan horse programs or otherwise
through our networks, computers, smartphones, tablets or other devices. Despite our efforts, such as to mitigate the effectiveness of such malicious email
campaigns through a variety of control and non-electronic checks, spoofing and phishing may damage our business and increase our costs. Any of these
events or circumstances could materially adversely affect our business, financial condition and operating results.
To date, we have regularly engaged consultants to assess our internal cybersecurity programs and compliance, and, in connection with such assessment,
have implemented various cybersecurity defense measures we believe are appropriate. However, we may be required to expend significant capital and other
resources to protect against, respond to, and recover from any potential, attempted, or existing cybersecurity incidents. As cybersecurity incidents continue
to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and
remediate any information security vulnerabilities. In addition, our remediation efforts may not be successful. Moreover, there could be public
announcements regarding any cybersecurity incidents and any steps we take to respond to or remediate such incidents, and if securities analysts or investors
perceive these announcements to be negative, it could, among other things, have a substantial adverse effect on the price of our Ordinary Shares. There can
be no assurance that our efforts will prevent service interruptions, or identify breaches in our systems, that could adversely affect our business and
operations and/or result in the loss of critical or sensitive information or the illegal transfer of funds to unknown persons, which could result in financial,
legal, business or reputational harm, and may harm our relationships with third parties.
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Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and
insider trading.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with the
regulations of the FDA or foreign regulators, failure to provide accurate information to regulatory authorities, failure to comply with manufacturing
standards we have established, failure to comply with federal and state health care fraud and abuse laws and regulations in the United States and abroad,
failure to report financial information or data accurately, disclose unauthorized activities to us or failure to comply with our own internal company policies.
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. These laws and regulations may restrict or prohibit a wide range of pricing, discounting,
marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the
improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause harm to our reputation. We have
adopted a code of business conduct and ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to
detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental
investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us,
and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the
imposition of significant fines or other sanctions.
In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding our
business, our results of operations or potential transactions we are considering. We may not be able to prevent a director, executive or employee from
trading in our Ordinary Shares on the basis of, or while having access to, material, nonpublic information. If a director, executive or employee was to be
investigated or an action was to be brought against a director, executive or employee for insider trading, it could have a negative impact on our reputation
and our stock price. Such a claim, with or without merit, could also result in substantial expenditures of time and money and divert attention of our
management team from other tasks important to the success of our business.
We are subject to risks related to restrictive data privacy regulations governing the collection, use, processing and cross-border transfer of personal
information.
In the ordinary course of our business, we may collect, process, use, store or transfer sensitive data in our data centers and on our networks, including
intellectual property, proprietary business information (both ours and that of our customers, suppliers and business partners) and personally identifiable
information, including in connection with conducting clinical trials. We are subject to strict data privacy laws and regulations in the United States, the
United Kingdom, the EU, Israel and other jurisdictions in which we operate, as well as contractual obligations, governing the collection, transmission,
storage and use of personal information. The legislative and regulatory landscape for data privacy and protection continues to evolve around the world and
are increasingly rigorous, with new and constantly changing requirements applicable to our business, including HIPAA, the EU General Data Protection
Regulation ((EU) 2016/679), or the GDPR, the Israeli Privacy Protection Law, 5741-1981, and other laws and regulations governing the collection, use,
disclosure and transmission of data. The enforcement practices of these laws and regulations are likely to remain uncertain for the foreseeable future. These
laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted
and applied in ways that may have a material adverse effect on our results of operations, financial condition and cash flows.
For example, in the United States, various federal and state regulators have adopted, or are considering adopting, laws and regulations concerning personal
information and data security. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal
information than federal, international or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts. For
example, the California Consumer Privacy Act, or the CCPA, which increases privacy rights for California residents and imposes obligations on companies
that process their personal information, came into effect on January 1, 2020. In addition, laws in all 50 U.S. states require businesses to provide notice to
consumers whose personal information has been disclosed as a result of a data breach. State laws are changing rapidly and there is discussion in Congress
of a new comprehensive federal data privacy law to which we would likely become subject if it is enacted.
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In addition, outside the United States, laws, regulations and standards in many jurisdictions apply broadly to the collection, use, retention, security,
disclosure, transfer and other processing of personal information. For example, the GDPR greatly increased the European Commission’s jurisdictional
reach of its laws and adds a broad array of requirements for handling personal data. EU member states are tasked under the GDPR to enact, and have
enacted, certain implementing legislation that adds to and/or further interprets the GDPR requirements and potentially extends our obligations and potential
liability for failing to meet such obligations. The GDPR, together with national legislation, regulations and guidelines of the EU member states governing
the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise
process personal data. Specifically, the GDPR’s requirements including having legal bases for processing personal information relating to identifiable
individuals and transferring such information outside of the European Economic Area, including to the United States, and other countries providing details
to those individuals regarding the processing of their personal information, keeping personal information secure, having data processing agreements with
third parties who process personal information, responding to individuals’ requests to exercise their rights in respect of their personal information, reporting
security breaches involving personal data to the competent national data protection authority and affected individuals, appointing data protection officers,
conducting data protection impact assessments and record-keeping. The GDPR imposes additional responsibilities and liabilities in relation to personal data
that we process and authorizes fines for certain violations of up to 4% of global annual revenue or €20 million, whichever is greater. The U.K. has
transposed the GDPR into domestic law, with its version of the GDPR that took effect on January 1, 2021, which could expose us to two parallel regimes,
each of which potentially authorizes similar fines for certain violations. As such, we may be required to put in place additional mechanisms ensuring
compliance with the new data protection rules.
All of these evolving compliance and operational requirements impose significant costs, such as costs related to organizational changes, implementing
additional protection technologies, training associates and engaging consultants, which are likely to increase over time. In addition, such requirements may
require us to modify our data processing practices and policies, distract management or divert resources from other initiatives and projects. Any failure or
perceived failure to comply with the requirements of privacy laws and regulations, including the CCPA, GDPR and related national data protection laws of
the member states of the EU and the U.K., may result in damage to our reputation and our relationship with our customers, as well as proceedings or
litigation by governmental agencies or customers, including class action privacy litigation in certain jurisdictions, which would subject us to significant
fines, sanctions, awards, penalties or judgments, which could have a material adverse effect on our business, prospects, financial condition and results of
operations.
Global economic conditions may negatively affect us and may magnify certain risks that affect our business.
During 2023, record levels of inflation resulted in significant volatility and disruptions in the global economy. In response to rising inflation, central banks
in the markets in which we operate, including the United States Federal Reserve, have tightened their monetary policies and raised interest rates, and such
measures may continue if there is a period of sustained heightened inflation. Higher interest rates and volatility in financial markets could lead to additional
economic uncertainty or recession. Increased inflation rates have increased our and our suppliers’ operating costs, including labor costs, raw materials
costs, manufacturing costs, freight costs and R&D costs. In addition to rising inflation, the global economy has also been impacted by fluctuating foreign
exchange rates and geopolitical tensions, such as the ongoing conflict between Russia and Ukraine, which has spurred rising energy costs and exacerbated
disruptions to the global supply chain caused by the COVID-19 pandemic and the government and societal responses to the pandemic. Supply chain
disruptions could continue to result in delays in our R&D and clinical initiatives. As we have substantial international operations, fluctuations in exchange
rates between the currencies in which we operate, which could increase our operating costs and adversely affect our results of operations, and cash flows.
The duration and extent of such macroeconomic developments are uncertain and we cannot accurately predict whether we will be able to effectively and
timely mitigate their impact on our business.
Risks Related to Regulatory Approval of Our Product Candidates
Clinical drug development is expensive, time consuming and uncertain. Development programs are subject to regulatory requirements, unanticipated
delays and we may ultimately not be able to obtain regulatory approvals for the commercialization of our product candidates.
Our most advanced product candidates are orally delivered tablet formulations of the synthetic form of the first 34 amino acids of human PTH, teriparatide.
We are developing EB613 to treat osteoporosis and EB612 to treat hypoparathyroidism. These product candidates have not yet reached late-stage clinical
development and are subject to the risks of failure inherent in regulatory assessments and drug development. The clinical development, manufacturing,
quality assurance, labeling, storage, record-keeping, advertising, promotion, pharmacovigilance, import, export, marketing and distribution of our product
candidates is subject to extensive regulation by the FDA in the United States and by comparable authorities in foreign markets. We are not permitted to
market our product candidates in the United States until we receive approval of an NDA or a BLA from the FDA or in any other country until we receive
marketing approval from the applicable regulatory authorities in such countries. We have not yet submitted a marketing application, or received marketing
approval, for any of our product candidates and have limited experience in conducting and managing the clinical trials necessary to obtain regulatory
approvals. 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.
Obtaining approval of an NDA, a BLA, or any other marketing application can be a lengthy, expensive and uncertain process. Despite the time and expense
invested in clinical development of product candidates, regulatory approval is never guaranteed.
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The FDA or comparable foreign regulatory authorities can delay, limit or deny approval of a product candidate for many reasons, including:
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such authorities may disagree with the number, design, size, conduct or implementation of our clinical trials or any of our collaborators’ clinical
trials;
we or any of our development partners may be unable to demonstrate to the satisfaction of the FDA or other regulatory authorities that a product
candidate is safe and effective for any indication;
the results of clinical trials may not meet the level of statistical significance or clinical significance required by the FDA, EMA or other regulatory
agencies for approval;
such authorities may not accept clinical data from trials which are conducted at clinical facilities or in countries where the standard of care is
potentially different from that authority’s jurisdiction;
the data collected from non-clinical studies and clinical trials of our product candidates may not be sufficient to support the submission of an
application for regulatory approval;
the results of clinical trials may not demonstrate the safety or efficacy required by such authorities for approval;
we or any of our future development partners may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its
safety risks;
such authorities may disagree with our interpretation of data from preclinical studies or clinical trials or the use of results from studies that served
as precursors to our current or future product candidates;
such authorities may find deficiencies in our manufacturing processes or facilities or those of third-party manufacturers with which we or any of
our future development partners contract for clinical and commercial supplies;
the FDA may require development of a REMS as a condition of approval; and
the approval policies or regulations of such authorities may significantly change in a manner rendering our or any of our future development
partners’ clinical data insufficient for approval.
Each of our oral PTH product candidates, including EB613 and EB612, are still in clinical development and face a variety of risks and uncertainties,
including the following:
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future clinical trial results may show that our oral PTH is not effective, including if our drug delivery technology is not effective, our product
candidates are not effective, our clinical trial designs are flawed, or clinical trial investigators or subjects do not comply with trial protocols;
our product candidates may not be well tolerated or may cause negative side effects;
our ability to complete the development and commercialization of our oral PTH for our intended uses may be significantly dependent upon our
ability to obtain and maintain experienced and committed collaborators to assist us with obtaining clinical and regulatory approvals for, and the
manufacturing, marketing and distribution of, our oral PTH;
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even if our oral PTH is shown to be safe and effective for its intended purposes, we may face significant or unforeseen difficulties in obtaining or
manufacturing sufficient quantities at reasonable prices, or at all;
even if our oral PTH is successfully developed, commercially produced and receives all necessary regulatory approvals, there is no guarantee that
there will be market acceptance;
even if our oral PTH is successfully developed, commercially produced and receives all necessary regulatory approvals for the treatment of
Osteoporosis, there is no guarantee that we will successfully develop and commercialize it for other indications, including hypoparathyroidism and
delayed union fractures; and
our competitors may develop therapeutics or other treatments that are superior to or less costly than our own with the result that our products, even
if they are successfully developed, manufactured and approved, may not generate significant revenues.
If we are unsuccessful in dealing with any of these risks, or if we or a potential partner are unable to successfully commercialize our oral PTH or any other
product candidates we may develop in the future, it would likely have a material adverse effect on our business, prospects, financial condition and results of
operations.
In addition, before we can submit an application for regulatory approval in the United States, we must conduct a pivotal trial that will be substantially
broader than our completed Phase 2 trials in osteoporosis and hypoparathyroidism (with the earlier formulation of EB612). Phase 3 clinical trials frequently
produce unsatisfactory results even when prior clinical trials were successful. Therefore, even if the results of our Phase 2 trials are successful, the results
of the additional trials that we conduct may or may not be successful. Further, our product candidates may not be approved even if they achieve their
primary endpoints in Phase 3 clinical trials. The FDA, EMA or other regulatory agencies may require that we conduct additional clinical, nonclinical,
manufacturing validation or drug product quality studies beyond those planned and submit data from such trials before considering or reconsidering the
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 FDA, EMA or other regulatory agencies. If any of these outcomes occur, we would not receive approval for our oral PTH tablet or other
product candidates we may develop in the future.
In addition, the FDA, EMA or other regulatory agencies may also approve a product candidate for fewer or more limited indications than we request, may
impose significant limitations related to use restrictions for certain age groups, warnings, precautions or contraindications or may grant approval contingent
on the performance of costly post-marketing clinical trials or risk mitigation requirements. The FDA, EMA or other regulatory agencies may also not
accept the labeling claims that we believe would be necessary or desirable for the successful commercialization of our product candidates.
The commencement and completion of clinical trials can be delayed or prevented for a number of reasons.
EB613 completed a six-month placebo-controlled Phase 2 double-blind, dose-ranging trial in 2021. In December 2021, we held an end-of-Phase 2 meeting
with the FDA to review the six-month phase 2 results and a proposed Head-to-Head Non-Inferiority Phase 3 study protocol vs. Forteo®, our nonclinical
and clinical development plan and the use of BMD, rather than fracture incidence, as the primary endpoint to support an NDA. Following our End of Phase
2 Meeting with the FDA and pursuant to the FDA’s concern that a Head-to-Head study phase 3 design may not be favorable to support an NDA for EB613,
we redesigned the pivotal phase 3 study for EB613 based on the FDA’s suggestion to explore a placebo-controlled trial. A Type C meeting with the FDA in
relation to Entera’s proposed Phase 3 registrational study was held in the second half of 2022 and in October 2022, the Company concluded its Type C
meeting and the FDA agreed that a single Phase 3 placebo-controlled study could support an NDA submission of EB613 (oral hPTH (1-34), teriparatide
tablets). The FDA also agreed that Total BMD could serve as the primary endpoint of the registrational study in post-menopausal osteoporosis patients. In
February 2023, we announced that a Type D meeting protocol review had been accepted by the FDA. The objective of the Type D meeting review was to
confirm that the protocol fully meets FDA’s expectations, including the analysis of the primary endpoint and the population PK evaluations, ahead of
potential initiation of the Phase 3 study. On April 3, 2023, we reported that the FDA would not be opposed to Entera initiating the Phase 3 study under the
proposed FNIH BQP pathway and that the Company’s proposed PK sampling scheme seemed reasonable. On the same day, we announced that we plan to
continue our dialogue with the FDA and await the final qualification of the FNIH-BQP criteria and their guidance on the statistical evaluation of our BMD
endpoint before initiating a Phase 3 study for EB613.
In addition, with respect to EB612, we have since developed what we believe could be an improved formulation of EB612 based on new intellectual
property, tailored to optimize its PK profile and the potential for reduced daily dosing. We initiated a PK study in May 2023, which is testing various
potential drug candidates based on our new platform, including several which could be developed for the treatment of hypoparathyroidism. We are also
collaborating on an undisclosed peptide for this indication using our N-Tab™ Technology.
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Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of any of our clinical trials for a number of
reasons including:
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difficulties obtaining regulatory approval to commence a clinical trial or complying with conditions imposed by a regulatory authority regarding
the scope or term of a clinical trial;
delays in reaching or failing to reach agreement on acceptable terms with prospective contract research organizations, or CROs, contract
manufacturing organizations, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly;
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 obtaining institutional review board or ethics committee approval to conduct a clinical trial at a prospective site;
the FDA, EMA or other regulatory authority may require changes to any of our trial designs, our pre-clinical strategy or our manufacturing plans;
various challenges recruiting and enrolling subjects to participate in clinical trials, including size and nature of subject population, proximity of
subjects to clinical sites, eligibility criteria for the trial, budgetary limitations, nature of trial protocol, the patient referral practices of physicians,
changes in the readiness of subjects to volunteer for a trial, the availability of approved effective treatments for the relevant disease and
competition from other clinical trial programs for similar indications;
difficulties in maintaining contact with subjects who withdraw from the trial, resulting in incomplete data;
governmental or regulatory delays and changes in regulatory requirements, policy and guidelines;
the FDA or other regulatory authorities may impose a clinical hold, or we or our investigators, IRBs, or ethics committees may elect to suspend or
terminate clinical research or trials;
varying interpretations of data by the FDA and foreign regulatory agencies; and
inaccurate interpretations by us of the FDA’s guidance for the clinical and regulatory path for our product candidates.
If changes in regulatory requirements and guidance occur, we may need to significantly amend clinical trial protocols or submit new clinical trial protocols
with appropriate regulatory authorities to reflect these changes. Amendments may require us to renegotiate terms with CROs or investigators, or resubmit
clinical trial protocols to IRBs or ethics committees for re-examination, which may impact the costs, timing or successful completion of a clinical trial. Our
clinical trials may be suspended or terminated at any time by the FDA (for trials in the United States), other regulatory authorities (for trials conducted
outside the United States), the IRB /ethics committee overseeing any given clinical trial, any of our clinical trial sites with respect to that site, or us, due to
a number of factors, including:
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failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
failing to establish clinical endpoints acceptable to the FDA and other regulatory authorities;
findings of an inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities;
unforeseen issues, including serious adverse events associated with a product candidate, or lack of effectiveness or any determination that a
clinical trial presents unacceptable health risks;
lack of adequate funding to continue the clinical trial due to unforeseen costs or other business decisions; and
upon a breach or pursuant to the terms of any agreement with, or for any other reason by, current or future collaborators that have responsibility
for the clinical development of any of our product candidates.
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Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in
connection with such services. Under certain circumstances, including the Physician Payments Sunshine Act, we are required to report some of these
relationships to the FDA and other regulatory authorities. The FDA and other regulatory authorities may conclude that a financial relationship between us
and a principal investigator has created a conflict of interest or otherwise affected the investigator’s conduct of the trial. The FDA and other regulatory
authorities may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be
jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA and other regulatory authorities and may
ultimately lead to the denial of marketing approval of one or more of our product candidates.
If we do not succeed in conducting and managing our non-clinical development activities or clinical trials, or in obtaining regulatory approvals, we might
not be able to commercialize our product candidates, or might be significantly delayed in doing so, which could have a material adverse effect on our
business, prospects, financial condition and results of operations.
The results of previous clinical trials may not be predictive of future results, our progress in trials for one product candidate may not be indicative of
progress in trials for other product candidates, and our trials may not be designed so as to support regulatory approval.
We currently have no products approved for sale and we cannot guarantee that we will ever have marketable products. Clinical failure can occur at any
stage of clinical development. Clinical trials may produce negative or inconclusive results, and we or any of our current and future collaborators may
decide, or regulators may require us, to conduct additional clinical or non-clinical testing. We will be required to demonstrate with substantial evidence
through well-controlled clinical trials that our product candidates are safe and effective for use in a diverse population before we can obtain regulatory
approvals for their commercial sale. Success in early clinical trials does not mean that future clinical trials will be successful because product candidates in
later-stage clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA and other regulatory authorities despite having
progressed through initial clinical trials. Product candidates that have shown promising results in early clinical trials may still suffer significant setbacks in
subsequent clinical trials. Similarly, the outcome of non-clinical testing and early clinical trials may not be predictive of the success of later clinical trials,
and interim results of a clinical trial do not necessarily predict final results. Progress in trials of one product candidate does not indicate that we will make
similar progress in additional trials for that product candidate or in trials for our other product candidates. A number of companies in the pharmaceutical
industry, including those with greater resources and experience than us, have suffered significant setbacks in advanced clinical trials, even after obtaining
promising results in earlier clinical trials.
The design of a clinical trial can determine whether its results will support approval of a product. We may be unable to design and/or execute a clinical trial
to support regulatory approval. Flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced or completed. In
addition, we or our investigators may have little control over whether subjects comply with important aspects of clinical trial protocols. In particular, in
trials of our oral PTH, if subjects do not comply with restrictions on eating and drinking before and after administration of our product candidates,
interaction between the drug and food in the gastrointestinal tract, or a “food effect,” may decrease the bioavailability and increase the variability of drug
delivered to the subject, which may negatively impact efficacy.
In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate due to
numerous factors, including changes in trial protocols, differences in size and type of the patient populations, adherence to the dosing regimen and other
trial protocols, modifications in the formulation throughout the course of development and the rate of dropout among clinical trial participants. While we
have not had any serious adverse events in our clinical trials to date that are believed to be related to our oral PTH product candidates, we may need to
change future trial designs in response to adverse events that occur during future clinical development. We do not know whether any Phase 2, Phase 3 or
other clinical trials we or any of our collaborators may conduct will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to
market our product candidates.
Even if regulatory approvals are obtained for our product candidates, we will be subject to ongoing government regulation. If we fail to comply with
applicable current and future laws and government regulations, it could delay or prevent the promotion, marketing or sale of our products.
Even if marketing approval is obtained for our product candidates, a regulatory authority may still impose significant restrictions on a product’s indications,
conditions for use, distribution or marketing or impose ongoing requirements for potentially costly post-market surveillance, post-approval studies or
clinical trials, all of which may result in significant expense and limit our ability to commercialize our products. Our products will also be subject to
ongoing requirements governing the labeling, packaging, storage, advertising, distribution, promotion, recordkeeping and submission of safety and other
post-market information, including adverse events, and any changes to the approved product, product labeling or manufacturing process. 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.
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If we, our drug products or the manufacturing facilities for our drug products, fail to comply with applicable regulatory requirements, a regulatory agency
may:
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issue warning letters or untitled letters or take similar enforcement actions;
seek an injunction or impose civil or criminal penalties or monetary fines;
suspend or withdraw marketing approval;
suspend any ongoing clinical trials;
refuse to approve pending applications or supplements to applications;
suspend or impose restrictions on operations, including costly new manufacturing requirements;
seize or detain products, refuse to permit the import or export of products, exclude products from federal healthcare programs, or request that we
initiate a product recall; or
refuse to allow us to enter into supply contracts, including government contracts.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the
United States or abroad, and compliance with such regulation may be expensive and consume substantial financial and management resources. If we or any
future marketing collaborators or contract manufacturers are slow or unable to adapt to changes in existing requirements or the adoption of new
requirements or policies or are not able to maintain regulatory compliance, it could delay or prevent the promotion, marketing or sale of our products,
which would adversely affect our business and results of operations.
Healthcare legislative changes may harm our business and future prospects.
Healthcare costs have risen significantly over the past decade. Globally, governments are becoming increasingly aggressive in imposing health care cost-
containment measures. Certain proposals, if passed, would impose limitations on the prices we will be able to charge for the products that we are
developing, or the amounts of reimbursement available for these products from governmental agencies or third-party payors. These limitations could in
turn reduce the revenue that we will be able to generate in the future from sales of our products and licenses of our technology.
In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or MMA, changed the way Medicare covers and pays
for pharmaceutical products. The MMA expanded Medicare coverage for outpatient drug purchases by those covered by Medicare under a new Part D and
introduced a new reimbursement methodology based on average sales prices for Medicare Part B physician-administered drugs. In addition, the MMA
authorized Medicare Part D prescription drug plans to limit the number of drugs that will be covered in any therapeutic class. As a result of this legislation
and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain and reduce costs. These cost reduction
initiatives and other provisions of the MMA could decrease the coverage and price that we receive for any approved products and could seriously harm our
future business prospects. While this law applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy
and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from this law may result in a similar
reduction in payments from private payors.
In March 2010,the Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, 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 health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.
The ACA, among other things, increased rebates a manufacturer must pay to the Medicaid program, addressed a new methodology by which rebates owed
by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, established a
new Medicare Part D coverage gap discount program, in which manufacturers must provide 75% point-of-sale discounts on products covered under Part D
and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers
to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models. Further, the ACA imposed a significant
annual fee on companies that manufacture or import branded prescription drug products. Substantial new provisions affecting compliance were enacted,
which may affect our business practices with health care practitioners. The ACA appears likely to continue the pressure on pharmaceutical pricing and may
also increase our regulatory burdens and operating costs.
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In addition, other legislative changes have been proposed and adopted in the United States since the ACA 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 2027 absent additional congressional action. However, pursuant to the CARES Act, and subsequent legislation, these
reductions were suspended from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic. 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. These new laws may result in additional reductions in Medicare
and other healthcare funding, which could have a material adverse effect on customers for our drugs, if approved, and accordingly, our financial operations.
If government spending is further reduced, anticipated budgetary shortfalls may also impact the ability of relevant agencies, such as the FDA, to continue to
function at current levels, which may impact the ability of relevant agencies to timely review and approve research and development, manufacturing and
marketing activities, which may delay our ability to develop, market and sell any product candidates we may develop. In addition, any significant spending
reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented, or any significant taxes or fees
that may be imposed on us, as part of any broader deficit reduction effort or legislative replacement to the Budget Control Act, could have an adverse
impact on our anticipated product revenues.
There have been changes and modifications to certain aspects of the ACA, 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 ACA 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 ACA, effective January 1, 2019, 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 ACA qualified health plans and
health insurance issuers under the ACA 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 ACA are likely to continue, with unpredictable and uncertain results.
Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their 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, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and
reform 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. Further, on November 20, 2020, the U.S. Department of Health and Human Services, or
HHS, finalized a regulation removing 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. The rule also creates a new safe harbor for price reductions
reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. At the
state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing,
including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency
measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
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. The rule also creates a new safe harbor for price
reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.
This rule (with exceptions) became effective on January 19, 2021. We continue to evaluate what effect, if any, these rules will have on our business. 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. Any adopted health reform measure could reduce the ultimate demand for our products,
if approved, or put pressure on our product pricing. Individual states in the United States have also become increasingly active in passing legislation and
implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions
on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other
countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine
what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. We expect that additional state
and federal healthcare reform measures will be adopted in the future.
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The delivery of healthcare in the EU, including the establishment and operation of health services and the pricing and reimbursement of medicines, is
almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers have different priorities and
approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary
constraints in most EU member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers.
Coupled with ever-increasing EU and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing
approval of our product candidates, restrict or regulate post-approval activities and affect our ability to commercialize any products for which we obtain
marketing approval. Both in the United States and in the EU, legislative and regulatory proposals have been made to expand post-approval requirements
and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes will be enacted, or
whether the regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product
candidates, if any, may be.
Our relationships with customers and payors are subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations,
which, if violated, could expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages,
reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and others will play a primary role in the recommendation and prescription of any products for which we obtain marketing
approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws
and regulations, primarily in the United States, that may constrain the business or financial arrangements and relationships through which we market, sell
and distribute our products for which we obtain marketing approval. Restrictions under applicable healthcare laws and regulations, include the following:
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the federal Anti-Kickback Statute prohibits, among other things, the knowing and willful offer, payment, solicitation or receipt of any form of
remuneration in return for, or to induce, (i) the referral of a person, (ii) the furnishing or arranging for the furnishing of items or services
reimbursable under the Medicare, Medicaid or other governmental programs, or (iii) the purchase, lease or order or arranging or recommending
purchasing, leasing or ordering of any item or service reimbursable under the Medicare, Medicaid or other governmental programs. 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. In addition, the
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 False Claims Act;
the federal Physician Self-Referral Law, or “Stark Law”, prohibits, among other things, a physician (defined to include a doctor of medicine or
osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor) from referring
Medicare and Medicaid patients to certain types of entities with which the physician or any of the physician’s immediate family members have a
financial relationship, unless an exception to the law’s prohibition is met. In addition, the government may assert that a claim including items or
services resulting from a violation of the Stark Law constitutes a false or fraudulent claim for purposes of the False Claims Act;
the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for
knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false
statement to avoid, decrease or conceal an obligation to pay money to the federal government;
HIPAA imposes criminal and civil liability for executing a scheme to defraud any health care benefit program or making false statements relating
to health care matters. 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;
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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 statement in connection with the delivery of or payment for health care benefits, items or services;
the Physician Payments Sunshine Act, created under the ACA, and its implementing regulations, which require specified manufacturers of drugs,
devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program,
with specific exceptions, to report annually to CMS information related to payments or other “transfers of value” made to physicians. All such
reported information is publicly available;
analogous state and non-U.S. laws and regulations, such as certain state anti-kickback and false claims laws which may apply to items or services
reimbursed by any third-party payor, including commercial insurers; state 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; state laws that 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 laws
governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and
may not have the same effect, thus complicating compliance efforts; and
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regulation by the CMS and enforcement by the HHS Office of Inspector General or the U.S. Department of Justice.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our future
business activities could be subject to challenge under one or more of such laws.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial
costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or
case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or
any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines,
exclusion from U.S. government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any
of the physicians or other providers or entities with whom we expect to do business with are found to be not in compliance with applicable laws, they may
be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
Risks Related to Commercialization of Our Product Candidates
We are likely to face significant competition, and if our competitors’ products are more effective, safer or less expensive than ours, our commercial
opportunities will be negatively affected. Our lead product candidates, if approved, would compete with existing products.
Our industry is highly competitive and subject to rapid and significant technological change. While we believe that our technology, drug candidates,
knowledge, experience and scientific resources provide us with competitive advantages, we face competition from many different sources, including large
pharmaceutical, specialty pharmaceutical, biotechnology and generic drug companies and academic and government institutions. These organizations may
have significantly greater resources than we do and conduct similar research, seek and obtain patent protection that may impact our freedom to operate and
establish collaborative arrangements for research, development, manufacturing and marketing of products that compete with our product candidates. We
believe that the key competitive factors that will affect the development and commercial success of our oral PTH product candidates, and any other product
candidates that we develop, are efficacy, safety and tolerability profile, convenience in dosing, product labeling, price and availability of reimbursement
from the government and other third-parties. Our commercial opportunity could be reduced or eliminated if our competitors have products that are better in
one or more of these categories. Furthermore, our competitors may, among other things, develop and commercialize products that are safer, more effective,
less expensive, or more convenient or easier to administer, obtain quicker regulatory approval, establish superior proprietary positions, have access to more
manufacturing capacity, implement more effective approaches to sales and marketing, or form more advantageous strategic alliances.
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Our primary innovation is our development of an oral drug delivery technology, N-Tab™, for peptides, therapeutic protein replacement therapies in small
tablet form. If another company develops an alternative technology for oral delivery of such molecules in small tablet form that is equal to or better than
our technology, we may be unable to compete.
The osteoporosis market is already served by a variety of competing products. Many of these existing products have achieved widespread acceptance
among physicians, patients and payors for the treatment of osteoporosis. We anticipate that our product candidate EB613, if approved, will compete with
other osteoanabolic drugs such as daily subcutaneous Forteo®, generic teriparatide daily subcutaneous injections, daily subcutaneous injectable Tymlos®
and EVENITY® which requires monthly injections, and the rest of the pharmacological treatments for osteoporosis which include anti-resorptive agents
such as the bisphosphonates and Prolia®. Many of these products are available on a generic basis, and EB613 may not demonstrate sufficient additional
clinical benefits to physicians and patients or be priced adequately to support reimbursement. In many cases, insurers or other third-party payors,
particularly Medicare, seek to encourage the use of generic products. Furthermore, our competitors in this market are large pharmaceutical companies and
the alternatives have been on the market for many years and have widespread market acceptance.
Ascendis Pharma developed a long-acting, oral prodrug formulation of PTH for the treatment of hypoparathyroidism, which was approved in the European
Union in November 2023 and has a PDUFA date of May 14, 2024 from the FDA. We believe that our key competitors in hypoparathyroidism treatment
include TransCon™ PTH and eneboparotide, a peptide in Phase 3 development, both of which require daily subcutaneous injections. If we obtain
regulatory approval for EB612, it may compete with TransCon™ PTH and eneboparotide which by that time may have been marketed for several years and
may have wide-spread market acceptance that may be difficult to overcome. Moreover, although we have obtained orphan drug designation for EB612 for
the treatment of hypoparathyroidism, we may be unable to maintain the benefits associated with orphan drug designation, including the potential for market
exclusivity.
We are subject to manufacturing risks that could substantially increase our costs and limit supply of our products.
The process of manufacturing our products is complex, highly regulated and subject to several risks, including:
• We do not have experience in manufacturing our product candidates at commercial scale. We may not succeed in the scaling up of our final
manufacturing process. We may need a larger-scale manufacturing process for our oral PTH than what we have planned, depending on the dose
and regimen that will be determined in future studies. Any changes in our manufacturing processes as a result of scaling up may result in the need
to obtain additional regulatory approvals. Difficulties in achieving commercial-scale production or the need for additional regulatory approvals as
a result of scaling up could delay the development and regulatory approval of our product candidates and ultimately affect our success. Contract
manufacturers may not have sufficient expertise to manufacture a dry oral formulation with a large molecule API, in which case we may have to
establish our own commercial manufacturing capabilities, which could be expensive and delay launch of product candidates.
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The manufacturing process for large molecules is more complex and subject to greater regulation than that of other drugs. The process of
manufacturing large molecules, such as our product candidates, is extremely susceptible to product loss due to contamination, equipment failure or
improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in product characteristics and
difficulties in scaling the production process. Even minor deviations from normal manufacturing processes could result in reduced production
yields, product defects and other supply disruptions. If microbial, viral or other contaminations are discovered in our product candidates or in the
manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of
time to investigate and remedy the contamination.
The manufacturing facilities in which our product candidates are made could be adversely affected by equipment failures, labor shortages, natural
disasters, power failures, outbreaks of an infectious disease such as the duration and intensity of the ongoing Israel-Hamas War, other geopolitical
tensions such as the ongoing conflict between Russia and Ukraine, and numerous other factors.
• We and our contract manufacturing organizations, or CMOs, must comply with applicable cGMP regulations and guidelines. We and our CMOs
may encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel. We and our
CMOs are subject to inspections by the FDA and comparable agencies in other jurisdictions to confirm compliance with applicable regulatory
requirements. Any failure to follow cGMP or other regulatory requirements or delay, interruption or other issues that arise in the manufacture, fill-
finish, packaging, or storage of our product candidates as a result of a failure of our facilities or the facilities or operations of third parties to
comply with regulatory requirements or pass any regulatory authority inspection could significantly impair our ability to develop and
commercialize our product candidates, including leading to significant delays in the availability of drug product for our clinical trials or the
termination or hold on a clinical trial, or the delay or prevention of a filing or approval of marketing applications for our product candidates.
Significant noncompliance could also result in the imposition of sanctions, including fines, injunctions, civil penalties, failure of regulatory
authorities to grant marketing approvals for our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or
recalls of products, operating restrictions and criminal prosecutions, any of which could damage our reputation. If we are not able to maintain
regulatory compliance, we may not be permitted to market our product candidates and/or may be subject to product recalls, seizures, injunctions,
or criminal prosecution.
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Any adverse developments affecting manufacturing operations for our product candidates, if any are approved, may result in shipment delays,
inventory shortages, lot failures, product withdrawals or recalls, or other interruptions in the supply of our products. We may also have to take
inventory write-offs and incur other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or seek
more costly manufacturing alternatives.
Our product candidates that have been produced and are stored for later use may degrade, become contaminated or suffer other quality defects,
which may cause the affected product candidates to no longer be suitable for their intended use in clinical trials or other development activities. If
the defective product candidates cannot be replaced in a timely fashion, we may incur significant delays in our development programs that could
adversely affect the value of such product candidates.
We currently have no sales, marketing or distribution infrastructure. Any failure or delay in the development of our internal sales, marketing and
distribution capabilities would adversely affect the commercialization of our products. If we enter into collaborations to market and sell any approved
products, our revenue may be lower and we will be dependent on the efforts of a third party.
We have no established sales, marketing or distribution operations. If our product candidates are approved and we were to commercialize these products,
such activities would be expensive and time consuming. If we elect to fund and undertake commercialization activities on our own, we may need to obtain
additional expertise and additional capital, which may not be available to us on acceptable terms or at all. In addition, the costs of establishing sales and
marketing operations may be incurred in advance of any approval of our product candidates. Moreover, we may not be able to hire a sales force that is
sufficient in size or has adequate expertise in the medical markets that we intend to target. Any failure or delay in the development of our internal sales,
marketing and distribution capabilities would adversely affect the commercialization of our products.
Alternatively, we may consider entering into a collaboration to commercialize our oral PTH candidates globally or in selected regions. Any such
collaborator could be responsible for, or substantially support, late stage clinical trials of our oral PTH product candidates, as well as regulatory approvals
and registrations. These arrangements are typically complex and time consuming to negotiate. To the extent that we enter into collaboration agreements
with respect to marketing, sales or distribution, our product revenue may be lower than if we directly marketed and sold any approved products. In
addition, any revenue we receive will depend in whole or in part upon the efforts of these third-party collaborators, which may not be successful and are
generally not within our control. If we are unable to enter into these arrangements on acceptable terms or at all, we may not be able to successfully
commercialize any approved products. If we are not successful in commercializing any approved products, either on our own or through collaborations
with one or more third parties, our future product revenue will suffer and we may incur significant additional losses.
Even if approved, if any of our product candidates do not achieve broad market acceptance among physicians, patients, the medical community and
third-party payors, our revenue generated from their sales will be limited.
The commercial success of our product candidates will depend upon their acceptance among physicians, patients and the medical community. The degree
of market acceptance of our product candidates will depend on a number of factors, including:
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limitations or warnings contained in the approved labeling for a product candidate;
changes in the standard of care for the targeted indications for any of our product candidates;
limitations in the approved clinical indications for our product candidates;
demonstrated clinical safety and efficacy compared to other products;
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lack of significant adverse side effects;
sales, marketing and distribution support;
availability and extent of coverage and reimbursement from managed care plans and other third-party payors;
timing of market introduction and perceived effectiveness of competitive products;
the degree of cost-effectiveness of our product candidates;
availability of alternative therapies at similar or lower cost, including generic and over-the-counter products;
the extent to which the product candidate is approved for inclusion on formularies of hospitals and third-party payors, including managed care
organizations;
whether the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy for particular
diseases;
adverse publicity about our product candidates or favorable publicity about competitive products;
convenience and ease of administration of our products; and
potential product liability claims.
If any of our product candidates are approved, but do not achieve an adequate level of acceptance by physicians, patients and the medical community, we
may not generate sufficient revenue from these products, and we may not become or remain profitable. In addition, efforts to educate the medical
community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful.
Even if we obtain regulatory approval of any of our product candidates in a major pharmaceutical market such as the United States or the EU, we may
never obtain approval or commercialize our products in other major markets, which would limit our ability to realize their full market potential.
In order to market any products in a country or territory, we must establish and comply with numerous and varying regulatory requirements of such
countries or territories regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other
countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary
among countries and can involve additional product testing and validation and additional administrative review periods. Seeking regulatory approvals in all
major markets could result in significant delays, difficulties and costs for us and may require additional preclinical studies or clinical trials which would be
costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products
in those countries. Satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. In addition,
our failure to obtain regulatory approval in any country may delay or have negative effects on the process for regulatory approval in other countries. We do
not have any product candidates approved for sale in any jurisdiction, including international markets, and we do not have experience in obtaining
regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required
approvals, our target market will be reduced and our ability to realize the full market potential of our products will be harmed.
The successful commercialization of our product candidates, if approved, will depend in part on the extent to which governmental authorities and
third-party payors establish adequate coverage and reimbursement levels and pricing policies.
The successful commercialization of our product candidates, if approved, will depend, in part, on the extent to which coverage and reimbursement for our
products will be available from government and health administration authorities, private health insurers and other third-party payors. To manage
healthcare costs, many governments and third-party payors increasingly scrutinize the pricing of new technologies and require greater levels of evidence of
favorable clinical outcomes and cost-effectiveness before extending coverage. In light of such challenges to prices and increasing levels of evidence of the
benefits and clinical outcomes required of new technologies, we cannot be sure that coverage will be available for our oral peptide candidates, if approved,
or any other product candidate that we commercialize and, if available, that the reimbursement rates will be adequate. If we are unable to obtain adequate
levels of coverage and reimbursement for our product candidates, their marketability will be negatively and materially impacted.
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Reimbursement may impact the demand for, or the price of, any product for which we obtain marketing approval. In addition, third-party payors are likely
to impose strict requirements for reimbursement in order to limit off-label use of a higher priced drug. 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:
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a covered benefit under its health plan;
safe, effective and medically necessary;
appropriate for the specific patent;
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 at 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.
The unavailability or inadequacy of third-party coverage and reimbursement could have a material adverse effect on the market acceptance of our product
candidates and the future revenues we may expect to receive from those product candidates. In addition, we are unable to predict what additional legislation
or regulation relating to the healthcare industry or third-party coverage and reimbursement may be enacted in the future, or what effect such legislation or
regulation would have on our business.
Obtaining coverage and reimbursement approval for a product from a government or other third-party payors is a time-consuming and costly process that
could require us to provide supporting scientific, clinical and cost effectiveness data for the use of our products to the payor. We may not be able to provide
data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be
available for our product candidates, if approved. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our
future products. If reimbursement is not available, or is available only to limited levels, we may not be able to commercialize our product candidates,
profitably or at all, even if approved.
We may become exposed to costly and damaging liability claims, either when testing our product candidates in the clinic or at the commercial stage;
and our product liability insurance may not cover all damages from such claims.
We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and
use of pharmaceutical products. Currently we have no products that have been approved for commercial sale; however, the current and future use of
product candidates by us in clinical trials, and the sale of any approved products in the future, may expose us to liability claims. These claims might be
made by patients that use the product, healthcare providers, pharmaceutical companies, our collaborators or others selling such products. Any claims
against us, regardless of their merit, could be difficult and costly to defend and could materially adversely affect the market for our product candidates or
any prospects for commercialization of our product candidates. Regardless of the merits or eventual outcome, liability claims may result in:
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decreased demand for any of our product candidates or products we develop;
injury to our reputation and significant negative media attention;
withdrawal of clinical trial participants or cancellation of clinical trials;
costs to defend the related litigation, which may be only partially recoverable even in the event of successful defense;
a diversion of management’s time and our resources;
substantial monetary awards to trial participants or patients;
regulatory investigations, product recalls, withdrawals or labeling, marketing or promotional restrictions;
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loss of revenue; and
the inability to commercialize any products we develop.
Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval,
may exhibit unforeseen side effects. If any of our product candidates were to cause adverse side effects during clinical trials or after approval of the product
candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings that identify known potential adverse
effects and patients who should not use our product candidates.
Although we maintain limited product liability insurance for our product candidates, it is possible that our liabilities could exceed our insurance coverage.
We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for any of our product candidates.
However, we may not be able to maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability
that may arise. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our
assets may not be sufficient to cover such claims and our business operations could be impaired.
Should any of the events described above occur, this could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Our Dependence on Third Parties
We are highly dependent upon our ability to enter into agreements with collaborators to develop, commercialize and market our products.
We may enter into collaborations with third parties that we believe could provide us with funding, research support, and other milestone payments. We face
significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for a collaboration will depend upon, among other
things, our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s
evaluation of a number of factors. These factors may include the design or results of clinical trials, the likelihood of approval by the FDA, the EMA or
similar regulatory authorities, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such
product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist
if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may
also consider alternative product candidates or technologies for similar indications that may be available for collaboration and whether such a collaboration
could be more attractive than the one with us for our product candidate.
Collaborations are complex and time-consuming to negotiate and document. If we are unable to reach agreements with suitable collaborators on a timely
basis, on acceptable terms, or at all, and are unable to raise supplemental capital otherwise, we may have to delay, curtail the development of a product
candidate, reduce or delay one or more of our other development programs, delay potential commercialization of a product candidate or reduce the scope of
any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we fail to
enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development or commercialization activities ourselves, we
may not be able to further develop our product candidates or bring them to market or continue to develop our technology platforms and our business may
be materially and adversely affected.
Any collaboration we enter into may pose a number of risks, including the following:
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Collaborators may have significant discretion in determining the efforts and resources that they will apply to these collaborations;
Collaborators may not perform their obligations as expected;
Collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to
continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or
available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;
Collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate,
repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
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Collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product
candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under
terms that are more economically attractive than ours;
Product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or
products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates;
A collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit
sufficient resources to the marketing and distribution of such product or products;
Disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development,
might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional
responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and
expensive;
Collaborators may not properly obtain, maintain, defend or enforce our intellectual property rights or may use our proprietary information in such
a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential
litigation or other intellectual property-related proceedings, including proceedings challenging the scope, ownership, validity and enforceability of
our intellectual property.
Collaborators may own or co-own intellectual property covering our product candidates or research programs that results from our collaboration
with them, and in such cases, we may not have the exclusive right to commercialize such intellectual property or such product candidates or
research programs;
Collaborators may infringe, misappropriate or otherwise violate the intellectual property rights of third parties, which may expose us to litigation
and potential liability;
Collaborators may fail to comply with applicable laws, rules or regulations when performing services for us, which may expose us to legal
proceedings and potential liability; and
Collaborations may be terminated for convenience by the collaborator and, if terminated, we may suffer from negative publicity and we may find
it more difficult to attract new collaborators.
The Israel-Hamas War may cause us to fail to meet contractually obligated deadlines with our collaboration partners or otherwise strain our
relationships with current collaborators or other business partners.
If we enter into collaborations to develop and potentially commercialize any product candidates, we may not be able to realize the benefit of such
transactions if we or our collaborator elects not to exercise the rights granted under the agreement or if we or our collaborator are unable to successfully
integrate a product candidate into existing operations and company culture. In addition, if our agreement with any of our collaborators terminates, our
access to technology and intellectual property licensed to us by that collaborator may be restricted or terminate entirely, which may delay our continued
development of our product candidates utilizing the collaborator’s technology or intellectual property or require us to stop development of such product
candidates completely. We may also find it more difficult to find a suitable replacement collaborator or attract new collaborators, and our development
programs may be delayed or the perception of us in the business and financial communities could be adversely affected. All of the risks relating to product
development, regulatory approval and commercialization described in this Annual Report also apply to the activities of any of our future program
collaborators.
We may not be able to secure and maintain research institutions to conduct our clinical trials.
We rely on research institutions to conduct our clinical trials. Specifically, the limited number of centers experienced with pharmaceutical product
candidates heightens our dependence on such research institutions. Our reliance upon research institutions, including hospitals and clinics, provides us with
less control over the timing and cost of clinical trials and the ability to recruit subjects. If we are unable to reach agreements with suitable research
institutions on acceptable terms, if any resulting agreement is terminated, if research institutions are closed down by public authorities for reasons outside
of our control, or if we cannot fulfill contractual commitments, we may be unable to quickly replace the research institution with another qualified
institution on acceptable terms. Furthermore, we may not be able to secure and maintain suitable research institutions to conduct our clinical trials.
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Independent clinical investigators and CROs that we engage to conduct our clinical trials may not devote sufficient time or attention to our clinical
trials or be able to repeat their past success.
We expect to continue to depend on independent clinical investigators and CROs to conduct our clinical trials. CROs may also assist us in the collection
and analysis of data. There is a limited number of third-party service providers that specialize or have the expertise required to achieve our business
objectives. Identifying, qualifying and managing performance of third-party service providers can be difficult, time consuming and can cause delays in our
development programs. These investigators and CROs will not be our employees and we will not be able to control, other than by contract, the amount of
resources, including time, which they devote to our product candidates and clinical trials. If independent investigators or CROs fail to devote sufficient
resources to the development of our product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval and
commercialization of any product candidates that we develop. In addition, the use of third-party service providers requires us to disclose our proprietary
information to these parties, which could increase the risk that this information will be misappropriated. Further, the FDA and other regulatory authorities
require that we comply with standards and GCP requirements for conducting, recording and reporting clinical trials to assure that data and reported results
are credible and accurate and that the rights, integrity and confidentiality of trial subjects are protected. Regulatory authorities enforce these GCPs through
periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs fail to comply with applicable GCPs, the clinical data
generated in our clinical trials may be deemed unreliable and the FDA, EMA or comparable regulatory authorities may require us to perform additional
clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory
authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with product
produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory
approval process. Failure of clinical investigators or CROs to meet their obligations to us or comply with GCP procedures could adversely affect the
clinical development of our product candidates and harm our business.
If the third parties or consultants that assist us in conducting our clinical trials do not perform their contractual duties or obligations, experience work
stoppages, do not meet expected deadlines, terminate their agreements with us or 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 trial protocols or GCPs, or for any other reason, we may need to conduct additional
clinical trials or enter into new arrangements with alternative third parties, which could be difficult, costly or impossible, and our clinical trials may be
extended, delayed or terminated or may need to be repeated. If any of the foregoing were to occur, we may not be able to obtain, or may be delayed in
obtaining, regulatory approval for the product candidates being tested in such trials, and will not be able to, or may be delayed in our efforts to, successfully
commercialize these product candidates.
We contract with third parties for the supply of materials used in drug formulation for clinical testing and expect to contract with third parties for the
manufacturing of our product candidates for large-scale testing. This reliance on third parties increases the risk that we will not have sufficient
quantities of our product candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair our development or
commercialization efforts.
We anticipate continuing our engagement of third parties to provide our clinical supply as we advance our product candidates into and through clinical
development. We expect in the future to use third parties for the manufacture of our product candidates for clinical testing, as well as for commercial
manufacture. We plan to enter into long-term supply agreements with several manufacturers for commercial supplies. We may be unable to reach
agreement on satisfactory terms with contract manufacturers to manufacture our product candidates. Additionally, the facilities to manufacture our product
candidates must be the subject of a satisfactory inspection before the FDA, the EMA or other regulatory authorities approve an NDA or grant a marketing
authorization for the product candidate manufactured at that facility. We will depend on these third-party manufacturers for compliance with the FDA’s and
EMA’s requirements for the manufacture of our finished products. We do not control the manufacturing process of, and are completely dependent on, our
contract manufacturers for compliance with cGMPs. If our manufacturers cannot successfully manufacture material that conforms to our specifications and
the FDA, European Commission and other regulatory authorities’ cGMP requirements, they will not be able to secure and/or maintain regulatory approval
for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality
assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our
product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly
impact our ability to develop, obtain regulatory approval for, or market our product candidates, if approved, and may subject us to recalls or enforcement
action for products already on the market.
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Our failure or the failure of our third party subcontractors and suppliers to comply with applicable regulations could result in sanctions being imposed on
us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating
restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates that we may develop.
Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured the product candidates ourselves, including:
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the possibility of a breach of the manufacturing agreements by the third parties because of factors beyond our control;
the possibility that the supply is inadequate or delayed;
the risk that the third party may enter the field and seek to compete and may no longer be willing to continue supplying;
the possibility of termination or nonrenewal of the agreements by the third parties before we are able to arrange for a qualified replacement third-
party manufacturer; and
the possibility that we may not be able to secure a manufacturer or manufacturing capacity in a timely manner and on satisfactory terms in order to
meet our manufacturing needs.
Any of these factors could cause the delay of approval or commercialization of our product candidates, cause us to incur higher costs, or prevent us from
commercializing our product candidates successfully. Furthermore, if any of our product candidates are approved and contract manufacturers fail to deliver
the required commercial quantities of finished product on a timely basis and at commercially reasonable prices, and we are unable to find one or more
replacement manufacturers capable of production at a substantially equivalent cost, in substantially equivalent volumes and quality and on a timely basis,
we would likely be unable to meet demand for our products and could lose potential revenue. It may take several years to establish an alternative source of
supply for our product candidates and to have any such new source approved by the FDA, the EMA or any other relevant regulatory authorities.
We maintain our cash at financial institutions, often in balances that exceed federally insured limits.
A portion of our cash may be held in accounts at U.S. banking institutions. Cash held in non-interest-bearing and interest-bearing operating accounts may
exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. If such banking institutions were to fail, we could lose all or a portion of
those amounts held in excess of such insurance limitations. The risk of loss in excess of insurance limitations and otherwise has increased across financial
institutions. Any loss that we may experience in the future could have a material and adverse effect on our ability to pay our operational expenses or make
other payments and may require us to move our accounts to other banks, which could cause delays in making payments to our vendors and employees,
among other counterparties, and cause other business and operational disruptions.
Risks Related to Our Intellectual Property
If we fail to establish, maintain, defend and enforce intellectual property rights with respect to our technology, our business, prospects, financial
condition and results of operations may be materially adversely affected.
Our success depends in large part on our ability to obtain and maintain protection with respect to our intellectual property and proprietary technology. Our
product candidates utilize our proprietary technology and know-how relating to the oral delivery of large molecules for the treatment of certain conditions
with oral PTH and other targeted peptides. We seek to protect our proprietary position by filing patent applications in the United States and certain foreign
jurisdictions relating to our product candidates and technologies that are important to our business. This process is expensive, complex and time-
consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also
possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. If we do not
adequately obtain, maintain, protect and enforce our proprietary rights in our technologies, competitors may be able to use our technologies and erode or
negate any competitive advantage we may have, which could have a material adverse effect on our business and our ability to achieve profitability.
We have limited patent protection with respect to our product candidates and technologies. We have been issued a patent with claims generally directed to
compositions comprising a protein, an absorption enhancer and a protease inhibitor, as well as methods for oral administration of a protein with an
enzymatic activity in each of the United States, Australia, Canada, Japan, New Zealand, China, Israel and Russia. Related patent applications are pending
in the United States, the EU, Hong Kong, Brazil and India. We have also filed patent applications derived from six patent families in various jurisdictions
that currently contain claims directed to oral administration technologies, including compositions and drug delivery devices utilizing an absorption
enhancer and methods of treating osteoporosis, hypoparathyroidism and bone fractures and related conditions with orally administered parathyroid
hormone. Certain of these patent applications have already matured into patents in the United States, Israel, India, China, Canada, New Zealand, Brazil and
Japan. Other applications are in prosecution. We have also recently filed seven additional international patent applications (patent families) with claims
pertaining to a novel oral delivery platform, with claims directed at compositions comprising a protein, an absorption enhancer and an alkaline polymer,
and methods of oral administration these compositions. We cannot be certain that patents will be issued or granted with respect to any of our pending or
future patent applications, or that issued or granted patents will not later be found to be invalid or unenforceable. The patent position of pharmaceutical
companies is generally uncertain because it involves complex legal and factual considerations. The standards applied by the USPTO and foreign patent
offices in granting patents are not always applied uniformly or predictably, and can change. For example, there is no uniform worldwide policy regarding
patentable subject matter or the scope of claims allowable in pharmaceutical or biotechnology patents. Even if our pending patent applications issue as
patents, such patents may not cover our product candidates in the United States or in other countries. Accordingly, we cannot predict whether additional
patents protecting our technology will issue in the United States or in non-U.S. jurisdictions, or whether any patents that do issue will have claims of
adequate scope to provide us with a competitive advantage.
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The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent
offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held
unenforceable, which could limit our ability to stop others from using or commercializing technology and products similar or identical to ours, or limit the
duration of the patent protection covering our technology and product candidates. In addition, patents have a limited lifespan. In the United States and most
foreign jurisdictions, the natural expiration of a patent is generally 20 years after its effective filing date. Various extensions may be available; however, the
life of a patent and the protection it affords is limited. For example, the Hatch-Waxman Act permits a patent term extension of up to five years beyond the
expiration date of a U.S. patent as partial compensation for the useful patent term lost, if any, during the FDA regulatory review process. However, a patent
term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of the product’s approval by the FDA, only one patent
applicable to an approved drug is eligible for the extension, and only those claims covering the approved drug, a method for using it or a method for
manufacturing it may be extended. We may not be granted an extension because we may fail to satisfy applicable requirements and even if we are granted
an extension, the applicable time period or the scope of patent protection afforded could be less than we request. In addition, if we encounter delays in
obtaining regulatory approvals, the period of time during which we could market a product under patent protection could be reduced. Even if patents
covering our product candidates are obtained, once such patents expire, we may be vulnerable to competition from similar or generic products. 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, we cannot provide any assurance that any of our issued patents or any patents that
may be issued to us in the future will provide sufficient protections for our technology or product candidates, in whole or in part, or will effectively prevent
competitors from commercializing similar or identical technologies and products.
Our issued patents may not be sufficient to provide us with a competitive advantage. For example, competitors and other third parties may be able to
circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner. We may also grant licenses under our
intellectual property that may limit our ability to exploit such intellectual property. For example, we are party to the Patent Transfer Agreement with
Oramed, pursuant to which we have granted Oramed an exclusive, worldwide, royalty-free, irrevocable and perpetual license, with the right to sublicense,
under certain of our patent rights to develop, manufacture and commercialize covered products or otherwise exploit such patent rights in the fields of
diabetes and influenza and we have agreed not to, directly or indirectly, engage in any activities within the fields of diabetes and influenza. Even if such
agreement were to be terminated, Oramed would retain its exclusive license under such patent rights.
In the future, we may enter into additional collaborative agreements or license agreements with third parties which may subject us to obligations that must
be fulfilled and require us to manage complex relationships with third parties. If we are unable to meet our obligations or manage our relationships with our
collaborators under these agreements, our revenue may decrease. From the standpoint of our future strategic collaborators, the strength of the intellectual
property under which we may grant licenses can be a determinant of the value of these relationships. If we are unable to secure, protect and enforce our
intellectual property, it may become more difficult for us to attract strategic collaborators. The loss or diminution of our intellectual property rights could
also result in a decision by future third-party collaborators to terminate their agreements with us. In addition, these agreements may be complex and may
contain provisions that could give rise to legal disputes, including potential disputes concerning financial obligations or ownership of intellectual property
and data under such agreements. Such disputes can lead to lengthy, expensive litigation or arbitration, requiring us to divert management time and
resources to such dispute. Any such development could have a material adverse effect on our business, prospects, financial condition and results of
operations.
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We may become involved in proceedings to protect or enforce our proprietary rights, which could be expensive and time consuming, and may ultimately
be unsuccessful.
Competitors or other third parties may infringe or otherwise violate our patents, trademarks, copyrights or other intellectual property rights. To counter
infringement or other violations, we may be required to file claims, which can be expensive and time consuming. Any such claims could provoke these
parties to assert counterclaims against us, including claims alleging that we infringe their patents or other intellectual property rights. In addition, in a
patent infringement proceeding, a court may decide that one or more of the patents we assert is invalid or unenforceable, in whole or in part, construe the
patent’s claims narrowly or refuse to prevent the other party from using the technology at issue on the grounds that our patents do not cover the technology.
In any intellectual property litigation, even if we are successful, any award of monetary damages or other remedy we receive may not be commercially
valuable. 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. Third parties may also raise challenges to the validity of
our patent claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-
examination, post-grant review and inter partes review proceedings and equivalent proceedings in foreign jurisdictions such as opposition proceedings. If
third parties have prepared and filed patent applications in the United States that also claim technology to which we have rights, we may have to participate
in interference proceedings in the USPTO, to determine priority of invention for patent applications filed before March 16, 2013, or in derivation
proceedings to determine inventorship for patent applications filed after such date. Such proceedings could result in the revocation of, cancellation of, or
amendment to our patents in such a way that they no longer cover our product candidates or provide us with any competitive advantage.
In addition, we may be subject to third-party challenges regarding our exclusive ownership of our intellectual property. If a third party were successful in
challenging our exclusive ownership of any of our intellectual property, we may lose our right to use such intellectual property, such third party may be
able to license such intellectual property to other third parties, including our competitors, and third parties could market competing products and
technology.
In addition, during the course of this kind of litigation or proceedings, there could be public announcements of the results of hearings, motions or other
interim proceedings or developments or public access to related documents. If investors perceive these results to be negative, the market price for our
Ordinary Shares could be significantly harmed. Any of the foregoing could have a material adverse effect on our competitive position, business, financial
conditions, results of operations, and prospects.
Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. We
may face claims that we are violating the intellectual property rights of others.
Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. Other entities may have or obtain patents
or other proprietary rights that could limit our ability to make, use, sell, offer for sale or import our product candidates and future approved products or
impair our competitive position. We may face claims, including from direct competitors, asserting that the commercial use of our technology infringes or
otherwise violates the intellectual property rights of others. We cannot be certain that our technologies and processes do not violate the intellectual property
rights of others. Third parties may assert infringement claims against us based on existing or future intellectual property rights. We expect that we may
increasingly be subject to such claims as our product candidates approach commercialization, and as we gain greater visibility as a public company. We
may not be aware of all such intellectual property rights potentially relating to our product candidates and their uses. Thus, we do not know with certainty
that our oral PTH (1-34) tablet or any other product candidate, or our commercialization thereof, does not and will not infringe or otherwise violate any
third party’s intellectual property.
If we were found to infringe or otherwise violate the intellectual property rights of others, we could face significant costs to implement work-arounds, and
we cannot provide any assurance that any such work-around would be available or technically equivalent to our current technology. In such cases, we
might need to license a third party’s intellectual property, and such required licenses might not be available on acceptable terms, or at all. Even if we were
able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us and could require us to
make substantial licensing and royalty payments. We could be forced, including by court order, to cease commercializing the infringing technology or
product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully
infringed a patent or other intellectual property right. A finding of infringement could prevent us from commercializing our product candidates or force us
to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or
trade secrets of third parties could expose us to similar liabilities and have a similar negative impact on our business.
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The pharmaceutical and biotechnology industries have produced a significant number of patents, and it may not always be clear to industry participants,
including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the
interpretation is not always uniform or predictable. There is a substantial amount of litigation involving patent and other intellectual property rights in the
biotechnology and pharmaceutical industries generally, and these lawsuits can be very time consuming and costly. If we are sued for patent infringement,
we would need to demonstrate that our products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are
invalid, and we may not be successful in doing so. Proving invalidity is difficult. For example, in the United States, proving invalidity requires a showing
of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we
may incur substantial costs and divert management’s time and attention in defending these proceedings, which could have a material adverse effect on our
business.
Also, to the extent that our agreements provide that we will defend and indemnify our suppliers, service providers, future strategic collaborators or any
other party for claims against them relating to any alleged infringement of the intellectual property rights of third parties in connection with such suppliers’,
service providers’, strategic collaborators’ or other parties’ use of our technologies, we may incur substantial costs defending and indemnifying such parties
to the extent they are subject to these types of claims. Any claims brought against us, any suppliers, service providers, future strategic collaborators or any
other party indemnified by us alleging that we have violated the intellectual property of others could have a material adverse effect on our business,
prospects, financial condition and results of operations.
We may not be able to protect and enforce our intellectual property rights throughout the world.
We currently have limited patent protection for our product candidates and technologies, and filing, prosecuting, maintaining and defending patents on
product candidates in all countries throughout the world would be prohibitively expensive. In addition, we may not pursue or obtain patent protection in all
major markets. In addition, 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, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to certain third
parties. Furthermore, many 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.
Competitors may use our technologies in jurisdictions where we have not obtained or are unable to adequately enforce patent protection to develop or
commercialize their own products. These products may compete with our future products, and our patents or other intellectual property rights may not be
effective or sufficient to prevent them from competing. Proceedings to enforce our patent rights in such jurisdictions, whether or not successful, could result
in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted
narrowly, put our patent applications at risk of not issuing and provoke third parties to assert claims against us. We may not prevail in any lawsuits that we
initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual
property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
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 to enforce our intellectual property.
Changes in U.S. patent law could diminish the value of our future patents, if issued, thereby impairing our ability to protect our product candidates.
As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing
patents in the pharmaceutical industry involve both technological and legal complexity. Therefore, obtaining and enforcing pharmaceutical patents is costly,
time-consuming and inherently uncertain. In addition, the United States has recently enacted wide-ranging patent reform legislation, which includes
provisions that affect the way patent applications are prosecuted, redefine prior art, may affect patent litigation, and switch the U.S. patent system from a
“first to invent” system to a “first inventor to file” system. It is not clear what, if any, impact such legislation will have on the operation of our business.
Additionally, the United States Supreme Court has ruled on several patent cases in recent years, 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 with regard to our ability to obtain
patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the
U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could increase the
uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any U.S. patents that may issue to us in the
future, all of which could have a material adverse effect on our business and financial condition.
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Intellectual property litigation may lead to unfavorable publicity that harms our reputation and causes the market price of our Ordinary Shares to
decline.
During the course of any intellectual property litigation, there could be public announcements of the results of hearings, rulings on motions, and other
interim proceedings. If securities analysts or investors regard these announcements as negative, the perceived value of our product candidates or future
products, services or intellectual property could be diminished and the market price of our Ordinary Shares may decline as a result. Furthermore, such
negative publicity could severely impair our capability to enter into future agreements with key commercial collaborators.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these
requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other government fees on patents and/or applications will be due to be paid to the
USPTO and various government patent agencies outside of the United States over the lifetime of our owned patents and/or applications and any patent
rights we may own or license in the future. The USPTO and various non-U.S. government patent agencies require compliance with several procedural,
documentary, fee payment and other similar provisions during the patent application process. In many cases, an inadvertent lapse can be cured by payment
of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment
or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential
competitors might be able to enter the market and this circumstance could have a material adverse effect on our business.
Under applicable employment laws, 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, our Israeli employees may be entitled to seek compensation for their
inventions irrespective of their contractual agreements with us.
Our agreements with our employees and key consultants generally include non-competition provisions. These provisions prohibit such employees and 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 provisions under the laws of the jurisdictions in which our employees and consultants 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, a significant portion of our intellectual property has been developed by our employees and consultants in the
course of their employment or consulting relationship with us. Under the Israeli Patent Law, 5727-1967, inventions conceived by an employee or consultant
during the scope of his or her employment or consulting relationship with a company are regarded as “service inventions.” Even when our agreements with
our employees and consultants include provisions regarding the assignment and waiver of rights to additional compensation in respect of inventions created
within the course of their employment or consulting relationship with us, including in respect of service inventions, we cannot guarantee that such
provisions will be upheld by Israeli courts, as a result of uncertainty under Israeli law with respect to the efficacy of such provisions. If we are required to
pay additional compensation or face disputes relating to service inventions, our results of operations could be adversely affected.
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We may not be able to protect the confidentiality of our technology, which, if disseminated, could negatively impact our plan of operations.
In addition to seeking patent protection, we also rely on trade secret protection and confidentiality agreements to protect proprietary know-how that may
not be patentable, processes for which patents may be difficult to obtain and/or enforce, and other elements of our technology. Any disclosure to or
misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological
achievements, which would harm our competitive position. While we strive to maintain systems and procedures to protect the confidentiality of our trade
secrets and technical know-how, these systems and procedures may fail to provide an adequate degree of protection. For example, although we generally
enter into agreements with our employees, consultants, advisors, and other collaborators restricting the disclosure and use of trade secrets, technical know-
how and confidential information, we cannot provide any assurance that these agreements will be sufficient to prevent unauthorized use or disclosure of our
trade secrets and technical know-how, that these agreements will not be breached or that we have executed agreements with all parties who may have had
access to our proprietary information. We may not have adequate remedies in the case of a breach of any such agreements, and our competitors or others
may independently develop substantially equivalent or superior proprietary information and techniques or otherwise gain access to our trade secrets or
know-how. Monitoring and policing unauthorized use and disclosure of intellectual property is difficult. Further, the laws of certain foreign countries do not
protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in
protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent material disclosure of the intellectual
property related to our technologies to third parties, or if our competitors or other third parties independently develop any of our trade secrets, we will not
be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and
financial condition.
We currently have relationships with different consultants who perform research and development activities for us and who are not employed by us, and we
may enter into additional relationships of such nature in the future. We have limited control over the activities of these consultants and can expect only
limited amounts of their time to be dedicated to our activities. These persons may have consulting, employment or advisory arrangements with other
entities that may conflict with or compete with their obligations to us. We typically require our consultants to sign agreements that require such consultants
to treat our proprietary information and results of studies as confidential. However, in connection with each such relationship, we may not be able to
maintain the confidentiality of our technology, the dissemination of which could hurt our competitive position and results of operations. To the extent that
our scientific consultants develop inventions or processes independently that may be applicable to our product candidates, disputes may arise as to the
ownership of the proprietary rights to such information, and we may expend significant resources in such disputes and we may not win those disputes.
We may be subject to claims by third parties asserting that we or our employees, consultants or contractors have misappropriated their intellectual
property, or claiming ownership of what we regard as our own intellectual property.
Certain of our employees, consultants and contractors were previously employed at other biotechnology or pharmaceutical companies, including our
competitors or potential competitors. Although we try to ensure that our employees, consultants and contractors do not use the proprietary information or
know-how of others in their work for us, we may be subject to claims that we or these employees, consultants or contractors have used or disclosed
intellectual property, including trade secrets or other proprietary information, of any such employee’s, consultant’s or contractor’s former employer.
Litigation may be necessary to defend against these claims and, even if we are successful in defending ourselves, could result in substantial costs to us or
be distracting to our management. If we do not succeed with respect to any such claims, in addition to paying monetary damages and possible ongoing
royalties, we may lose valuable intellectual property rights or personnel. Any of the foregoing could have a material adverse effect on our competitive
position, business, financial conditions, results of operations, and prospects.
In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to
execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact
develops intellectual property that we regard as our own. Further, such assignment agreements may not be self-executing, may be insufficient in scope or
may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of
what we regard as our intellectual property.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or
personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to
management.
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If trademarks and trade names related to our product candidates are not adequately protected, then we may not be able to build name recognition in
our markets of interest and our business may be adversely affected.
We are currently in the process of registering the trademark N-Tab™ for our oral drug delivery platform technology, globally. In the future, our registered
or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks.
We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition by potential collaborators or
customers in our markets of interest. Any unauthorized use of these trademarks could harm our reputation or commercial interests. In addition, our
enforcement against third-party infringers or violators may be unduly expensive and time-consuming, and the outcome may be an inadequate remedy. Over
the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and
our business may be adversely affected.
Risks Related to Our Ordinary Shares
The price of our Ordinary Shares may be volatile, and holders of our Ordinary Shares could lose all or part of their investment.
The price of securities for publicly traded emerging biopharmaceutical and drug discovery and development companies has been highly volatile and is
likely to remain highly volatile in the future. The market price of our Ordinary Shares on Nasdaq may fluctuate as a result of a number of factors, some of
which are beyond our control, including, but not limited to:
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our clinical trial results and the timing of the release of such results;
the amount of our cash resources and our ability to obtain additional funding;
the announcement of research activities, business developments, technological innovations or new products, or acquisitions or expansion
plans by us or our competitors;
the success or failure of our research and development projects or those of our competitors;
our entering into or terminating strategic relationships;
changes in laws or government regulation;
actual or anticipated fluctuations in our and our competitors’ results of operations and financial condition;
regulatory developments and the decisions of regulatory authorities as to the approval or rejection of new or modified products and plans
for clinical development;
the departure of our key personnel;
disputes related to intellectual property and proprietary rights, including patents, litigation matters and our ability to obtain intellectual
property protection for our technologies;
our sale, or the sale by our significant shareholders, of Ordinary Shares or other securities in the future;
public concern regarding the safety, efficacy or other aspects of the products or methodologies we are developing;
market conditions in our industry and changes in estimates of the future size and growth rate of our markets;
market acceptance of our products;
the mix of products that we sell and related services that we provide;
the success or failure of our licensees to develop, obtain approval for and commercialize our licensed products, for which we are entitled
to contingent payments and royalties;
the publication of the results of preclinical or clinical trials for EB613, EB612 or any other oral peptide product candidates we may
develop, including the oral GLP-2 and OXM programs we are developing with OPKO;
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the failure by us to achieve a publicly announced milestone;
delays between our expenditures to develop and market new or enhanced products and the generation of sales from those products;
changes in the amounts that we spend to develop, acquire or license new products, technologies or businesses;
changes in our expenditures to promote our products;
variances in our financial performance from the expectations of market analysts;
the limited trading volume of our Ordinary Shares; and
general economic and market conditions, including factors unrelated to our industry or operating performance, such as the duration and
intensity of the ongoing Israel-Hamas War, and other geopolitical tensions.
In addition, the stock market in general has recently experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of individual companies. Broad market and industry factors may materially affect the market price of companies’ stocks,
including ours, regardless of actual operating performance.
We do not know whether a market for our Ordinary Shares will be sustained and as a result, it may be difficult for holders of our Ordinary Shares to
sell their securities.
Although our Ordinary Shares are listed on Nasdaq, an active trading market for our Ordinary Shares may not be sustained. The lack of an active market
may impair the ability of holders of our Ordinary Shares to sell their Ordinary Shares at the time they wish to sell them or at a price that they consider
reasonable. The lack of an active market may also reduce the value of our Ordinary Shares and may cause the trading price of our Ordinary Shares to be
more volatile. An inactive market may also impair our ability to raise capital by selling Ordinary Shares and may impair our ability to acquire other
companies by using our Ordinary Shares as consideration.
Our stock price may continue to be volatile, and securities class action litigation has often been instituted against companies following periods of
volatility of their stock price. Any such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s
attention and resources.
In the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation
has often been instituted against these companies. Although there is no such shareholder litigation currently pending or threatened against the Company,
such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
Future sales by our shareholders may adversely affect our stock price and our ability to raise funds in new stock offerings.
Sales of our Ordinary Shares in the public market could lower the market price of our Ordinary Shares. Sales may also make it more difficult for us to sell
equity securities or equity-related securities in the future at a time and price that our management deems acceptable or at all. Most of our outstanding
Ordinary Shares are not restricted from resale. In the event of a sale of Ordinary Shares offered by selling shareholders, the price of our Ordinary Shares
could decline, and such decline could be material.
The market price of our Ordinary Shares could be negatively affected by future sales of our securities.
If our shareholders, particularly our directors or our executive officers and their affiliates, sell substantial amounts of Ordinary Shares in the public market,
or if there is a public perception that these sales may occur in the future, the market price of our Ordinary Shares may decline. The perception in the public
market that our shareholders might sell our Ordinary Shares could also depress the market price of our Ordinary Shares and could impair our future ability
to obtain capital, especially through an offering of equity securities. In addition, our sale of additional Ordinary Shares or other similar securities in order to
raise capital might have a similar negative impact on the share price of our Ordinary Shares. A decline in the price of our Ordinary Shares may impede our
ability to raise capital through the issuance of additional Ordinary Shares or other equity securities, and may cause holders of our Ordinary Shares to lose
part or all of their investment.
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We have never paid, and we currently do not intend to pay dividends.
We have never declared or paid any cash dividends on our Ordinary Shares. We currently intend to retain any future earnings to finance operations and to
expand our business and, therefore, do not expect to pay any cash dividends in the foreseeable future. As a result, capital appreciation, if any, of our
Ordinary Shares will be investors’ sole source of gain for the foreseeable future. In addition, Israeli law may limit our declaration or payment of dividends,
and may subject our dividends to Israeli withholding taxes.
We may not have sufficient insurance to cover our liability in any current or future litigation claims either due to coverage limits or as a result of
insurance carriers seeking to deny coverage of such claims.
We may face a variety of litigation-related liability risks. Our amended Articles of Association, or Articles, other applicable agreements and/or Israeli law
may require us to indemnify (and advance expenses to) our current and past directors and officers and employees from reasonable expenses related to the
defense of any action arising from their service to us, including circumstances under which indemnification is otherwise discretionary. While our directors
and officers are included in a director and officer liability insurance policy, which covers all our directors and officers in some circumstances, our insurance
coverage does not cover all of our indemnification obligations and may not be adequate to cover any indemnification or other claims against us. In addition,
the underwriters of our present coverage may seek to avoid coverage in certain circumstances based upon the terms of the respective policies. If we incur
liabilities that exceed our coverage under our directors and officers insurance policy or incur liabilities not covered by our insurance, we would have to
self-fund any indemnification amounts owed to our directors and officers and employees in which case our results of operations and financial condition
could be materially adversely affected. Further, if D&O insurance becomes prohibitively expensive to maintain in the future, we may be unable to renew
such insurance on economic terms or unable renew such insurance at all. The lack of D&O insurance may make it difficult for us to retain and attract
talented and skilled directors and officers to serve our company, which could adversely affect our business.
There is a risk that we may be a passive foreign investment company, for U.S. federal income tax purposes for any taxable year, which generally would
result in certain adverse U.S. federal income tax consequences to our U.S. investors.
There is a risk that we may be treated as a passive foreign investment company, or PFIC, for any taxable year. The application of the PFIC rules to a
company like us is subject to uncertainties, and for the reasons described below, we cannot express a view as to whether we will be a PFIC for the current
or any future taxable year. In general, a non-U.S. corporation is a PFIC for any taxable year in which (i) 75% or more of its gross income consists of
passive income, or the income test, or (ii) 50% or more of the average value of its assets consists of assets (generally determined on a quarterly basis) that
produce, or are held for the production of, passive income, or the assets test. Generally, passive income includes interest, dividends, rents, royalties and
certain gains, and cash is generally treated as a passive asset that produces passive income for PFIC purposes. The assets shown on our balance sheet
consist, and are expected to continue to consist, primarily of cash and cash equivalents for the foreseeable future. Therefore, whether we will satisfy the
assets test for the current or any future taxable year will depend largely on the quarterly value of our goodwill and on how quickly we utilize our cash in
our business. Because (i) the value of our goodwill may be determined by reference to the market price of our Ordinary Shares, which has been, and may
continue to be volatile given the nature and early stage of our business, (ii) we hold, and expect to continue to hold, a significant amount of cash, and (iii) a
company’s annual PFIC status can be determined only after the end of each taxable year, we cannot express a view as to whether we will be a PFIC for the
current or any future taxable year. In addition, it is not clear how to apply the income test to a company like us, which is still developing its key intangible
assets and whose overall losses from research activities significantly exceed the amount of its income (including passive income). If our losses from
research and development activities are disregarded for purposes of the income test, we may be a PFIC for any taxable year if 75% or more of our gross
income (as determined for U.S. federal income tax purposes) for the relevant year is from interest and financial investments. Because the revenue shown on
our financial statements is not calculated based on U.S. tax principles, and because for any taxable year we may not have sufficient (or any) non-passive
revenue, there is a risk that we may be or become a PFIC under the income test for any taxable year. If we were a PFIC for any taxable year during which a
U.S. investor owned our Ordinary Shares , such U.S. shareholder generally will be subject to certain adverse U.S. federal income tax consequences,
including increased tax liability on gains from dispositions of the Ordinary Shares and certain distributions and a requirement to file annual reports with the
Internal Revenue Service. U.S. investors should consult with their tax advisers regarding the application of the PFIC rules as they may relate to an
investment in our company.
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We are a smaller reporting company and non-accelerated filer, and our compliance with the reduced reporting and disclosure requirements applicable
to smaller reporting companies and non-accelerated filers could make our Ordinary Shares less attractive to investors and may make it more difficult to
raise capital as and when we need it.
We qualify as a “smaller reporting company,” and we expect to take advantage of certain exemptions from various reporting requirements that are
applicable to other public companies that are not smaller reporting companies, including reduced disclosure obligations regarding executive compensation
in our periodic reports and proxy statements. In addition, we qualify as a “non-accelerated filer,” and we expect to take advantage of certain exemptions
from various reporting requirements that are applicable to other public companies that are not non-accelerated filers, including the auditor attestation
requirements of Section 404.
We cannot predict whether investors will find our Ordinary Shares less attractive as a result of our reliance on these exemptions. If some investors find our
Ordinary Shares less attractive as a result, there may be a less active trading market for our Ordinary Shares and our stock price may be more volatile.
Additionally, because of the exemptions from various reporting requirements provided to us a smaller reporting company and non-accelerated filer, we may
be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our
business with other companies in our industry if they believe that our reporting is not as transparent as the reporting of other companies in our industry. If
we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.
Our Ordinary Shares may be delisted from the Nasdaq Capital Market if we are unable to maintain compliance with Nasdaq’s continued listing
standards.
Nasdaq imposes, among other requirements, continued listing standards, including a minimum bid requirement. The price of our Ordinary Shares must
trade at or above $1.00 to comply with the minimum bid requirement for continued listing on the Nasdaq Capital Market. On November 21, 2022, the
Company received a notice (the “Notice”) from the Nasdaq Stock Market LLC (“Nasdaq”), stating that the Company’s Ordinary Shares fail to comply with
the $1.00 minimum bid price requirement for continued listing on Nasdaq in accordance with Nasdaq Listing Rule 5550(a)(2) based upon the closing bid
price of the ordinary shares for the 30 consecutive business days prior to the date of the Notice. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the
Company was provided an initial compliance period of 180 calendar days, or until May 22, 2023, to regain compliance with the minimum bid price
requirement.
On March 23, 2023, Nasdaq notified us that we had regained compliance with the minimum bid price requirement given that the closing bid price for our
Ordinary Shares had been at or above $1.00 for 14 consecutive trading days, from March 3, 2023 through March 22, 2023.
On June 29, 2023, the Company received an additional notice (the “Additional Notice”) from Nasdaq, stating that the Company’s Ordinary Shares fail to
comply with the minimum bid price requirement based upon the closing bid price of the ordinary shares for the 30 consecutive business days prior to the
date of the Additional Notice. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided an initial compliance period of 180 calendar
days to regain compliance with the minimum bid price requirement. On December 27, 2023, we received an extension of 180 calendar days, or until June
24, 2024, from Nasdaq, to regain compliance with the minimum bid price requirement. On March 1, 2024, Nasdaq notified us that we had regained
compliance with the minimum bid price requirement given that the closing bid price for our Ordinary Shares had been at or above $1.00 for 10 consecutive
trading days, from February 15, 2024 through February 29, 2024.
However, there can be no assurance that we will maintain compliance with the $1.00 minimum bid price requirement or comply with Nasdaq’s other
continued listing standards in the future.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or
prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the
trading price of our Ordinary Shares.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls
and procedures, are designed to prevent fraud among other objectives. Any failure to implement required new or improved controls, or difficulties
encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with
Section 404 of the Sarbanes-Oxley Act of 2002, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in
our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our
financial statements or identify other areas for further attention or improvement. Inferior internal controls could also subject us to regulatory scrutiny and
sanctions, impair our ability to raise revenue and cause investors to lose confidence in our reported financial information, which could have a negative
effect on the trading price of our Ordinary Shares.
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We are required to disclose changes made in our internal controls and procedures and our management is required to assess the effectiveness of these
controls annually. However, for as long as we are a non-accelerated filer, our independent registered public accounting firm will not be required to attest to
the effectiveness of our internal controls over financial reporting pursuant to Section 404. An independent assessment of the effectiveness of our internal
controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to
financial statement restatements and require us to incur the expense of remediation.
If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, our share price and trading
volume could decline.
The trading market for our Ordinary Shares depends in part on the research and reports that securities or industry analysts publish about us or our business.
We do not have control over these analysts and we do not have commitments from them to write research reports about us. If securities or industry analysts
do not commence coverage of our company, the trading price for our shares may be negatively affected. In the event we obtain securities or industry analyst
coverage, if one or more of the analysts who covers us downgrades our shares, our shares price would likely decline. If one or more of these analysts ceases
to cover us or fails to publish regular reports on us, interest in the purchase of our shares could decrease, which could cause our share price or trading
volume to decline.
Risks Relating to Our Incorporation and Location in Israel
The Israeli government grants we have received for research and development expenditures restrict our ability to manufacture products and transfer
technologies outside of Israel and require us to satisfy specified conditions. If we fail to satisfy these conditions, we may be required to refund grants
previously received together with interest and penalties or to pay other amounts according to the formulas set out in the relevant laws.
Our research and development efforts have been financed, in part, through the grants that we have received from the IIA. Pursuant to these grants, we must
comply with the requirements of the Research Law. Until the grants are repaid with interest, royalties are payable to the IIA in the amount of 3% on
revenues derived from sales of products or services developed in whole or in part using the IIA grants, including EB612, EB613 and any other oral PTH
product candidates we may develop. The royalty rate may increase to 5%, with respect to approved applications filed following any year in which we
achieve sales of over $70 million.
Under the Research Law, we are prohibited from manufacturing products developed using these grants outside of the State of Israel without special
approvals. We may not receive the required approvals for any proposed transfer of manufacturing activities. Even if we do receive approval to manufacture
products developed with government grants outside of Israel, the royalty rate may be increased and we may be required to pay up to three times the grant
amounts and the interest, depending on the manufacturing volume that is performed outside of Israel. This restriction may impair our ability to outsource
manufacturing or engage in our own manufacturing operations for those products or technologies. For additional information, see “Item 1-Business-The
Israeli Innovation Authority (IIA) Grant.”
Additionally, under the Research Law, we are prohibited from transferring in any manner (including by way of license), the IIA-financed technologies and
related rights (including know-how and other intellectual property rights) in or outside of the State of Israel, except under limited circumstances and only
with the approval of the IIA. We may not receive the required approvals for any proposed transfer and, even if received, we may be required to pay the IIA
a portion of the consideration that we receive upon any transfer of such technology to a non-Israeli entity up to 600% of the grant amounts and the interest.
The scope of the IIA support received, the royalties that we have already paid to the IIA, the amount of time that has elapsed between the date on which the
know-how or other intellectual property rights were transferred and the date on which the IIA grants were received and the sale price and the form of
transaction will be taken into account in order to calculate the amount of the payment to the IIA. Approval to transfer the technology to residents of the
State of Israel is also required, and may be granted in specific circumstances only if the recipient abides by the provisions of applicable laws, including the
restrictions on the transfer of know-how and the obligation to pay royalties. No assurance can be made that approval to any such transfer, if requested, will
be granted. Transfer of know-how or rights outside of the state of Israel without IIA approval is a criminal offense.
These restrictions may impair our ability to sell our technology assets or to perform or outsource manufacturing outside of Israel, engage in change of
control transactions or otherwise transfer our know-how outside of Israel and may require us to obtain the approval of the IIA for certain actions and
transactions and pay additional royalties and other amounts to the IIA. In addition, any change of control and any change of ownership of our Ordinary
Shares that would make a non-Israeli citizen or resident an interested party, as defined in the Israeli Securities Law, 5728-1968, as amended, requires
written notice to the IIA, and our failure to comply with this requirement could result in monetary fines. Such non-Israeli interested parties, which include
5% shareholders and shareholders who have the right to appoint a director to the Board, are required to sign an undertaking towards the IIA in which they
would undertake to comply with the Research Law. Shareholders that purchased Ordinary Shares in our IPO would not be required to sign such an
undertaking.
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These restrictions will continue to apply even after we have repaid the full amount of the grants and the interest. If we fail to satisfy the conditions of the
Research Law, we may be required to refund grants previously received together with interest and penalties, to make other payments to the IIA or become
subject to criminal charges.
Legislative developments in Israel may have an adverse effect on the Company’s business.
The Israeli government is currently pursuing extensive changes to Israel’s judicial system. In response to the foregoing developments, certain leading
international financial institutions, including investment banks, investors and key economists, have indicated several causes for concern, including that
such proposed changes, if adopted, may cause a downgrade to Israel’s sovereign credit rating and Israel’s international standing, which would adversely
affect the macroeconomic condition in which we operate, and also potentially deter foreign investment into Israel or Israeli companies, which may hinder
our ability to raise additional funds, if deemed necessary by our management and the Board.
Security, political and economic instability in the Middle East may harm our business, including the duration and intensity of the ongoing Israel-
Hamas War and its impact on our operations and workforce.
Our principal research and development facilities are located in Israel. In addition, some 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, Hamas (an Islamist militia and political group in the Gaza
Strip) and Hezbollah (an Islamist militia and political group in Lebanon).
In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets.
Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other
areas within the State of Israel. These attacks resulted in thousands of deaths and injuries, and Hamas additionally kidnapped many Israeli civilians and
soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and commenced a military campaign against Hamas.
While we have a few employees who are in active military service, the ongoing war with Hamas has not, since its inception, materially impacted our
business or operations. Furthermore, we do not expect any delays to any of our programs as a result of the situation. However, we cannot currently predict
the intensity or duration of Israel’s war against Hamas, nor can we predict how this war will ultimately affect our business and operations or Israel’s
economy in general.
Additionally, political uprisings, social unrest and violence in various other countries in the Middle East, including Israel’s neighbor Syria, are affecting the
political stability of those countries. This instability may lead to deterioration of the political relationships that exist between Israel and certain countries
and have raised concerns regarding security in the region and the potential for armed conflict. In addition, Iran has threatened to attack Israel. Iran is also
believed to have a strong influence among the Syrian government, Hamas and Hezbollah. These situations may potentially escalate in the future into more
violent events which may affect Israel and us. These situations, including conflicts which involved missile strikes against civilian targets in various parts of
Israel, have, in the past, negatively affected business conditions in Israel.
Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could have a material adverse
effect on our business. Although such hostilities did not have a material adverse impact on our business in the past, we cannot guarantee that hostilities will
not be renewed and have such an effect in the future. The political and security situation in Israel may result in parties with whom we have contracts
claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions. These or other Israeli
political or economic factors could harm our operations and product development. Any hostilities involving Israel or the interruption or curtailment of trade
between Israel and its present trading partners could adversely affect our operations and could make it more difficult for us to raise capital. We could
experience disruptions if acts associated with such conflicts result in any serious damage to our facilities. Furthermore, several countries, as well as certain
companies and organizations, continue to restrict business with Israel and Israeli companies, which could have an adverse effect on our business and
financial condition in the future. Our business interruption insurance may not adequately compensate us for losses, if at all, that may occur as a result of an
event associated with a security situation in the Middle East, and any losses or damages incurred by us could have a material adverse effect on our business.
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Our operations may be disrupted by the obligations of personnel to perform military service.
Our employees in Israel, including executive officers, generally, may be called upon to perform up to 42 days (and in some cases more) of annual military
reserve duty until they generally reach the age of 45 (or older in some cases) and, in emergency circumstances, could be called to active duty. In response to
increased tension and hostilities, since September 2000 there have been occasional call-ups of military reservists, including in connection with the mid-
2006 war in Lebanon and the December 2008, November 2012 and July 2014 conflicts with Hamas. In October 2023, Hamas terrorists invaded southern
Israel and launched thousands of rockets in a widespread terrorist attack on Israel. As a result, the Israeli government declared that the country was at war
and the Israeli military began to call-up reservists for active duty. To date, several employees were called for duty, but it is possible that there will be further
or longer military reserve duty call-ups in the future, which may affect our business due to a shortage of skilled labor and loss of institutional knowledge,
and necessary mitigation measures we may take to respond to a decrease in labor availability, such as overtime and third-party outsourcing, which may
materially adversely affect our operations, business and results of operations. Our operations could also be disrupted by the absence of a significant number
of our employees related to military service or the absence for extended periods of one or more of our key employees for military service in connection
with other military and security matters.
Our business is subject to currency exchange risk and fluctuations between the U.S. dollar and other currencies may negatively affect our earnings and
results of operations.
The U.S. dollar is both our functional and reporting currency. As a result, our results of operations may be adversely affected by exchange rate fluctuations
between the U.S. dollar and the NIS. A significant portion of the expenses associated with our Israeli operations, including personnel and facilities related
expenses, are incurred in NIS. Consequently, inflation in Israel will have the effect of increasing the cost of our operations in Israel unless it is offset on a
timely basis by a devaluation of the NIS relative to the U.S. dollar. In addition, if the value of the U.S. dollar decreases against the NIS, our earnings may
be negatively impacted. Moreover, exchange rate fluctuations in currency exchange rates in countries other than Israel where we operate, perform our
clinical trials or conduct business may also negatively affect our earnings and results of operations. We cannot predict any future trends in the rate of
inflation or deflation in Israel or the rate of devaluation or appreciation of the NIS against the U.S. dollar. If the dollar cost of our operations in Israel
increases, our dollar-measured results of operations will be adversely affected. For example, in 2023, the value of the NIS depreciated against the U.S.
dollar by 3.1%, which was potentially computed by inflation in Israel of 3%. In 2022, the value of the NIS depreciated against the U.S. dollar by 13.3%,
which was potentially computed by inflation in Israel of 5.5%. As a result of these fluctuations, our NIS denominated expenses were affected.
Potential future revenue may be derived from abroad, including outside of the United States. As a result, our business and share price may be affected by
fluctuations in foreign exchange rates with these other currencies, which may also have a significant impact on our reported results of operations and cash
flows from period to period. Currently, we do not have any exchange rate hedging arrangements in place. Foreign currency fluctuations could materially
adversely affect our results of operations or could positively affect our results of operations in ways that may not necessarily be repeated in future periods.
It may be difficult to enforce a U.S. judgment against us or our officers and directors, to assert U.S. securities laws claims in Israel or to serve process
on our officers and directors.
We are incorporated under the laws of the State of Israel. Service of process upon us, our directors and officers and the Israeli experts, if any, a significant
number of whom reside outside the United States, may be difficult to obtain within the United States. Furthermore, because the majority of our assets and
investments, and several of our directors, officers and such Israeli experts, if any, are located outside the United States, any judgment obtained in the United
States against us or any of them may be difficult to collect within the United States. In addition, such judgment may not be enforced by an Israeli court.
In addition, it may also be difficult for an investor to effect service of process on these persons in the U.S. or to assert U.S. securities law claims in original
actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the
most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law
is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, 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 addressing the matters
described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, holders of our Ordinary Shares may not be able to
collect any damages awarded by either a U.S. or foreign court.
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Provisions of Israeli law and our Articles may give rise to withholding obligations or delay, prevent or make difficult a change of control and therefore
depress the price of our shares.
Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for
transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For
example, under Israel’s Companies Law, 5759-1999, as currently amended, or the Companies Law, upon the request of a creditor of either party to a
proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that as a result of the merger the surviving
company will be unable to satisfy the obligations of any of the parties to the merger. Additionally, a tender offer for all of a company’s issued and
outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital.
Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest in the tender offer unless, following
consummation of the tender offer, the acquirer would hold more than 98% of the company’s outstanding shares. Furthermore, the shareholders, including
those who indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition an Israeli
court to alter the consideration for the acquisition, unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek
such appraisal rights.
Furthermore, 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. For example, Israeli tax law does not recognize tax-free share exchanges to the same
extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances that makes the deferral contingent on the
fulfillment of numerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of
the participating companies are, subject to certain exceptions, restricted. Moreover, with respect to certain share swap transactions, the tax deferral is
limited in time, and when the time expires, tax then becomes payable even if no actual disposition of the shares has occurred.
Our Articles provide that our directors are elected on a staggered basis such that a potential acquirer cannot readily replace our entire Board at a single
general shareholders meeting.
These provisions could cause our Ordinary Shares to trade at prices below the price for which third parties might be willing to pay to gain control of us.
Third parties who are otherwise willing to pay a premium over prevailing market prices to gain control of us may be unable or unwilling to do so because
of these provisions of Israeli law and our Articles.
Your rights and responsibilities as a shareholder are governed by Israeli law, which may differ in some respects from the rights and responsibilities of
shareholders of U.S. companies.
We are incorporated under Israeli law. The rights and responsibilities of the holders of our Ordinary Shares are governed by our Articles and Israeli law.
These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S.-based corporations. In particular,
a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards
the company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting
of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and
acquisitions and interested party transactions requiring shareholder approval. In addition, a shareholder who knows that it possesses the power to determine
the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward
the company with regard to such vote or appointment. There is limited case law available to assist us in understanding the implications of these provisions
that govern shareholders’ actions, and 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.
Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our
securities.
In recent years, certain Israeli issuers listed on United States exchanges have been faced with governance-related demands from activist shareholders,
unsolicited tender offers and proxy contests. Responding to these types of actions by activist shareholders could be costly and time-consuming, disrupting
our operations and diverting the attention of management and our employees. Such activities could interfere with our ability to execute our strategic plan.
In addition, a proxy contest for the election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation
expenses and require significant time and attention by management and our Board. The perceived uncertainties as to our future direction also could affect
the market price and volatility of our securities.
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ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY.
We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item
106(a) of Regulation S-K. These risks include, among other things: operational risks, intellectual property theft, fraud, extortion, harm to employees or
customers and violation of data privacy or security laws.
Identifying and assessing cybersecurity risk is integrated into our overall risk management systems and processes. Cybersecurity risks related to our
business, technical operations, privacy and compliance issues are identified and addressed through a multi-faceted approach including third party
assessments, internal IT Audit, IT security, governance, risk and compliance reviews. Our IT policies, processes and practices are based on recognized
frameworks established by our external IT service provider and other applicable industry standards. In general, we seek to address cybersecurity risks
through a comprehensive, cross-functional approach that is focused on preserving the confidentiality, security and availability of the information that we
collect and store by identifying, preventing and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur.
As part of the above processes, we regularly engage consultants to assess our internal cybersecurity programs and compliance with applicable practices and
standards.
As part of our cybersecurity defense measures, we enforce the use of the following security systems:
EDR System (Endpoint Detection & Response)
Two-factor authentication for email (Office 365) and cloud-stored information
•
•
• We protect our mail system against spam, phishing, spoofing, and malware using a (Mail Relay system).
Additionally, we enforce a real-time threat notification mechanism and activate alerts and reports for failures in our backup system.
We do not believe that there are currently any known risks from cybersecurity threats that are reasonably likely to materially affect us or our business
strategy, results of operations or financial condition. We also describe whether and how risks from identified cybersecurity threats, including as a result of
any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of
operations, or financial condition, under the heading “We are increasingly dependent on information technology systems, infrastructure and data, and our
internal computer systems, or those of our collaborators, third-party clinical research organizations or other contractors or consultants, may fail or suffer
security breaches, which could result in a material disruption of our product development programs.” included as part of our risk factor disclosures at Item
1A of this Annual Report on Form 10-K.
Our Audit Committee of the Board of Directors, or the Audit Committee, is responsible for overseeing cybersecurity risk and periodically updates our
Board of Directors on such matters. The Audit Committee receives periodic updates from management regarding cybersecurity matters and is notified
between such updates regarding any significant new cybersecurity threats or incidents.
Management is responsible for the operational oversight of company-wide cybersecurity strategy, policy, and standards across relevant departments to
assess and help prepare us to address cybersecurity risks.
ITEM 2.
PROPERTIES.
Our facilities in Israel, which house our research and development and certain production and management functions, are in Jerusalem, Israel. Most of our
clinical development, clinical operations and regulatory functions are located in the United States. Under a lease agreement with Unihead Biopark Ltd., that
extends through 2028, we lease approximately 622 square meters of office and laboratory space. We have the option to terminate the lease early in
December 2024 and in June 2026. The average rent over the current term is $180,000 per year.
We believe that our current office and laboratory space in Israel is sufficient to meet our anticipated needs for the foreseeable future and is suitable for the
conduct of our business. We believe that suitable additional space would be available if required in the future on commercially reasonable terms.
ITEM 3.
LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
75
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
PART II
EQUITY SECURITIES.
Market for our Ordinary Shares
Our Ordinary Shares are listed on the Nasdaq Capital Market under the symbol “ENTX”.
As of March 1, 2024, there were approximately 89 holders of record of our Ordinary Shares. This number does not include the number of persons whose
shares are in nominee or in “street name” accounts through brokers.
Dividends
The Company has never declared or paid cash dividends on its Ordinary Shares and has no intention to pay any cash dividend for the foreseeable future.
The Company currently plans to retain future earnings, if any, to finance the development of its business and for other corporate purposes.
The actual amount, timing, and frequency of future dividends, if any, will be at the sole discretion of the board of directors and will be declared based upon
various factors, many of which are beyond our control.
If the Company decides to distribute a cash dividend, Israeli residents who are individuals are generally subject to Israeli income tax at a rate of either 25%
or 30%, if the recipient of such dividend is a “substantial shareholder” at the time of distribution or at any time during the preceding 12-month period,
unless the cash dividend is paid out of income that has been tax exempt due to an “approved enterprise” status under the Law for the Encouragement of
Capital Investments, 5719-1959, in which case the Company will be subject to corporate tax at a rate then in effect under Israeli law on the amount of cash
dividend and in addition, an Israeli shareholder, corporation or individual, will be subject to a tax rate of 20% on such cash dividend distribution. In
addition, Israeli resident corporations are generally exempt from Israeli corporate tax for dividends paid on our Ordinary Shares. Pursuant to the
Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes on Income, as amended (the
“U.S.-Israel Tax Treaty”), the maximum tax on dividends paid to a holder of our Ordinary Shares who qualifies as a resident of the United States within the
meaning of the U.S.-Israel Tax Treaty is 25% or 15% in case of dividends paid out of the profits of an “approved enterprise”, subject to certain conditions.
Furthermore, dividends not generated by an “approved enterprise” paid to a U.S. corporation holding at least 10% of our issued voting power during the
part of the tax year which precedes the date of payment of the dividend and during the whole of its prior tax year (if any), are generally taxed at a rate of
12.5%, subject to certain conditions.
ITEM 6.
[Reserved]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Annual Report contains forward-looking statements within the meaning of the PSLRA, Section 27A of the Securities Act, and Section 21E of the
Exchange Act, about our expectations, beliefs or intentions regarding our product development efforts, business, financial condition, results of operations,
strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate to historical or current matters. Rather,
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. These factors include those contained in “Item 1A - Risk
Factors” and “Cautionary Statement Regarding Forward-Looking Statements” of this Annual Report. We do not undertake any obligation to update
forward-looking statements except as required by applicable law. We intend that all forward-looking statements be subject to the safe harbor provisions of
PSLRA. These forward-looking statements reflect our views only as of the date they are made.
Overview
Entera is a clinical stage company focused on developing first-in-class oral tablet formats of peptides or protein replacement therapies. We focus on
underserved, chronic medical conditions for which oral administration of a protein therapy has the potential to significantly shift a treatment paradigm.
76
Currently, most protein therapies are administered via frequent intravenous, subcutaneous, or intramuscular injections. In chronic diseases where patients
require persistent management, these cumbersome, often painful and high-priced injections can create a major treatment gap.
From a technical standpoint, oral delivery of therapeutic proteins is challenging due to the enzymatic degradation within the gastrointestinal tract and poor
absorption into the blood stream due to the proteins’ polarity and molecular weight. We leverage our N-Tab™ oral delivery technology which is designed
to simultaneously stabilize the peptide in the gastrointestinal tract and promote its absorption into the bloodstream.
Our most advanced product candidate, EB613 (oral PTH (1-34), teriparatide), is being developed as the first oral, osteoanabolic (bone building) once-daily
tablet treatment for post-menopausal women with low BMD and high-risk osteoporosis with no prior fracture. A placebo controlled, dose ranging Phase 2
study of EB613 tablets (n= 161) met primary (pharmacodynamic/bone turnover biomarker) and secondary endpoints (BMD). Following the completion of
a Type C and a Type D meeting with the U.S. Food and Drug Administration’s (FDA), we announced the FDA’s concurrence that a 2-year, placebo-
controlled phase 3 (registrational) study with Total Hip BMD as primary endpoint could support a new drug application (“NDA”) for EB613.
The EB612 program is being developed as the first oral PTH(1-34) tablet peptide replacement tablet therapy for hypoparathyroidism. With respect to our
EB612 program we are currently testing new generations of our N-Tab™ Technology with the naked PTH(1-34) peptide to assess the effectiveness once or
twice a day dosing regimens as well as collaborating with a third party on another peptide in this field. To date, Entera’s proprietary PTH tablets have been
safely administered to a total of 102 healthy subjects in Phase 1 studies and 153 patients in Phase 2 studies in osteoporosis and hypoparathyroidism, two
diseases that remain underserved with the current standard of care and which disproportionately affect women. We believe these product candidates, if
approved, hold the potential to become standards of care for patients with osteoporosis and hypoparathyroidism. Additionally, we are exploring the use of
our PTH(1-34) tablets for the treatment of stress fractures in athletes and expect to collaborate with an investigator sponsored study in this area. We expect
to initiate a phase 2 trial for this indication in the second half of 2024.
In May 2023, the results from our oral GLP-2 program were published in the International Journal of Peptide Research and Therapeutics, “Oral Delivery
Technology Enabling Gastro-Mucosal Absorption of Glucagon-Like-Peptide-2 Analog (Teduglutide) - A Novel Approach for Injection-Free Treatment of
Short Bowel Syndrome.” We believe GLP-2 represents a strong candidate for our N-Tab™ Technology and warrants further development as an injection-
free alternative to patients suffering from short bowel syndrome and other gastrointestinal disorders where GLP-2 plays a role.
In September 2023, we entered into a research collaboration agreement with OPKO. Under the terms of this agreement, OPKO has agreed to supply its
proprietary long-acting GLP-2 peptide and certain Oxyntomodulin analogs for the development of oral tablet formulations using our proprietary N-Tab™
technology. Oxyntomodulin (OXM) is a naturally occurring peptide hormone found in the colon, with glucagon-like-peptide 1 (GLP-1) and glucagon dual
agonist activity which suppresses appetite and induces weight loss. OPKO has developed several proprietary, modified OXM analogs as potential
candidates for treating obesity, including an injectable pegylated peptide which demonstrated significant reductions in weight loss and decreased plasma
triglyceride levels in over 430 patients in phase 2/2B studies. We expect in vivo PK/PD data from both the oral GLP-2 tablet program and the oral OXM
tablet program in 2024. We and OPKO have each agreed to be responsible for specific phases of development of the two oral peptides to the point of
demonstrated in vivo feasibility.
Since our inception, we have raised a total of $91.3 million from a combination of public and private equity offerings, grants and the exercise of options
and warrants. Since inception, we have incurred significant losses. For the years ended December 31, 2023 and 2022, our operating losses were $8.9
million and $13.0 million, respectively, and we expect to continue to incur significant expenses and losses for the foreseeable future. As of December 31,
2023, we had an accumulated deficit of $104.4 million. Our losses may fluctuate significantly from quarter to quarter and year to year, depending on the
timing of our clinical trials, our expenditures on research and development activities, and payments under any future collaborations into which we may
enter.
As a result of our recurring losses from operations, negative cash flows and lack of liquidity, management is of the opinion that there is substantial doubt as
to the Company's ability to continue as a going concern. Our independent registered public accounting firm included an explanatory paragraph in its report
on our financial statements as of, and for the year ended, December 31, 2023, expressing the existence of substantial doubt about our ability to continue as
a going concern. The audited consolidated financial statements included herein have been prepared assuming that we will continue as a going concern and
do not include adjustments that might result from the outcome of this uncertainty. If we are unable to raise the requisite funds, we will need to delay certain
program initiation, curtail or cease operations. See “Item 1A-Risk Factors-Risks Related to Our Financial Position and Need for Additional Capital.”
77
As of December 31, 2023, we had cash and cash equivalents of $11.0 million. We believe that our existing cash resources will be sufficient to meet our
projected operating requirements through the second quarter of 2025, which include the capital required to fund our ongoing operations, including R&D,
the completion of the Phase 1 study related to the new generation platform and the GLP-2/OXM collaborative research we are conducting with OPKO.
However, this does not include the capital required to fund our proposed Phase 3 pivotal study for EB613 in osteoporosis. We currently do not have funding
sufficient for this Phase 3 study, and our ability to commence the study requires additional funding, which may not be available on reasonable terms, or at
all. Any delay or our inability to secure such funding will delay or prevent the commencement of this study.
In order to fund further operations, we will need to raise additional capital. We may raise these funds through a variety of means, including private or
public equity offerings, debt financings, strategic collaborations and licensing arrangements. Additional financing may not be available when we need it or
may not be available on terms that are favorable to us.
Patent Transfer, Licensing Agreements and Grant Funding
Oramed Patent Transfer Agreement
In 2011, we entered into the Patent Transfer Agreement with Oramed, pursuant to which Oramed assigned to us all of its rights, title and interest in the
patent rights that Oramed licensed to us when we were originally organized, subject to a worldwide, royalty-free, exclusive, irrevocable, perpetual and sub-
licensable license granted to Oramed under the assigned patent rights to develop, manufacture and commercialize products or otherwise exploit such patent
rights in the fields of diabetes and influenza. Additionally, we agreed not to engage, directly or indirectly, in any activities in the fields of diabetes and
influenza. Under the terms of the Patent Transfer Agreement, we agreed to pay Oramed royalties equal to 3% of our net revenues generated, directly or
indirectly, from exploitation of the assigned patent rights, including the sale, lease or transfer of the assigned patent rights or sales of products or services
covered by the assigned patent rights.
Israeli Innovation Authority Grants
We have received grants of approximately $0.5 million from the IIA to partially fund our research and development. The grants are subject to certain
requirements and restrictions under the Research Law. In general, until the grants are repaid with interest, royalties are payable to the Israeli government in
the amount of 3% on revenues derived from sales of products or services developed in whole or in part using the IIA grants, including EB613, EB612 and
any other oral PTH product candidates we may develop. The royalty rate may increase to 5%, with respect to approved applications filed following any
year in which we achieve sales of over $70 million.
The amount that must be repaid may be increased up to six times the amount of the grant received and the interest. The rate of royalties may be accelerated
and the royalty liability may increase (up to three times the amount of the grant amount and the interest), if manufacturing of the products developed with
the grant money is transferred outside of the State of Israel. Moreover, a payment of up to 600% of the grant received may be required upon the transfer of
any IIA-funded know-how to a non-Israeli entity. We signed a contract with a U.K.-based contract manufacturing organization to produce and supply pills
for trials performed worldwide. We believe that, because this production is not for commercial purposes, it will not affect the royalty rates to be paid to the
IIA. Should the IIA successfully take a contrary position, the maximum royalties to be paid to the IIA will be approximately $1.5 million, which is three
times the amount of the original grant (three times of the interest will also be added). Under a collaboration agreement that was previously mutually
terminated in May 2023, from 2019 through March 31, 2023, we recognized an aggregate amount of $1.7 million of revenue in accordance with ASC 606,
"“Revenues from Contracts with Customers” With respect to revenue generated from the collaboration agreement. Prior to its termination, we had been
required to pay to the IIA 5.38% of each payment made to us under the collaboration agreement with an ultimately liability of up to 600% of the grant
received plus interest. As of December 31, 2023, we had paid royalties to the IIA in the amount of $83,000 related to a collaboration agreement and other
material transfer agreements (“MTAs”). As of December 31, 2023, we owed $13,000 to the IIA, which was paid in February 2024.
In addition to paying any royalties due, we must abide by other restrictions associated with receiving such grants under the Research Law that continue to
apply following repayment to the IIA.
78
Financial Overview
Revenue
To date, we have not generated any revenue from sales of our products, and we do not expect to receive any revenue from any product candidates that we
develop unless and until we obtain regulatory approval and successfully commercialize our products.
Revenues are recognized according to ASC 606, “Revenues from Contracts with Customers”.
According to ASC 606, a performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services. Goods and
services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created. A good or
service promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are
readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the
contract. Options granted to the customer that do not provide a material right to the customer that it would not receive without entering into the contract do
not give rise to performance obligations.
Under ASC 606, the consideration that we would be entitled to upon the achievement of contractual milestones, which are contingent upon the occurrence
of future events of development and commercial progress, are a form of variable consideration. When assessing the portion, if any, of such milestone-
related consideration to be included in the transaction price, we first assess the most likely outcome for each milestone, and exclude the consideration
related to milestones of which the occurrence is not considered the most likely outcome. We then evaluate if any of the variable consideration determined in
the first step is constrained. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of
cumulative revenue under the contract will not occur. Estimates of variable consideration and determination of whether to include estimated amounts in the
transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is
reasonably available. We did not recognize any revenues from milestone payments.
An entity should recognize revenue for a sales-based or usage-based royalty promised in exchange for a license of intellectual property only when (or as)
the later of the following events occurs:
•
•
The subsequent sale or usage occurs; and
The performance obligation to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied (or
partially satisfied).
Research and Development Expenses
We primarily focus on our research and development activities. Product candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We
expect that our research and development expenses will increase significantly in future periods as we advance EB613, EB612 and other product candidates
into later stages of clinical development and invest in additional preclinical candidates.
Research and development expenses consist of costs incurred for the development of our drug delivery technology and our product candidates, including:
•
•
•
•
•
•
employee-related expenses, including salaries, bonuses and share-based compensation expenses for employees and service providers in
the research and development function;
expenses incurred in operating our laboratories including our small-scale manufacturing facility;
expenses incurred under agreements with CROs, and investigative sites that conduct our clinical trials;
expenses related to outsourced and contracted services, such as external laboratories, consulting and advisory services;
supply, development and manufacturing costs relating to clinical trial materials; and
other costs associated with pre-clinical and clinical activities.
79
Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities,
including due to the timing of initiation of clinical trials and the enrollment of patients in clinical trials. For the years ended December 31, 2023 and 2022,
our research and development expenses were $4.5 million and $5.8 million, respectively. Research and development expenses for the years ended
December 31, 2023 and 2022 were primarily for the development of EB613, EB612, and development of our new generation platform. The successful
development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing and estimated costs of the efforts
that will be necessary to complete the development of, or the period, if any, in which material net cash inflows may commence from, any of our product
candidates. This is due to numerous risks and uncertainties associated with developing drugs, including:
•
•
•
•
•
•
the uncertainty of the scope, rate of progress, results and cost of our clinical trials, nonclinical testing and other related activities;
the cost of manufacturing clinical supplies and establishing commercial supplies of our product candidates and any products that we may
develop;
the number and characteristics of product candidates that we pursue;
the cost, timing and outcomes of regulatory approvals;
the cost and timing of establishing any sales, marketing, and distribution capabilities; and
the terms and timing of any collaborative, licensing and other arrangements that we may establish, including any milestone and royalty
payments thereunder.
A change in the outcome of any of these variables with respect to the development of EB613, EB612 or any other product candidate that we may develop
could mean a significant change in the costs and timing associated with the development of such product candidate. For example, if the FDA or other
regulatory authority were to require us to conduct preclinical or clinical studies beyond those that we currently anticipate as necessary for development, if
we experience significant delays in enrollment in any clinical trials, or if we encounter difficulties in manufacturing our clinical supplies, then we could be
required to expend significant additional financial resources and time on the completion of the clinical development.
General and Administrative Expenses
General and administrative expenses consist principally of salaries, benefits, share-based compensation and related costs for directors and personnel in
executive and finance functions. Other general and administrative expenses include D&O insurance and other insurance, communication expenses,
professional fees for legal and accounting services, costs associated with maintaining and prosecuting our intellectual property portfolio and business
development expenses.
We expect that our general and administrative expenses will increase in the future as we increase our headcount and expand our administrative function to
support our operations.
Financial Expenses (Income), Net
Financial expenses (income), net are composed primarily of interest income from bank deposits and exchange rate differences of certain currencies against
our functional currency.
Income Tax Expenses (Benefit)
We have not generated taxable income since our inception, and as of December 31, 2023, we had carry-forward tax losses of $75.8 million. We anticipate
that we will be able to carry forward these tax losses indefinitely to future tax years. Accordingly, we do not expect to pay taxes in Israel until we have
taxable income after the full utilization of our carryforward tax losses. We provided a full valuation allowance with respect to the deferred tax assets related
to these carry forward losses of the Company.
The Company’s subsidiary, Entera Bio, Inc., is taxed separately under U.S. tax laws. As of December 31, 2023, Entera Bio Inc. had tax loss carry-forwards
of $156 thousand.
80
Results of Operations
Comparison of Years Ended December 31, 2023 and 2022
Revenues
Cost of revenues
Operating expenses:
Research and development expenses
General and administrative expenses
Other income
Operating loss
Financial income, net
Income tax expenses
Net loss
Revenue
$
$
$
$
$
$
$
$
$
Year Ended
December 31,
2023
2022
Increase (Decrease)
%
$
(In thousands, except for percentage information)
134 $
101
(134)
(101)
- $
- $
4,510 $
4,430 $
(49) $
8,891 $
(31) $
29 $
8,889 $
5,848 $
7,253 $
(51) $
13,017 $
(83) $
137 $
13,071 $
(1,338)
(2,823)
2
(4,126)
52
(108)
(4,182)
(100)%
(100)%
(22.8)%
(38.9)%
(3.9)%
(31.6)%
(62.6)%
(78.8)%
(32.0)%
Revenues for the year ended December 31, 2022 were mainly attributable to pre-clinical R&D services provided under our previously terminated
collaboration agreement. We did not recognize any revenue for the year ended December 31, 2023 due to the termination of the collaboration agreement,
effective May 2, 2023.
Cost of Revenues
Cost of revenues for the year ended December 31, 2022 were mainly attributable to pre-clinical R&D services provided under our previously terminated
collaboration agreement. The decrease in cost was due to the lack of revenue, as described above, for the year ended December 31, 2023.
Research and Development Expenses
Research and development expenses for the year ended December 31, 2023 were $4.5 million, as compared to $5.8 million for the year ended December
31, 2022. The decrease of $1.3 million was primarily due to a decrease of $1.5 million in pre-clinical activity and materials costs, a decrease of $0.6 million
in employee compensation, including a one-time payment made to a former employee pursuant to the terms of his separation agreement. The decrease was
partially offset by an increase of $0.8 million in clinical expenses for our Phase 1 PK study related to our new generation platform and new formulations
for EB612.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2023 were $4.4 million, compared to $7.3 million for the year ended December 31,
2022. The decrease of $2.8 million was mainly attributable to a decrease of $1.1 million in employee compensation, including a one-time payment to our
former employee pursuant to the terms of his separation agreement, a decrease of $0.8 million as part of a restructuring of professional fees and other
advisor expenses, a decrease in Board fees of $0.2 million due to the Board’s forfeiture of their fees for the third and fourth quarters of 2023 and a decrease
of $0.7 million in D&O insurance costs.
Financial Income, Net
Financial income, net for the year ended December 31, 2023 was $31,000, compared to $83,000 for the year ended December 31, 2022. Our financial
income for 2023 was composed primarily of interest income from bank deposits and exchange rate differences of certain currencies against our functional
currency, which is the U.S. Dollar.
81
Liquidity and Capital Resources
Since inception, we have incurred significant losses. As a result of our recurring losses from operations, negative cash flows from operating activities and
lack of liquidity, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of, and for
the year ended, December 31, 2023, expressing the existence of substantial doubt about our ability to continue as a going concern. For the years ended
December 31, 2023 and 2022, our operating losses were $8.9 million and $13.0 million, respectively. We expect to continue to incur significant expenses
and losses for the next several years as we advance our products through development and provide administrative support for our operations. As of
December 31, 2023, we had an accumulated deficit of $104.4 million. Since our inception, we have raised a total of $91.3 million, including $25.3 million
through at-the-market-offering (“ATM”) programs, $6.6 million in our December 2023 Private Placement (as defined below), $14.3 million in our
December 2019 private placement, $11.2 million in our IPO in 2018 and $33.9 million in aggregate funding from a combination of grants, exercise of
options and warrants and private placements of Ordinary Shares, preferred shares and debt prior to our IPO. In addition, as of December 31, 2023, we had
received approximately $1.7 million under our previously terminated collaboration agreement.
As of December 31, 2023, we had cash and cash equivalents of $11.0 million. Our primary uses of cash have been to fund research and development,
general and administrative and working capital requirements, and we expect these will continue to be our primary uses of cash.
Equity Offerings
On September 2, 2022, we entered into a Sales Agreement with SVB Securities LLC, as sales agent, to implement an ATM program under which we may
from time to time offer and sell up to 5,000,000 Ordinary Shares (the “SVB ATM Program”) under our currently effective Registration Statement on Form
S-3 and a related prospectus supplement forming a part thereof. The sales agent is entitled to a fixed commission of 3% of the aggregate gross proceeds as
well as and reimbursement of expenses. As of December 31, 2023, we had sold 4,030 shares under the SVB ATM Program for aggregate proceeds of $5
thousand, net of issuance costs.
On December 20, 2023, we entered into a securities purchase agreement with certain investors (the “Purchasers”), providing for the private placement (the
“December 2023 Private Placement”) to the Purchasers of an aggregate of 7,916,879 units (collectively, the “Units”), each Unit consisting of (i) one
Ordinary Share (or, in lieu thereof, one pre-funded warrant to purchase one Ordinary Share (the “Pre-Funded Warrants”)) and (ii) one warrant to purchase
one Ordinary Share (the “Ordinary Share Warrant”), for aggregate proceeds of approximately $6.6 million (or $0.835 per Unit, which represented the
aggregate of the Nasdaq closing price on December 20, 2023 plus $0.125 per Ordinary Share Warrant). The Private Placement was priced at the market
under applicable Nasdaq rules and closed on December 22, 2023.
Each Ordinary Share Warrant has an exercise price of $1.00 per share (a premium of 41% to the closing price per Ordinary Share on Nasdaq on December
20, 2023), is immediately exercisable, and expires five years from the date of issuance, and is subject to customary adjustments for dividends, splits,
combinations and fundamental transactions, such as a merger of the Company. None of the warrants contain any “ratchet”, “reset” or other adjustments
related to financial antidilution.
If all Ordinary Share Warrants were exercised for cash, then the Company would receive additional proceeds of approximately $7.9 million. There can be
no assurance that the holders of the Ordinary Share Warrants exercise their respective warrants for cash, or at all.
Funding Requirements
We believe that our existing cash resources will be sufficient to meet our projected operating requirements through the second quarter of 2025, which
include the capital required to fund our ongoing operations, including R&D, the completion of the Phase 1 study related to the new generation platform and
the GLP-2/OXM collaborative research we are conducting with OPKO. However, this does not include the capital required to fund our proposed Phase 3
pivotal study for EB613 in osteoporosis. We currently do not have funding sufficient for the pivotal phase 3 study, and our ability to commence the study
will require additional funding, which may not be available on reasonable terms, or at all. Any delay or our inability to secure such funding will delay or
prevent the commencement of these studies.
82
We have based these estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently
expect. Because of the numerous risks and uncertainties associated with the development of our product candidates, and the extent to which we may enter
into collaborations with third parties for development of these or other product candidates, we are unable to estimate the amounts of increased capital
outlays and operating expenses associated with completing the development of our current and future product candidates. Our future capital requirements
will depend on many factors, including:
●
●
●
●
the costs, timing and outcome of clinical trials for, and regulatory review of our five oral peptide programs, including EB613 and EB612
and any other product candidates we may develop;
the costs of development activities for any other product candidates we may pursue;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims; and
our ability to establish collaborations on favorable terms, if at all.
We are in the process of evaluating various financing alternatives in the public or private equity markets or through license of our N-Tab™ technology to
additional external parties through partnerships or research collaborations as we will need to finance future research and development activities, general
and administrative expenses and working capital through fund raising. However, there is no certainty about our ability to obtain such funding.
Other than the SVB ATM Program, we do not have any committed external sources of funds. To the extent that we raise additional capital through the sale
of equity or convertible debt securities, the ownership interest of our then-existing shareholders will be diluted, and the terms of these securities may
include liquidation or other preferences that may adversely affect our existing shareholders’ rights as shareholders. Debt financing, if available, may
involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital
expenditures or declaring dividends and may include requirements to hold minimum levels of funding. If we raise additional funds through collaborations,
strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or
research programs or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or
collaborations, when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant
rights to develop and market our oral PTH product candidates and any other product candidates that we would otherwise prefer to develop and market
ourselves.
Our audited consolidated financial statements for the year ended December 31, 2023, included elsewhere in this Annual Report, note that there is
substantial doubt about our ability to continue as a going concern as of such date; and in its report accompanying our audited consolidated financial
statements included herein, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from
operations and our cash outflows from operating activities raise substantial doubt as to our ability to continue as a going concern. This means that our
management and our independent registered public accounting firm have expressed substantial doubt about our ability to continue our operations without
an additional infusion of capital from external sources. The audited consolidated financial statements have been prepared on a going concern basis and do
not include any adjustments that may be necessary should we be unable to continue as a going concern. If we are unable to finance our operations, our
business would be in jeopardy and we might not be able to continue operations and might have to liquidate our assets. In that case, investors might receive
less than the value at which those assets are carried on our financial statements, and it is likely that investors would lose all or a part of their investment.
Cash Flows
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
The following table sets forth the primary sources and uses of cash for each of the periods set forth below:
Net Cash used in operating activities
Net Cash used in investing activities
Net Cash provided by financing activities
Net decrease in cash and cash equivalents
83
(audited)
Year ended December 31,
2023
2022
$
$
(in thousands)
(7,310) $
(17)
6,036
(1,291) $
(12,499)
(102)
13
(12,588)
Net Cash Used in Operating Activities
Net Cash used in operating activities for the year ended December 31, 2023 was $7.3 million, consisting primarily of our operating loss of $8.9 million, and
an increase of $0.2 million in our working capital which was partially offset by approximately $1.8 million of share-based compensation and depreciation
expenses.
Net Cash used in operating activities for the year ended December 31, 2022 was $12.5 million, consisting primarily of our operating loss of $13.0 million
and an increase of $1.8 million in our working capital, which was partially offset by approximately $2.3 million of share-based compensation and
depreciation expenses.
The decrease of $5.2 million in cash used in operating activities for the year ended December 31, 2023 compared to the same period in 2022 was mainly
attributed to a decrease of $4.1 million in our operating loss, a decrease of $1.6 million in working capital primarily due to payments to suppliers and
services providers, which was partially offset by a decrease of $0.5 million in share-based compensation and depreciation expenses.
Net Cash Used in Investing Activities
Net Cash used in investing activities for the years ended December 31, 2023 and December 31, 2022 primarily consisted of purchase of property and
equipment.
Net Cash Provided by Financing Activities
Net Cash provided by financing activities for the year ended December 31, 2023 primarily reflects net proceeds of $5.8 million from issuance of the Units
in the December 2023 Private Placement.
Net Cash provided by financing activities for the year ended December 31, 2022 primarily reflects net proceeds of $13 thousand from the exercise of
options to purchase Ordinary Shares.
Contractual Obligations
The following tables summarize our contractual obligations and commitments as of December 31, 2023 that will affect our future liquidity:
Contractual Obligations
Operating leases for facility
Total
Severance Obligations
Total
Less than
1 year
Payments due by period
1 - 3 years
(In thousands)
3 - 5 years
More than
5 years
$
$
454 $
454 $
184 $
184 $
270 $
270 $
- $
- $
-
-
We have long-term liabilities for severance pay that are calculated pursuant to Israeli law generally based on the most recent salary of the relevant
employees multiplied by the number of years of employment to the extent not covered by our regular deposits with defined contribution plans. As of
December 31, 2023, our severance pay liability, net was immaterial. Because the timing of any such payments is not fixed and determinable, we have not
included these liabilities in the table above.
Contingencies
We also have obligations to make future payments to third parties that become due and payable on the achievement of certain milestones. We have not
included these commitments in our statements of financial position or in the table above because the achievement and timing of these milestones is not
fixed and determinable. These potential future commitments include a commitment to pay Oramed royalties equal to 3% of our net revenues pursuant to the
terms of the Patent Transfer Agreement between us and Oramed and a commitment to pay royalties to the IIA.
84
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of
consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue,
expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under
the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between
our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
While our significant accounting policies are more fully described in Note 2 to the consolidated financial statements included elsewhere in this Annual
Report, we believe that the following accounting policies are the most critical to assist shareholders and investors reading the consolidated financial
statements in fully understanding and evaluating our financial condition and results of operations. These policies relate to the more significant areas
involving management’s judgments and estimates and they require our most difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of the matters that are inherently uncertain.
Share-Based Compensation
In 2013 and in 2018, we adopted share-based compensation plans for employees, directors and service providers. Our share-based compensation plan
adopted in 2013 governs the issuance of equity incentive awards prior to our initial public offering, and the share-based compensation plan adopted in 2018
governs the issuance of equity incentive awards from and after the closing of our initial public offering. As part of the plans, we grant employees, directors
and service providers, from time to time and at our discretion, options to purchase our Ordinary Shares and restricted share units. The fair value of the
services received in exchange for the grant of the options is recognized as an expense in our statements of comprehensive loss with a corresponding
adjustment to equity in our statements of financial position. The total amount is recognized as an expense ratably over the service period of the options,
which is the period during which all vesting conditions are expected to be met.
We estimate the fair value of our share-based compensation to employees, directors and service providers using the Black-Scholes option pricing model,
which requires the input of highly subjective assumptions, including (a) the expected volatility of our shares, (b) the expected term of the award, (c) the
risk-free interest rate, (d) expected dividends and (e) the fair value of our Ordinary Shares at the date of grant.
The following table summarizes the allocation of our share-based compensation expense:
Cost of revenues
Research and development
General and administrative
Total
Recently Issued Accounting Pronouncements
Year ended
December 31,
2023
2022
$
$
(in thousands)
- $
424
1,265
1,689 $
14
708
1,525
2,247
Certain recently issued accounting pronouncements are discussed in Note 2 to the consolidated financial statements included elsewhere in this Annual
Report.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Not required for smaller reporting companies.
85
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ENTERA BIO LTD.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2023
TABLE OF CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 1309)
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
86
Page
87
88
89
90
91
92
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Entera Bio Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Entera Bio Ltd. and its subsidiary (the “Company”) as of December 31, 2023 and 2022,
and the related consolidated statements of operations, changes in shareholders' equity and cash flows for the years then ended, including the related notes
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years
then ended in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in
note 1c to the consolidated financial statements, the Company has suffered recurring losses from operations and has cash outflows from operating activities
that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 1c. The
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 of these consolidated financial statements 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 Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be
communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii)
involved our especially challenging, subjective, or complex judgments. We determined there are no critical audit matters.
/s/ Kesselman & Kesselman
Certified Public Accountants (lsr.)
A member firm of PricewaterhouseCoopers International Limited
Tel-Aviv, Israel
March 8, 2024
We have served as the Company’s auditor since 2010.
87
ENTERA BIO LTD.
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share data)
A s s e t s
CURRENT ASSETS:
Cash and cash equivalents
Accounts receivable
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS:
Property and equipment, net
Operating lease right-of-use assets
Deferred income taxes
Funds in respect of employee rights upon retirement
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
L i a b i l i t i e s and shareholders' equity
CURRENT LIABILITIES:
Accounts payable
Accrued expenses and other payables
Current maturities of operating lease
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES:
Operating lease liabilities
Liability for employee rights upon retirement
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Ordinary Shares, NIS 0.0000769 par value: Authorized - as of December 31, 2023 and
December 31, 2022, 140,010,000 shares; issued and outstanding as of
December 31, 2023, and December 31, 2022, 35,476,341 and 28,809,922
shares, respectively
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
TOTAL SHAREHOLDERS' EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
* Represents an amount less than one thousand US dollars
The accompanying notes are an integral part of the consolidated financial statements.
88
December 31
2023
2022
11,019
-
238
11,257
100
388
14
6
508
11,765
83
874
134
1,091
256
32
288
1,379
12,309
246
294
12,849
139
90
43
6
278
13,127
17
1,233
91
1,341
-
32
32
1,373
1
114,730
41
(104,386)
10,386
11,765
*
107,210
41
(95,497)
11,754
13,127
ENTERA BIO LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
REVENUES
COST OF REVENUES
GROSS PROFIT
OPERATING EXPENSES:
Research and development
General and administrative
Other income
TOTAL OPERATING EXPENSES
OPERATING LOSS
FINANCIAL INCOME, net
LOSS BEFORE INCOME TAX
INCOME TAX EXPENSES
NET LOSS
LOSS PER SHARE BASIC AND DILUTED
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTATION OF BASIC
AND DILUTED LOSS PER SHARE
The accompanying notes are an integral part of the consolidated financial statements.
89
Year ended December 31
2023
2022
-
-
-
4,510
4,430
(49)
8,891
8,891
(31)
8,860
29
8,889
134
101
33
5,848
7,253
(51)
13,050
13,017
(83)
12,934
137
13,071
0.31
0.45
29,007,794
28,808,090
ENTERA BIO LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(U.S. dollars in thousands, except share and per share data)
Accumulated
other
Comprehensive
income
Ordinary shares
Number
of shares
Additional
paid-
issued Amounts
*
-
*
-
*
-
28,804,411
-
5,511
-
28,809,922
-
in capital
104,950
-
13
2,247
107,210
-
6,662,389
4,030
-
35,476,341
1
*
-
1
5,826
5
1,689
114,730
Accumulated
deficit
Total
41
-
-
-
41
-
-
-
-
41
(82,426) 22,565
(13,071) (13,071)
13
2,247
(95,497) 11,754
(8,889)
(8,889)
-
-
-
5,827
-
5
1,689
-
(104,386) 10,386
BALANCE AT JANUARY 1, 2022
Net loss
Exercise of options to ordinary shares
Share-based compensation
BALANCE AT DECEMBER 31, 2022
Net loss
Issuance of ordinary shares, warrants and pre-funded warrants
due to a private placement, net of issuance costs
Issuance of shares under the ATM program, net of issuance costs
Share-based compensation
BALANCE AT DECEMBER 31, 2023
* Represents an amount less than one thousand US dollars.
The accompanying notes are an integral part of these consolidated financial statements.
90
ENTERA BIO LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments required to reconcile net loss to net cash used in operating activities:
Depreciation
Deferred income taxes
Share-based compensation
Finance income, net
Changes in operating asset and liabilities:
Decrease (increase) in accounts receivable
Decrease (increase) in other current assets
Increase (decrease) in accounts payable
Decrease in accrued expenses and other payables
Decrease in contract liabilities
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Funds with respect to employee rights upon retirement
Purchase of property and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of shares through ATM programs, net of issuance costs
Issuance of ordinary shares and warrants due to a private placement
Issuance costs
Exercise of options into shares
Net cash provided by financing activities
DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED DEPOSITS
CASH, CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT BEGINNING OF THE YEAR
CASH, CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT END OF THE YEAR
Reconciliation in amounts on consolidated balance sheets:
Cash and cash equivalents
Restricted deposits included in other current assets
Total cash and cash equivalents and restricted deposits
SUPPLEMENTAL DISCLOSURE OF CASH FLOW TRANSACTIONS:
Interest received
Income taxes paid in cash during the year
SUPPLEMENTARY INFORMATION ON INVESTING AND FINANCING ACTIVITIES NOT INVOLVING
CASH FLOWS:
Issuance costs
Operating lease right of use assets obtained in exchange for new operating lease liabilities
The accompanying notes are an integral part of the consolidated financial statements.
91
Year ended December 31
2023
2022
(8,889)
(13,071)
56
29
1,689
246
56
66
(563)
-
(7,310)
-
(17)
(17)
5
6,611
(580)
-
6,036
(1,291)
12,376
11,085
11,019
66
11,085
18
-
470
449
64
174
2,247
(78)
(63)
(40)
(149)
(1,568)
(15)
(12,499)
(55)
(47)
(102)
-
-
13
13
(12,588)
24,964
12,376
12,309
67
12,376
-
165
-
-
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 1 - GENERAL
a.
Entera Bio Ltd. (collectively with its subsidiary, the "Company) was incorporated on September 30, 2009 and commenced operation on June 1,
2010. On January 8, 2018, the Company incorporated its wholly owned subsidiary, Entera Bio Inc., in Delaware, United States. The Company is
focused on developing first-in-class oral tablet formats of peptides or protein replacement therapies. The Company focuses on underserved,
chronic medical conditions for which oral administration of a protein therapy has the potential to significantly shift a treatment paradigm.
b.
c.
d.
The Company’s most advanced product candidate, EB613, oral PTH (1-34), is being developed as the first oral, osteoanabolic (bone building)
once-daily tablet treatment for post-menopausal women with low bone mineral density (“BMD”) and high-risk osteoporosis with no prior
fracture.
The Company is preparing to initiate a Phase 3 registrational study for EB613 pursuant to the FDA’s qualification of a quantitative BMD
endpoint. The EB612 program is being developed as the first oral PTH(1-34) tablet peptide replacement therapy for hypoparathyroidism.
Additionally, the Company intends to license its N-Tab™ technology to biopharmaceutical companies for use with their proprietary compounds.
The Company's ordinary shares, NIS 0.0000769 par value per share (“ordinary shares”), have been listed on the Nasdaq Capital Market since
July 2018 under the symbol “ENTX”.
Because the Company is engaged in research and development activities, it has not derived significant income from its activities and has incurred
an accumulated deficit in the amount of $104.4 million as of December 31, 2023 and negative cash flows from operating activities. The
Company's management is of the opinion that its available funds as of December 31, 2023 will allow the Company to operate under its current
plans through the second quarter of 2025. This assumes the use of the Company’s capital to fund its ongoing operations, including research and
development, the completion of the Phase 1 study related to the new generation platform and the GLP-2/OXM collaborative research the
Company is conducting with OPKO Biologics, Inc., a subsidiary of OPKO Health Inc. (“OPKO”). The Company’s current capital resources do
not include the capital required to fund the Company's proposed Phase 3 study for EB613 in osteoporosis. These factors raise substantial doubt
as to the Company's ability to continue as a going concern. Management is in the process of evaluating various financing alternatives in the
public and private equity markets, debt financing and strategic collaborations, as the Company will need to finance future research and
development activities, general and administrative expenses and working capital through capital raising. However, there is no certainty about the
Company's ability to obtain such funding. These consolidated financial statements do not include any adjustments that may be necessary should
the Company be unable to continue as a going concern.
In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and
military targets. Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with
the Gaza Strip and in other areas within the State of Israel. These attacks resulted in thousands of deaths and injuries, and Hamas additionally
kidnapped many Israeli civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and commenced a
military campaign against Hamas. While the Company has a few employees who are in active military service, the ongoing war with Hamas has
not, since its inception, materially impacted the Company's business or operations. Furthermore, the Company does not expect any delays to any
of its programs as a result of the situation. However, the Company cannot currently predict the intensity or duration of Israel’s war against
Hamas, nor can predict how this war will ultimately affect its business and operations or Israel’s economy in general.
92
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a.
Basis of presentation of the financial statements
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.
GAAP”).
b.
Use of estimates in the preparation of financial statements
The preparation of the 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, the disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
c.
Functional currency
1)
Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in
which the entity operates (the “functional currency”). The U.S. dollar is the currency of the primary economic environment in which the
operations of the Company are conducted. The consolidated financial statements are presented in U.S. dollars.
The functional currency of the subsidiary is the U.S. dollar.
2)
Transactions and balances
Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Balances in non- U.S. dollar
currencies are translated into U.S. dollars using historical and current exchange rates for non-monetary and monetary balances,
respectively. For non-U.S. dollar transactions and other items in the statements of income (indicated below), the following exchange rates
are used: (i) for transactions – exchange rates at transaction dates or average exchange rates; and (ii) for other items (derived from non-
monetary balance sheet items such as depreciation and amortization) – historical exchange rates. Currency transaction gains and losses are
presented in financial income (expenses), as appropriate.
d.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and its subsidiary Entera Bio Inc. All inter-company transactions and
balances have been eliminated in consolidation.
93
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
e.
Cash and cash equivalents
The Company considers as cash equivalents all short-term, highly liquid investments, which include short-term bank deposits with original
maturities of three months or less from the date of purchase that are not restricted as to withdrawal or use and are readily convertible to known
amounts of cash.
f.
Bank deposits
Bank deposits with original maturity dates of more than three months but less than one year are included in short-term deposits. Such short-term
deposits bore interest at an average annual rate of approximately 6% for the year ended December 31, 2023.
Bank deposits with maturity of more than one year are considered long-term.
g.
Restricted cash
Restricted cash deposited in an interest-bearing saving account which is used as a security for the Company's office rent and credit card.
h.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash
equivalents. The Company maintains cash held in checking accounts and deposits at financial institutions in major Israeli and U.S. banks.
Management believes the Company is not exposed to significant credit risk to its current financial institution, but will continue to monitor
regularly and adjust, if needed, to mitigate risk. The Company has established guidelines regarding diversification of its investments and their
maturities, which are designed to maintain principal and maximize liquidity. To date, the Company has not experienced any losses associated with
this credit risk and continues to believe that this exposure is not significant.
i.
Fair value measurement
The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The
accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three
broad levels, which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy
gives the highest priority to Level 1 inputs.
Level 2: Observable inputs that are based on inputs not quoted on active markets but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3
inputs.
94
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
j.
Employee severance benefits
Under the Israeli Severance Pay Law, 1963, the Company is required to make severance payments upon dismissal of an Israeli employee or upon
termination of employment in certain other circumstances. The severance payment liability to the employees located in Israel (based upon length
of service and the latest monthly salary - one month’s salary for each year employed) is recorded on the Company’s balance sheet under “Liability
for employee rights upon retirement.” The liability is recorded as if it had been payable at each balance sheet date on an undiscounted basis.
In accordance with Section 14 of the Israeli Severance Pay Law, 1963, the Company makes regular deposits with certain insurance companies for
accounts controlled by each applicable employee in order to secure the employee’s retirement benefit obligation. The Company is fully relieved
from any severance pay liability with respect to each such employee after it makes the payments on behalf of the employee. The liability accrued
in respect of these employees and the amounts funded, as of the respective agreement dates, are not reflected in the Company balance sheet, as the
amounts funded are not under the control and management of the Company and the pension or severance pay risks have been irrevocably
transferred to the applicable insurance companies (the “Contribution Plan”).
For periods prior to December 2013, the liability was funded in part from the purchase of insurance policies or by the establishment of pension
funds with dedicated deposits in the funds. The amounts used to fund these liabilities are included in the balance sheets under “Funds in respect of
employee rights upon retirement”. These policies are the Company’s assets.
The amounts of severance payment expenses were $128 and $132 for the years ended December 31, 2023 and 2022, respectively.
The Company expects to contribute to insurance companies approximately $128 for the year ending December 31, 2024 in connection with its
expected severance liabilities for that year.
95
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
k.
Leases
The Company determines if an arrangement is a lease at inception. Balances related to operating leases are included in operating lease right-of-use
(“ROU”) assets and current and non-current operating lease liabilities in the consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to
make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized as of the commencement date based on the
present value of lease payments over the lease term. Lease terms will include options to extend or terminate the lease when it is reasonably certain
that the Company will either exercise or not exercise the option to renew or terminate the lease.
The discount rate for the lease is the rate implicit in the lease unless that rate cannot be readily determined. As the Company’s leases do not
provide an implicit rate, the Company’s uses its estimated incremental borrowing rate based on the information available at the commencement
date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease
term.
Sublease income is recognized on a straight-line basis over the expected lease term and is included in other income in our consolidated statements
of operations.
l.
Property and equipment
1)
2)
Property and equipment are stated at cost, net of accumulated depreciation and amortization.
The Company’s property and equipment are depreciated using the straight-line method, which approximates the pattern of usage,
over the term of the estimated useful life, as follows:
Computer equipment
Office furniture
Laboratory equipment
Years
3-5
10
7-10
Leasehold improvements are amortized by the straight-line method over the shorter of (i) the expected lease term and (ii) the estimated useful life
of the improvements.
96
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
m.
Impairment of long-lived assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may no longer be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the long-lived asset to the
estimated undiscounted future cash flows expected to be generated by the asset. If the sum of the expected undiscounted cash flow is less than the
carrying amount of the asset, the Company recognizes an impairment loss, which is the excess of the carrying amount over the fair value of the
asset, using the expected future discounted cash flows
As of December 31, 2023 and 2022, the Company did not recognize an impairment loss on its long-lived assets.
n.
Share-based compensation
The Company grants share options and restricted share units (“RSU”) (together “Share-Based Compensation”) to its employees, directors and
non-employees in consideration for services rendered.
The Company accounts for Share-Based Compensation awards classified as equity awards, including share-based option awards and RSUs, using
grant-date fair value. The Company recognize the value of the award as an expense over the requisite service period.
The Company applies ASU 2018-07 (Topic 718) that expands the scope of Topic 718 to include Share-Based Compensation transactions for
acquiring goods and services from non-employees. Under the provision of the amendment, the Company measures share-based compensation to
non-employees in the same manner as share-based compensation to employees.
The Company calculates the fair value of stock-based option awards on the date of grant using the Black-Scholes option pricing model. The
option-pricing model requires a number of assumptions, of which the most significant are the expected share price volatility and the expected
option term. The computation of expected volatility is based on the historical volatility of the Company’s ordinary shares. The expected option
term is calculated using the simplified method, as the Company has concluded that its historical share option exercise experience does not provide
a reasonable basis to estimate expected option terms. The interest rate for periods within the expected term of an award is based on the U.S.
Treasury yield curve in effect at the time of grant. The Company’s expected dividend rate is zero because the Company does not currently pay
cash dividends on its shares and does not anticipate doing so in the foreseeable future.
The Company elected to recognize compensation costs for awards granted to employees and directors conditioned only on continued service that
have a graded vesting schedule using the accelerated method based on the multiple-option award approach. The Company has elected to account
for forfeitures as they occur.
97
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
o.
Research and development expenses
Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of
salaries, share-based compensation expenses, payroll taxes and other employee benefits, lab expenses, consumable equipment and consulting fees.
All costs associated with research and development are expensed as incurred.
p.
Revenue recognition
On December 10, 2018, the Company entered into a research collaboration and license agreement with Amgen (the “Amgen Agreement”) for the
use of the Company’s oral delivery platform in the field of inflammatory disease and other serious illnesses. Pursuant to the Amgen Agreement,
the Company and Amgen had agreed to use the Company’s proprietary drug delivery platform to develop oral formulations for one preclinical
large molecule program that Amgen had selected. Additionally, the Company had granted Amgen an exclusive, worldwide, sublicensable license
under certain of its intellectual property relating to its drug delivery technology to develop, manufacture and commercialize the applicable
products.
On May 2, 2023, the Company and Amgen agreed to terminate the Amgen Agreement in accordance with its terms, effective on such date. Neither
party incurred any termination penalty or fees in connection with the termination of the Amgen Agreement.
Prior to its termination, the Company recognized revenue from the Amgen Agreement according to ASC 606, "Revenues from Contracts with
Customers”. The Company recognized no revenue prior to entering into the Amgen Agreement.
ASC 606 Revenue from Contracts with Customer introduces a five-step model for recognizing revenue from contracts with customers, as follows:
1. Identify the contract with a customer.
2. Identify the performance obligations in the contract.
3. Determine the transaction price.
4. Allocate the transaction price to the performance obligations in the contract.
5. Recognize revenue when (or as) the entity satisfies a performance obligation.
According to ASC 606, a performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services. Goods
and services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is
created. A good or service promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with
other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately
identifiable from other promises in the contract.
98
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
q.
Income taxes
1)
Deferred taxes
Deferred income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax
assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities
and are measured using the currently enacted tax rates and laws. A valuation allowance is recognized to the extent that it is more
likely than not that the deferred taxes will not be realized in the foreseeable future.
2)
Uncertainty in income taxes
The Company follows a two-step approach in recognizing and measuring uncertain tax positions. The first step is to evaluate the tax
position for recognition by determining if the available evidence indicates that it is more likely than not that the position will be
sustained based on technical merits. If this threshold is met, the second step is to measure the tax position as the largest amount that
has more than a 50% likelihood of being realized upon ultimate settlement.
r.
Loss per share
Basic loss per share is computed on the basis of the net loss, adjusted to recognize the effect of a down-round feature when it is triggered, for the
period, divided by the weighted average number of outstanding ordinary shares during the period.
Diluted loss per share is based upon the weighted average number of ordinary shares and of ordinary shares equivalents outstanding when dilutive.
Ordinary share equivalents include outstanding stock options and warrants, which are included under the treasury stock method when dilutive. The
calculation of diluted loss per share does not include options, and warrants, exercisable into an aggregate of 7,458,542 shares and 6,255,235 shares
for the years ended December 31, 2023 and 2022, respectively, because the effect would have been anti-dilutive.
s.
Legal and other contingencies
Management applies the guidance in ASC 450-20, “Loss Contingencies” when assessing losses resulting from contingencies. If the assessment of
a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated
liability is recorded as accrued expenses in the Company’s consolidated financial statements.
Legal costs incurred in connection with loss contingencies are expensed as incurred.
99
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
t.
Warrants
When the Company issues freestanding instruments, it first analyzes the provisions of ASC 480, “Distinguishing Liabilities From Equity” (“ASC
480”) in order to determine whether the instrument should be classified as a liability, with subsequent changes in fair value recognized in the
consolidated statements of operations in each period. If the instrument is not within the scope of ASC 480, the Company further analyzes the
provisions of ASC 815-10 in order to determine whether the instrument is considered indexed to the entity’s own stock, and qualifies for
classification within equity. All warrants issued by the Company have been classified within stockholders’ equity as “Additional paid-in capital”.
u.
Newly issued and recently adopted accounting pronouncements:
Recently issued accounting pronouncements, not yet adopted
In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This guidance is
intended to enhance the transparency and decision-usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor
requests for enhanced income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in
the United States and in foreign jurisdictions. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 on a prospective basis.
Early adoption is permitted, with the option to apply the standard retrospectively. The Company is currently evaluating this guidance to determine
the impact it may have on its consolidated financial statements disclosures.
In November 2023, the FASB issued ASU 2023-07 “Segment Reporting: Improvements to Reportable Segment Disclosures”. This guidance
expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the
chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition
for other segment items, and interim disclosures of a reportable. The Company is currently evaluating this guidance to determine the impact it may
have on its consolidated financial statements disclosures.
NOTE 3 - OPERATING LEASES
1)
The Company leases office and research and development space under several agreements. The annual lease consideration is a total
of $172 and is linked to the Israeli consumer price index. In April 2023, the Company extended the period of the lease agreement for
an additional five years, expiring on June 30, 2028, with two options for early termination by the Company subject to a notice
period. The annual lease consideration is a total of $180.
The Company recorded the related asset and obligation at the present value of lease payments over the expected terms, discounted
using the lessee’s incremental borrowing rate, which was 13.84%. The Company lease agreements do not provide a readily
determinable implicit rate. Therefore, the Company estimated the incremental borrowing rate to discount the lease payments based
on information available at lease commencement.
As of December 31, 2023, the Company provided bank guarantees of approximately $52, in the aggregate, to secure the fulfillment
of its obligations under the lease agreements.
100
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 3 - OPERATING LEASES (continued)
2)
The Company has entered into operating lease agreements for vehicles used by its employees. The lease periods are generally for
three years, and the payments are linked to the Israeli consumer price index. To secure the terms of the lease agreement, the
Company has made certain deposits to the leasing company, representing approximately three months of lease payments. The annual
lease consideration is a total of $22.
The lease cost was as follows:
Operating lease cost
Supplemental cash flow information related to leases was as follows:
Operating cash flows from operating leases
Supplemental balance sheet information related to operating leases was as follows:
Operating Leases
Operating lease right-of-use assets
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
Weighted-average remaining lease term (in years)
Weighted-average discount rate
Year ended
December 31, 2023
196
Year ended
December 31, 2022
197
Year ended
December 31, 2023
196
Year ended
December 31, 2022
197
December 31, 2023
December 31, 2022
388
134
256
390
2.5
14%
90
91
91
0.52
16%
As of December 31, 2023, the maturity of lease liabilities under our non-cancelable operating leases are $390 to be paid in 2024- 2026.
As of December 31, 2023, the maturity of lease liabilities under our non-cancelable operating leases were as follows:
2024
2025
2026
Total future minimum lease payments
Less: interest
Present value of operating lease liabilities
101
184
184
86
454
(64)
390
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 4 - COMMITMENTS AND CONTINGENCIES
a. Commitment to pay royalties to the government of Israel
The Company is committed to pay royalties to the Israel Innovation Authority (the “IIA”) on proceeds from sales of products for which the
government provided grants with respect to the research and development underlying such products. At the time the grants were received,
successful development of the related project was not assumed. In the case of failure of the project that was partly financed by the IIA, the
Company is not obligated to pay any such royalties.
Under the terms of the Company’s funding from the IIA, royalties are payable on sales of products developed from IIA funded projects in the
amount of 3% of sales during the first three years following commencement of revenues, 4% during the subsequent three years and 5%
commencing the seventh year up to 100% of the amount of the grant received by the Company (dollar linked) plus annual interest based on SOFR.
The interest had been based on LIBOR and it changed to SOFR. The amount that must be repaid may be increased to three times the amount of
the grant received, and the rate of royalties may be accelerated, if manufacturing of the products developed with the grant money is transferred
outside of the State of Israel. In addition, if the Company undergoes a change of control or otherwise transfers the technology “know-how” (as
defined under the Research Law) in or outside of Israel, the amount that must be repaid will be increased up to six times.
As of December 31, 2023, the total royalty amount that would be payable by the Company to the IIA, before interest and potential increases as
described above, was approximately $460. These grants were allocated to research and development in prior periods.
Following the signing of the Amgen Agreement, the IIA determined that the Company was required to pay 5.38% of each payment received by the
Company from Amgen under the agreement in an amount up to six times the grant received. As of December 31, 2023, the Company had paid a
total of $83 to the IIA. As of December 31, 2023, we had liability of $13 thousand to the IIA, which were paid in February 2024.
b. On June 1, 2010, D.N.A. Biomedical Solutions Ltd. ("D.N.A.") and Oramed Ltd., ("Oramed") entered into a joint venture agreement, (the "Joint
Venture Agreement") for the establishment of Entera Bio Ltd. According to the Joint Venture Agreement each of D.N.A. and Oramed acquired
50% of the Company's ordinary shares. D.N.A invested $600 in the Company, and Oramed and the Company entered into a Patent License
Agreement pursuant to which Oramed licensed to the Company one of Oramed’s patents (the “IPR&D”).
On February 22, 2011, Oramed and the Company entered into a patent transfer agreement, (the "Patent Transfer Agreement") that superseded the
Patent License Agreement, whereby Oramed assigned to the Company all of its rights, title and interest to its patent that Oramed licensed to the
Company in 2010, under certain conditions. Under this agreement, the Company is obligated to pay Oramed royalties equal to 3% of its net
revenues (as defined in the Patent Transfer Agreement).
c.
In September 2023, the Company entered into a research collaboration agreement with OPKO Biologics, Inc., a subsidiary of OPKO. Under the
terms of this agreement, OPKO has agreed to supply its proprietary long-acting GLP-2 peptide and certain Oxyntomodulin (OXM) analogs for the
development of oral tablet formulations using the Company’s proprietary oral delivery technology. The Company and OPKO have each agreed to
be responsible for specific phases of development of the two oral peptides to the point of demonstrated in vivo feasibility. Work under this
agreement commenced in the fourth quarter of 2023; therefore there was no material financial impact as of December 31, 2023.
102
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 5 - SHARE CAPITAL
1)
Rights of the Company’s ordinary shares
Each ordinary share is entitled to one vote. The holder of an ordinary shares is also entitled to receive dividends whenever funds are
legally available, when and if declared by the Board of Directors.
A holder of an ordinary share also has the right to receive upon liquidation of the Company, a sum equal to the nominal value of such
share, and if a surplus per share remains, to receive such surplus, subject to the rights conferred on any class of shares which may be
issued in the future. Since its inception, the Company has not declared any dividends.
2)
Changes in share capital:
a.
In connection with the Company’s initial public offering (“IPO”) in July 2018, the Company issued 1,400,000 IPO warrants to
purchase 700,000 ordinary shares, and these warrants were listed for trading on Nasdaq Capital Market (“Nasdaq”) on August 12,
2018. The IPO warrants were immediately exercisable at an initial exercise price of $8.40 per ordinary share for a period of five
years, unless earlier repurchased by the Company as described in the warrant agreement. The IPO warrants expired on July 2, 2023,
in accordance with their original terms, and Nasdaq removed them from listing.
b. On September 2, 2022, the Company entered into a sales agreement with SVB Securities LLC, as sales agent, to implement an ATM
program under which the Company may from time to time offer and sell up to 5,000,000 Ordinary Shares (the “SVB ATM
Program”).
During the year ended December 31, 2023, the Company issued 4,030 ordinary shares pursuant to the SVB ATM Program for net
proceeds of $5 at a weighted average price of $1.16 per ordinary share.
c. On December 20, 2023, the Company entered into a securities purchase agreement in connection with a private offering (the "2023
PIPE") with certain existing and new investors, including the Company's Chairman of the Board and the Chief Executive Officer
(collectively, the "Investors") for the private placement of 7,916,879 units at a purchase price of $0.835 per unit, each unit consisting
of (i) one ordinary share and (ii) one warrant to purchase one ordinary share (each an “ Investor Warrant”). The Company received
aggregate proceeds of approximately $6.6 million before expenses. Certain Investors elected to receive pre-funded warrants (the
“Pre-Funded Warrants”) in lieu of ordinary shares, as such warrants may not be exercised if the aggregate number of ordinary shares
beneficially owned by the holder thereof would exceed 4.99% or 9.99%, as applicable, immediately after exercise thereof.
The 2023 PIPE closed on December 22, 2023, and the Company issued 6,662,389 ordinary shares, 1,254,490 Pre-Funded Warrants
and 7,916,879 Investors Warrants.
Each Pre-Funded Warrant has an exercise price of NIS 0.0000769 per ordinary share, is immediately exercisable and may be
exercised at any time and has no expiration date and is subject to customary adjustments.
103
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 5 - SHARE CAPITAL (continued)
Each Investor Warrant has an exercise price of $1.00 per share, is immediately exercisable, and expires five years from the date of issuance,
and is subject to customary adjustments. The Company accounted for the Investors Warrant as a component of permanent equity, as part of
Additional Paid in Capital. The Investor Warrants are considered a separate instrument and they are indexed to the entity’s own stock based
on the provision of ASC 815.
The Chairman of the Board and the Chief Executive Officer participated in the 2023 PIPE on the same terms and subject to the same
conditions as all other Investors.
In connection therewith, the Company entered into a placement agency agreement with a registered U.S. broker-dealer (the “Broker”),
pursuant to which the Broker was entitled to the following consideration:
1. A cash fee equal to 10% of the total proceeds paid by subscribers introduced by the Broker.
2. A cash fee equal to 5% of the total proceeds paid by other subscribers that participated in the private placement.
3. Five-year warrants to purchase 487,496 ordinary shares, representing 10% of the ordinary shares issued to subscribers introduced by
the Broker, at a per share exercise price of $0.71 (the “Broker Warrants”).
In addition, the Company entered into a finder agreement with a private non-U.S. finder (the “Finder”), pursuant to which the Finder was
entitled to a cash fee equal to 5% of total proceeds paid by subscribers introduced by the Finder, as well as five-year warrants to purchase
179,640 ordinary shares, representing 10% of the ordinary shares issued to the subscribers introduced by the Finder, at a per share exercise
price of $0.71 (the “Finder Warrants”).
The Pre-Funded Warrants, Investors Warrants, Broker Warrants and Finder Warrants (collectively, the “Warrants”) were classified as a
component of permanent equity and recorded as part of the Additional Paid in Capital based on the provision of ASC 815. The Warrants are
freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they
were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the Investor to
receive a fixed number of shares of common stock upon exercise.
The Company had transaction costs of approximately $1.0 million, out of which $267 was stock-based compensation expenses due to
issuance of Broker Warrants and Finder Warrants.
104
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 6 - SHARE-BASED COMPENSATION
1)
Share-based compensation plan
On March 17, 2013, the Company's Board of Directors approved a Share Incentive Plan (the “2013 Plan”). Under the 2013 Plan, the
Company reserves specified number of ordinary shares for allocation to stock options (each, an “Option”), restricted share units, restricted
share awards and performance-based awards, that had been awarded to employees and non-employees under the 2013 Plan. Each Option is
exercisable for one ordinary share.
Any Option granted under the 2013 Plan that is not exercised within six years from the date upon which it becomes exercisable will expire.
Since adopting the 2018 Plan (as defined below), the Company has not granted any awards under the 2013 Plan.
On July 2, 2018, the Company's Board of Directors and shareholders of the Company approved a new Share Incentive Plan (the “2018
Plan”) and reserved 1,371,398 ordinary shares for allocation to stock options (each, a "2018 Plan Option"), restricted share units, restricted
share awards and performance-based awards, to employees and non-employees for issuance under the 2018 Plan. Each 2018 Plan Option is
exercisable for one ordinary share.
Any 2018 Plan Option that is not exercised within 10 years from the date of grant will expire.
The 2018 Plan Options granted to employees are subject to the terms stipulated by section 102(b)(2) of the Israeli Income Tax Ordinance
(the “Ordinance”). According to these provisions, the Company will not be allowed to claim as an expense for tax purposes the amounts
credited to the employees as a capital gain benefit in respect of the options granted.
2018 Plan Options granted to related parties or non-employees of the Company are governed by Section 3(i) of the Ordinance or Non-
Qualified Share Options ("NSO"). The Company will be allowed to claim as an expense for tax purposes in the year in which the related
parties or non-employees exercised the options into shares.
As of December 31, 2023, 638,598 ordinary shares remained available for future grants under the 2018 Plan.
On January 1, 2024, the Company’s Board of Directors approved an increase of 1,773,817 ordinary shares that may be issued under the
Company’s 2018 Plan pursuant of the terms of the 2018 Plan.
105
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 6 - SHARE-BASED COMPENSATION (continued)
2)
share-based compensation grants to employees and directors:
a) The below table summarizes the options grants to employees and directors during the years ended December 31, 2023 and 2022:
Period
Grantee
For the year ended
December 31, 2023
Employees and
Executive Officers
Number of
options
Exercise price Vesting period
Fair value at the
grant date
Expiration period
1,201,000
$0.80
(1)
$629
10 years
Directors
Directors
534,246
$ 0.73
33,638
$ 0.89
Quarterly over a period of
one year
Quarterly over a period of
three years
Consultant
30,000
$ 0.80
Immediate
For the year ended
December 31, 2022
Employees and
Executive Officers
1,455,000
$ 1.40- $2.86
(1)
Directors
Directors
250,964
$ 2.815
752,899
$ 2.815
Quarterly over a period of
one year
Quarterly over a period of
three years
$ 253
10 years
$ 15
10 years
$ 17
$1,462
10 years
10 years
$ 455
10 years
$ 1,365
10 years
(1) 25% vest on the first anniversary of the date of grant and the remaining 75% of the option vest in twelve equal quarterly installments following
the first anniversary of the grant date.
b) Upon the occurrence of a Triggering Event (as defined below) and subject to the approval of the Board of Directors, our CEO will be granted
additional options to purchases 200,000 ordinary shares. The exercise price will be determined at the time of the Board of Directors’ approval.
"Triggering Event" means the earlier of the following events: (i) the execution by the Company of a binding strategic or partnership agreement
with a strategic partner to fund the Company's Phase III FDA Trial; or (b) raising sufficient funding to complete the Company's Phase III FDA
Trial, in each case as such event is approved by the Board of Directors.
As of December 31, 2023, none of these events occurred.
c) On July 15, 2022, the Company entered into a mutual separation agreement with the Company’s former Chief Executive Officer, Dr. Jamas.
Pursuant to the separation agreement, Dr. Jamas received the following benefits: (i) a one-time lump sum payment of his annual base salary for
a period of 13 months, for a total gross amount equal to $412; and (ii) an extension of the exercise period for the vested portion of the options
granted on January 4, 2021, based on the award original terms, representing an aggregate of 492,832 ordinary shares, through the end of a two-
year period commencing on July 15, 2022. Effective July 15, 2022, upon termination of the employment agreement with Dr. Jamas, the
remaining 821,386 unvested options were forfeited and recognized as a reverse of expense of $457 in general and administrative expenses.
106
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 6 - SHARE-BASED COMPENSATION (continued)
d) On June 15, 2022, the Company entered into a separation agreement with Dr. Phillip Schwartz, a former executive officer of the Company,
under which Dr. Schwartz agreed to continue to provide services to the Company until July 21, 2022 (the “Separation Date”). Pursuant to the
terms of the separation agreement, which were approved by the Company’s shareholders on September 7, 2022, Dr. Schwartz received a full
acceleration of his unvested options, as of the Separation Date, to purchase 68,750 ordinary shares granted in April 2021 that otherwise would
have been forfeited. These options, together with 31,250 already vested options granted in April 2021 and 357,500 already vested options to
purchase ordinary shares granted in 2017, will be exercisable for a period of 10 years from their respective initial grant dates.
The acceleration described above was recognized as a "Type III" modification; therefore, on the shareholder approval date, the Company
recognized the incremental costs of unvested options based on the fair value of the options on such date. In addition, the extension of the
exercise period for the vested awards was recognized as a "Type I" modification. The total expense amount was $112 thousand, which was
classified as additional share-based compensation costs in the research and development expenses.
In addition, the separation agreement provides for the following payments to Dr. Schwartz, all of which would have otherwise been payable in
accordance with either Israeli law or pursuant to his existing employment agreement: a one-time cash separation payment in an amount equal to
NIS 537,600 (approximately $156) and additional payments of NIS 737,771 (approximately $214) in respect of all other ongoing accrued
benefits, subject to any mandatory deductions. The foregoing payments were recognized in the research and development expenses.
e) The fair value of each option granted is estimated at the date of grant using the Black-Scholes option-pricing model, with the following
weighted average assumptions:
Exercise price
Dividend yield
Expected volatility
Risk-free interest rate
Expected life - in years
Outstanding at beginning of the year
Granted
Exercised
Forfeited
Expired
Outstanding at end of the year
Exercisable at end of the year
2023
2022
$0.73-$0.89 $1.40-$2.86
-
-
74%-76% 69%-70.2%
3.58%-4.37% 1.35%-3.36%
5.3-6.11
5.5-6.5
2023
2022
Weighted
average
exercise
price
Weighted
average
exercise
price
Number of
options
3.30 4,316,859 $
0.78 2,458,863
-
(5,511)
2.27
(902,009)
(135,115)
4.97
2.57 5,733,087 $
3.26 3,165,677 $
3.63
2.29
2.14
1.41
3.80
3.30
4.06
Number of
options
5,733,087 $
1,798,884
-
(34,313)
(392,244)
7,105,414 $
4,208,325 $
107
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 6 - SHARE-BASED COMPENSATION (continued)
The following tables summarizes information concerning outstanding and exercisable options as of December 31, 2023, in terms of ordinary
shares for which the options may be exercised:
Options outstanding
Number of
options
outstanding
at end of
Year
December 31, 2023
Weighted
Average
Remaining
Contractual
Life
Options exercisable
Number of
options
exercisable
at end of
year
Weighted
Average
Remaining
contractual
Life
Exercise
prices per
share (USD)
0.73
0.79
0.89
1.24
1.40
2.02
2.14
2.53
2.57
2.815
2.86
3.15
3.61
3.68
3.97
6.31
534,244
1,223,000
33,638
492,831
600,000
500,000
379,900
33,638
187,500
1,003,863
135,000
345,000
237,368
147,290
232,552
1,019,590
7,105,414
9.01
9.32
9.43
0.54
8.54
8.37
6.26
5.89
8.33
8.01
8.25
7.30
7.27
3.26
5.05
3.95
400,684
-
-
492,831
187,500
187,500
356,155
33,638
68,562
690,155
52,187
184,375
155,306
147,290
232,552
1,019,590
4,208,325
9.01
-
-
0.54
8.54
8.37
6.26
5.89
8.33
8.01
8.25
7.30
7.27
3.26
5.05
3.95
The aggregate intrinsic value of the total of the outstanding and exercisable options as of December 31, 2023 is $0.
The following table illustrates the effect of share-based compensation on the statements of operations:
Cost of revenues
Research and development expenses
General and administrative
2023
2022
-
424
1,265
1,689
14
708
1,525
2,247
108
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 7 - INCOME TAX
A.
Corporate tax rate
1) Ordinary taxable income in Israel is subject to a corporate tax rate of 23%.
2) The Company’s subsidiary Entera Bio, Inc. is taxed separately under the U.S. tax laws at a tax rate of 29% (federal and state tax)
B.
Losses for tax purposes carried forward to future years
The balance of carryforward losses as of December 31, 2023 and 2022 are approximately $75.8 million and $67.1 million, respectively.
Under Israeli tax law, tax loss carry-forward have no expiration date.
C.
Tax assessments
The Company and its subsidiary have tax assessments that are considered to be final through tax year 2018.
D.
Loss (income) before income taxes is composed of the following:
Entera Bio Ltd.
Entera Bio Inc.
Total loss before taxes
E.
Income tax expense:
Current:
Subsidiary:
Total current income tax
Deferred income taxes - subsidiary
Total deferred income taxes
Total income tax expense
Year ended December 31
2023
2022
8,868
(8)
8,860
12,997
(65)
12,934
Year ended December 31
2023
2022
-
-
29
29
29
(37)
(37)
174
174
137
109
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 7 - INCOME TAX (continued)
F.
Deferred income taxes
Deferred tax assets:
Net operating loss carry forward
Research and development
Share-based compensation
Other
Net deferred tax assets before valuation allowance
Valuation allowance
Net deferred tax assets
December 31,
2023
2022
17,427
983
855
220
19,485
(19,471)
14
15,428
1,225
877
158
17,688
(17,645)
43
In assessing the likelihood of realizing deferred tax assets, management considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences and carry forward losses become deductible. Based on the taxable loss in the Israel,
management believes it was more likely than not that the deferred tax assets will not be realized in the Israel and believes it was more likely than
not that deferred tax assets will be realized for the U.S. subsidiary.
G.
Roll-forward of valuation allowance:
Balance at January 1, 2022
Additions
Balance at January 1, 2023
Additions
Balance at December 31, 2023
H.
Reconciliation of theoretical tax expenses to actual expenses
15,025
2,620
17,645
1,826
19,471
The primary difference between the statutory tax rate of the Company and the effective rate results virtually from the changes in valuation
allowance in respect of carry forward tax losses and research and development expenses due to the uncertainty of the realization of such tax
benefits.
I.
Uncertain tax positions
As of December 31, 2023 and 2022, the Company does not have a provision for uncertain tax positions as existing uncertain tax positions as,
based on the technical merits, they are not more likely than not to be sustained.
110
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 8 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:
Balance sheets:
Accrued expenses and other payables:
Employees and employees related
Provision for vacation
Accrued expenses
NOTE 9 - SUBSEQUENT EVENTS
December 31,
2023
2022
159
215
500
874
154
146
933
1,233
a. On January 1, 2024, an aggregate of 758,331 options to purchase ordinary shares were granted to seven non-executive board members with
an exercise price of $0.60 per share. The options will vest over one year in four equal quarterly installments starting on January 1, 2024.
This grant was approved by the shareholders of the Company on October 4, 2021.
b. On February 1, 2024, the Company entered into a consulting agreement. Under the terms of the agreement, the Company agreed to pay a
monthly fee of $5 and to issue the consultant 25,000 RSUs. The RSUs vest over five months in five equal monthly installments starting on
February 1, 2024.
c. On February 15, 2024, the Company entered into an investor relations consulting agreement. Under the terms of the agreement, the
Company agreed to issue the consultant 50,000 RSUs. The RSUs vest over five months in five equal monthly installments starting on
February 15, 2024.
111
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023. Based on such
evaluation, those officers concluded that our disclosure controls and procedures were effective as of December 31, 2023.
Management’s Report on Internal Control over Financial Reporting
Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining
adequate internal control over our financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. The Company’s internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and
procedures that:
•
•
•
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;
provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in
accordance with generally accepted accounting principles;
provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and the
Board (as appropriate); and
provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that
could have a material effect on our financial statements.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, 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.
Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial
reporting as of December 31, 2023 based on criteria established in Internal Control-Integrated Framework (2013) by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
Based on such assessment, our management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2023.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
During the quarter ended December 31, 2023, none of our officers or directors adopted or terminated any contract, instruction or written plan for the
purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-
Rule 10b5-1 trading arrangement”, as defined in Item 408 of Regulation S-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
None.
112
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The names of our directors and executive officers as of the date of this Annual Report and their respective ages, positions and biographies are set forth
below.
Name
Executive Officers
Miranda Toledano (5)
Dana Yaacov-Garbeli
Dr. Hillel Galitzer
Dr. Arthur Santora
Non-Employee Directors
Gerald Lieberman (1)
Dr. Roger J. Garceau (5)
Ron Mayron (1) (2)
Gerald M. Ostrov (1) (2) (3)
Sean Ellis (1) (3) (4)
Haya Taitel (1) (5)
Yonatan Malca (1)(2) (3) (4) (5)
Age
Position
47
40
45
73
77
70
60
74
49
61
57
Chief Executive Officer and Director
Chief Financial Officer
Chief Operating Officer
Chief Medical Officer
Director, Chairman of the Board of Directors
Director, Chairman of the Scientific Advisory Committee
Director, Chairman of the Compensation Committee
Director, Chairman of the Audit Committee
Director
Director
Director, Chairman of the Nominating and Corporate Governance Committee
(1) Independent in accordance with SEC regulations and Nasdaq rules requirements applicable to us.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
(4) Member of the Nominating and Corporate Governance Committee.
(5) Member of the Scientific Advisory Committee.
Executive Officers
Miranda Toledano has served as the Company's Chief Executive Officer, or CEO, since July 2022. Prior to her appointment as CEO, Ms. Toledano served
as the Company’s Chief Business Officer, Chief Financial Officer and Head of Corporate Strategy from May to June 2022. Ms. Toledano has served as a
member of our Board of Directors (the “Board”) since 2018, and as Member of the Scientific Advisory Committee since February 2022. Ms. Toledano has
over 20 years of C-level leadership, principal investment and Wall Street/capital market experience in the biotech sector. Previously, Miranda served as
Chief Operating Officer, Chief Financial Officer, and Director of TRIGR Therapeutics, an oncology focused, clinical stage bispecific antibody company,
from August 2018 until its acquisition by Compass Therapeutics (Nasdaq: CMPX) in June 2021. At TRIGR, Miranda oversaw the clinical development of
lead asset TR009 (now CTX-009) and led strategic execution, including a $117 million China License Transaction and acquisition by CMPX. Previously,
Ms. Toledano served as Head of Healthcare Investment Banking at MLV & Co. (acquired by B. Riley FBR & Co.), where she completed biotech equity
financings (IPOs, ATMs, and follow-ons) totaling over $4 billion in aggregate value. Earlier in her career, Ms. Toledano served as vice president in the
investment group of Royalty Pharma (Nasdaq: RPRX) from 2004 to 2010. Ms. Toledano is also a member of the board of directors of Journey Medical
(Nasdaq: DERM) and NEXGEL (Nasdaq: NXGL). Ms. Toledano holds a B.A. in Economics from Tufts University and an MBA in Finance and
Entrepreneurship from the NYU Stern School of Business.
Dana Yaacov-Garbeli has served as our Chief Financial Officer since July 2022. Prior that, Ms. Yaacov-Garbeli served as our Israel-based Chief Financial
Officer from June 2019 through July 2022. Ms. Yaacov-Garbeli has over 15 years of chief finance and accounting experience. She previously served as
Senior Manager at PwC Israel overseeing audits of public and private companies. She has significant experience in financial planning, operations
management, external and internal audit for public multinational companies under US GAAP, IFRS and PCAOB standards. Ms. Yaacov-Garbeli is also a
partner at A2Z-Finance, a company that provides financial and accounting services. Ms. Yaacov-Garbeli holds a B.A in accounting and business
management and an MBA in financial management from The College of Management and Academic studies. Ms. Yaacov-Garbeli is a Certified Public
Accountant in Israel.
113
Dr. Hillel Galitzer has served as our Chief Operating Officer since February 2014, prior to which he served as our Director of Scientific Development
from July 2012. Dr. Galitzer has more than ten years of experience in medical research and molecular biology. Between August 2010 and February 2014,
Dr. Galitzer was an analyst and the chief operating officer for Hadasit Bio Holdings Ltd., a publicly traded company on the Tel Aviv Stock Exchange
(TASE: HDST) and OTC markets. He is the co-founder and former chief operating officer of Optivasive Inc. He has written numerous publications in peer-
reviewed journals and has lectured and presented in international conferences and universities. Dr. Galitzer received his Ph.D. from the Hebrew University
Medical School in Jerusalem, where he was mentored by two world renowned researchers in the areas of parathyroid hormone and calcium regulation, his
M.B.A. from Bar Ilan University in Israel and his B.Med.Sc. from the Hebrew University Medical School in Jerusalem.
Dr. Arthur Santora has served as our Chief Medical Officer since September 2018. Dr. Santora has more than 30 years of experience in the
biopharmaceutical industry. He spent the majority of his career in the clinical research team at Merck & Co., Inc., from June 1989 to April 2017, where he
was the lead clinical research physician responsible for much of the clinical development of Fosamax® (alendronate sodium), one of the world’s most
prescribed osteoporosis treatments. He was closely involved in the clinical development of Merck’s once-weekly Fosamax Plus D (alendronate sodium/
vitamin D3 combination tablets), the first drug/vitamin combination tablet in the US. His position at Merck immediately prior to his termination of services
in 2017 was Scientific Associate Vice President of Clinical Research, where he was directly responsible for the technical and scientific support for all
clinical research of Fosamax/Fosamax plus D and contributed to the development of many other osteoporosis and endocrine marketed and investigational
drugs. Prior to joining Merck, he served as a Medical Officer at the US FDA and subsequently was a faculty member at Wayne State University Medical
School in Detroit. Dr. Santora is a Clinical Associate Professor at the clinical faculty of Rutgers Robert Wood Johnson Medical School in New Brunswick,
New Jersey. Dr. Santora completed a clinical fellowship in endocrinology at the NIH in Bethesda and received his M.D. and Ph.D. in biochemistry from
Emory University in Atlanta, where he also received graduate training in Internal Medicine.
Non-Employee Directors
Gerald Lieberman has served as a member of our Board since April 2014 and became our Chairman in July 2019. Mr. Lieberman is also a member of the
board of directors of Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA), a global leader in pharmaceuticals and the world’s largest generic
drug developer and manufacturer, where he chairs the Audit Committee and serves on both the Human Resources and Compensation Committee and the
Finance Committee. He also serves as Chairman of the Board of Directors of DosentRx, Ltd., a digital health company that has developed a personalized,
patient-controlled device for delivering medication. He is also currently a special advisor at Reverence Capital Partners, a private investment firm focused
on the middle-market financial services industry. From 2000 to 2009, Mr. Lieberman was an executive at Alliance Bernstein L.P., where he served as
President and Chief Operating Officer from 2004 to 2009, as Chief Operating Officer from 2003 to 2004 and as Executive Vice President, Finance and
Operations from 2000 to 2003. From 1998 to 2000, he served as Senior Vice President, Finance and Administration at Sanford C. Bernstein & Co., Inc.,
until it was acquired by Alliance Capital in 2000, forming Alliance Bernstein L.P. Prior to that, he served in various executive positions at Fidelity
Investments and at Citicorp. Prior to joining Citicorp he was a certified public accountant with Arthur Andersen. He previously served on the board of
directors of Forest Laboratories, LLC from 2011 to 2014, Computershare Ltd. from 2010 to 2012 and Alliance Bernstein L.P. from 2004 to 2009. Mr.
Lieberman received a B.S. Beta Gamma Sigma with honors in business from the University of Connecticut. Our Board believes that Mr. Lieberman is
qualified to serve as director based upon his experience on boards of other pharmaceutical companies and his years of experience working with healthcare
and pharmaceutical companies.
Dr. Roger J. Garceau has served as a member of our Board since March 2016, and he served as our interim CEO From August 2020 to January 4, 2021.
Dr. Garceau also served as our Chief Development Advisor from December 2016 to December 2021 (excluding the period he served as our interim CEO).
Dr. Garceau has more than 30 years of broad pharmaceutical industry experience. He has been a director of Enterome SA since December 2016, and a
director of Protara Therapeutics, Inc. since January 2019. Prior to joining Entera, Dr. Garceau served as Chief Medical Officer and Executive Vice
President of NPS Pharmaceuticals, Inc. from December 2008 and January 2013 respectively, until February 2015, when NPS Pharmaceuticals, Inc., then
traded on Nasdaq, was acquired by Shire plc. (NASDAQ: SHPG). Previously, Dr. Garceau served in several managerial positions with Sanofi-Aventis
(NYSE: SNY) from 2002 until 2008, and Pharmacia Corporation from 1986 until 2002. Dr. Garceau is a board-certified pediatrician and is a Fellow of the
American Academy of Pediatrics. Dr. Garceau holds a B.S. in Biology from Fairfield University in Fairfield, Connecticut and an M.D. from the University
of Massachusetts Medical School. Our Board believes that Dr. Garceau is qualified to serve as director based upon his experience with the Company and
his years of experience working with healthcare and pharmaceutical companies.
114
Ron Mayron has served as a member of our Board since April 2021 and is a global healthcare specialist who serves on the boards of numerous public and
privately-held pharma and medical device companies in Israel, including InnoCan Pharma Ltd., IceCure Medical Ltd., BioLight Life Sciences Investments
Ltd., IR-Med Inc., G-Med Ltd., Kaizen Bio Tec Ltd., and Simplivia Ltd. He previously served on the boards of DNA Biomedical Solutions Ltd. from
March 2021 to May 2023, Kadimastem, Ltd. from December 2020 to December 2023, WizePharma Inc. (now Mawson Infrastructure Group Inc.
(NASDAQ: MIGI)) from April 2015 to November 2018 and NurExone Biologic Inc. from December 2021 to August 2023. His prior executive experience
includes several leadership positions culminating in CEO of Teva Israel & Africa from 2009 until 2013 and CEO of S.L.E from 1999 and until 2007. Mr.
Mayron’s expertise within healthcare includes M&A, integration and implementation, global business development, global operations, and supply chain
management. He earned a B.Sc. from Ben-Gurion University, and an MBA from the University of Tel Aviv, and attended several programs at Insead
University Fontainebleu, France and the Massachusetts Institute of Technology, Boston. Our Board believes that Mr. Mayron is qualified to serve as a
director based upon his pharmaceutical industry experience in multiple capacities from operations to chief executive positions as well as his experience on
multiple boards of pharmaceutical and medical device companies in Israel.
Gerald M. Ostrov has served as a member of our Board since January 2019. Mr. Ostrov consults and invests in new technologies in the medical device
and consumer products fields. Mr. Ostrov currently serves on the board of directors of several privately held companies, including Synergio, a natural
products company working with industry giants, Addon Optics, an innovative technology company, and Nuvo Group Ltd., a developer of next generation
baby and mother health monitoring for both hospital and home use. From 2008 to 2010, he served as Chairman and CEO of Bausch & Lomb. There Mr.
Ostrov led the stabilization, streamlining and pipeline building of Bausch & Lomb following its going-private transaction. From 1998 until 2006, Mr.
Ostrov very successfully served as Company Group Chairman for Johnson & Johnson’s Worldwide Vision Care businesses. From 1991 to 1998, Mr. Ostrov
worked for Johnson & Johnson and quickly rose to serve as Company Group Chairman of the Consumer and Personal Care businesses in North America.
From 1982 to 1991, he served as President of CIBA Consumer Pharmaceuticals Company. From 1976 to 1982, he worked for the Health Care Division of
Johnson & Johnson. From 1973 to 1976, Mr. Ostrov worked at Procter & Gamble. Mr. Ostrov holds a B.S. from Cornell and an M.B.A. from Harvard. Our
Board believes that Mr. Ostrov is qualified to serve as a director based upon his years as an investor in healthcare related companies.
Sean Ellis has served as a member of our Board since June 2019. Mr. Ellis brings extensive knowledge of both life science industries and the U.S. financial
markets, with a longstanding history in asset management. Mr. Ellis is a fund manager of Centillion Fund, a venture capital fund dedicated to Israeli
investments, with a primary focus on investments in the biotech and healthcare industries. Centillion is one of Entera Bio’s earliest investors and largest
shareholders. He holds a BA from New York University and MBA from Columbia University. Our Board believes that Mr. Ellis is qualified to serve as a
director based upon his years as an investor in healthcare related companies.
Yonatan Malca has served as a member of our Board since 2011. Mr. Malca currently serves as a Chief Executive Officer and director of NanoGohst Ltd.
From 2009 to 2021, he served as a Chief Executive Officer and director of DNA Biomedical Solutions Ltd. (TASE: DNA). Mr. Malca also serves as a
director of Jungo Connectivity Ltd. (TASE: JNGO) and Unicorn Technologies (TASE: UNCT), each of which is an Israeli public company. He also serves
as director of BeamMed Ltd, a private medical device company. He previously served as a director of Nextgen-Biomed LTD. (TASE: NXGN) from July
2018 to April 2019, ARKO Holdings Ltd. from August 2014 to December 2020, and Tamda Ltd. from July 2016 to September 2020. Mr. Malca holds a
B.A. in Economics and Statistics from Bar-Ilan University and an M.A. in Economics and Finance from Bar Ilan University, Israel. Our Board believes that
Mr. Malca is qualified to serve as a director based upon his pharmaceutical industry experience as an executive as well as his experience on boards of
multiple pharmaceutical companies.
Haya Taitel was appointed in June 2023 to serve as a member of our Board. Ms. Taitel has over 30 years of global C-level biopharma commercial and
strategic executive experience. She currently serves as the Head of Sanofi’s Global Transplant Franchise where she is responsible for increasing franchise
growth and profitability. Prior to her role at Sanofi, Ms. Taitel served as the Chief Commercial Officer of Kadmon Pharmaceuticals, LLC, where she
contributed to the launch of Rezurock®, from 2013 until the company was acquired by Sanofi for $1.9 billion in November 2021. Ms. Taitel also led
Kadmon Board’s Executive Commercial Committee. Beginning in 1997, Ms. Taitel had held various commercial leadership positions of increasing
seniority at Johnson and Johnson in multiple therapeutic areas, including oncology, immunology, neurology and women’s healthcare. Ms. Taitel holds a
Master of Science, Pharmacology, (PharmD equivalence) from Temple University and a Bachelor of Science, Pharmacy and Biology from the Hebrew
University School of Pharmacy in Jerusalem, Israel. Our Board believes that Ms. Taitel is qualified to serve as a director based upon her extensive
biopharmaceutical industry experience and specific commercial domain expertise in women’s health.
Family Relationships
There are no family relationships among any of our directors or executive officers.
Involvement in Certain Legal Proceedings
Our directors and executive officers are not parties to any material legal proceedings.
115
Overall Role of the Board and Board Leadership Structure
Under the Israeli Companies Law, 1999 and the regulations promulgated thereunder (together, the “Companies Law”), our Board is responsible for setting
our general policies and supervising the performance of management. Our Board may exercise all powers and may take all actions that are not specifically
granted by the Companies Law or our Amended and Restated Articles of Association (“Articles”) to our shareholders or to management. Our executive
officers are responsible for our day-to-day management and have individual responsibilities established by our Board. Our CEO is appointed by, and serves
at the discretion of, our Board. All other executive officers are also appointed by our Board.
Under our Articles, the Board must consist of at least three and no more than ten persons. Currently, our Board consists of eight directors. Our Board is
divided into three classes, with staggered three-year terms with one class comes up for election each year. The Class I directors have terms expiring at our
annual meeting of shareholders in 2024, and the Class II and Class III directors have terms expiring at our annual meetings in 2025 and 2026, respectively.
The members of the classes as of the date hereof are as follows:
•
•
•
the Class I directors are Miranda Toledano, Roger Garceau and Ron Mayron;
the Class II directors are Yonatan Malca and Haya Taitel;
the Class III directors are Gerald Lieberman, Gerald M. Ostrov and Mr. Sean Ellis.
At each annual meeting of shareholders, directors will be elected to succeed the class of directors whose term has expired. This classification of our Board
could have the effect of increasing the length of time necessary to change the composition of a majority of the Board. In general, at least two annual
meetings of shareholders will be necessary for shareholders to effect a change in a majority of the members of the Board.
Under the Companies Law and our Articles, nominees for directors may also be proposed by any shareholder holding at least one percent (1%) of our
outstanding voting power. However, any such shareholder may propose a nominee only if a written notice of such shareholder’s intent to propose a
nominee has been given to our Chief Executive Officer. Subject to any requirements under the Companies Law, to be considered timely and thereby be
added to such agenda, such a request must be delivered, either in person or by certified mail, postage prepaid, and received at the Company's offices, (i) in
the case of an annual meeting, no less than sixty (60) days nor more than one-hundred twenty (120) days prior to the date of the first anniversary of the
preceding year’s annual meeting, provided, however, that, in the event that the date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, notice by the proposing shareholder, in order to be
timely, must be received no earlier than the close of business one-hundred twenty (120) days prior to such annual meeting and no later than the close of
business on the later of ninety (90) days prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of
such meeting is first made, and (ii) in the case of a Company meeting of shareholders that is an extraordinary meeting, no earlier than one-hundred twenty
(120) days prior to such extraordinary meeting and no later than the close of business on the later of sixty (60) days prior to such extraordinary meeting or
the tenth (10th) day following the day on which public announcement of the date of such meeting is first made, subject to applicable law. Any such notice
must include certain information, including, among other things, a description of all arrangements between the nominating shareholder and the proposed
director nominee and any other person pursuant to which the nomination is to be made by the nominating shareholder, the consent of the proposed director
nominee to serve as our director if elected and a declaration signed by the nominee declaring that there is no limitation under the Companies Law
preventing his or her election, and that all of the information that is required under the Companies Law to be provided to us in connection with such
election has been provided.
Our Board is also authorized to appoint directors in order to fill vacancies. Each of our directors will serve from the date of election or appointment until
the next annual meeting of shareholders for which such director’s class is due for reelection. The approval of at least a majority of the voting power in the
Company is generally required to remove any of our directors from office (other than external directors appointed according to the Companies Law, to the
extent then in office).
Under the Companies Law, our Board must also determine the minimum number of directors who are required to have accounting and financial expertise.
In determining the number of directors required to have such expertise, our Board must consider, among other things, the type and size of the company and
the scope and complexity of its operations. Our Board has determined that we require one director with accounting and financial expertise. Our Board has
determined that Mr. Gerald M. Ostrov and Mr. Yonatan Malca each have financial and accounting expertise as defined in the regulations promulgated under
the Companies Law.
116
Other than with respect to our directors who are also executive officers or employees, there are no arrangements or understandings between us, on the one
hand, and any of our directors, on the other hand, providing for benefits upon termination of their service as directors of our Company. For information
with respect to compensation arrangements with our directors that are also executive officers or employees, see the sections entitled “Item 11. Executive
Compensation” and “Item 13. Certain Relationships and Related Party Transactions” included in this Annual Report.
Alternate Directors
Our Articles provide that, as permitted under the Companies Law, any director may appoint another person, who is qualified to be appointed as a director
and who is not a director or an alternate director, to serve as his or her alternate director, subject to the approval of a majority of the members of the Board,
excluding such director. The term of an alternate director could be terminated at any time by the appointing director or our Board and would terminate
under circumstances in which, according to our Articles, the term of any director shall terminate or automatically terminate upon the termination of the
term of the appointing director. The Companies Law stipulates that an external director may not appoint an alternate director, except under very limited
circumstances. An alternate director has the same rights and responsibilities as a director, except for the right to appoint an alternate director.
Board Leadership Structure
The Board currently separates the roles of Board Chairperson and Chief Executive Officer. We believe that separation of the positions of Chairperson of the
Board and Chief Executive Officer reinforces the independence of the Board in its oversight of our business and affairs, is more conducive to objective
evaluation and oversight of management’s performance, increases management accountability, and improves the Board’s ability to monitor whether
management’s actions are in the best interests of the Company and its shareholders.
Role of the Board in Risk Oversight
Our Board is responsible for overseeing our risk management process. Our Board focuses on our general risk management strategy, the most significant
risks facing us, and oversees the implementation of risk mitigation strategies by management. Our Board is also apprised by management of particular risk
management matters in connection with its general oversight and approval of corporate matters and significant transactions. The Board’s independent
oversight function is further enhanced by the fact that all the directors have complete access to management and the Board and its committees may retain
their own respective advisors.
Director Independence
Our Board undertook a review of the independence of each director. Based on information provided by each director concerning his or her background,
employment, and affiliations, our Board has determined that the Board meets the independence standards under the applicable rules and regulations of the
SEC and the listing standards of Nasdaq. The Board has affirmatively determined that the following Directors are “independent” as of the date of this
Annual Report, as defined in the listing standards of Nasdaq: Gerald Lieberman, Ron Mayron, Gerald M. Ostrov, Sean Ellis, Yonatan Malca, and Haya
Taitel. In making these determinations, our Board considered the current and prior relationships that each non-employee director has or had with our
Company and all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial ownership of our
capital stock by each non-employee director, and the transactions involving them described in the section titled “Item 13. Certain Relationships and Related
Party Transactions, and Director Independence” contained in this Annual Report.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics applicable to all of our directors, executive officers and employees, including our Chief Executive
Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similar functions. The full text of the Code of
Business Conduct and Ethics can be found on our website at www.enterabio.com. Information contained on, or that can be accessed through, our website
does not constitute a part of this Annual Report and is not incorporated by reference herein. 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 ethics, we will disclose the nature of such amendment or
waiver on our website as required by the rules and regulations of the SEC.
117
Board Committees
Our Board has established the following committees:
Audit Committee
Composition
Under the Nasdaq rules and SEC regulations, we are required to maintain an Audit Committee consisting of at least three independent directors, each of
whom is financially literate and one of whom has accounting or related financial management expertise and would qualify as an “audit committee financial
expert” as such term is defined in Item 407(d)(5) of Regulation S-K.
Our Audit Committee consists of Gerald M. Ostrov, who also serves as chairman of the committee, Yonatan Malca, and Sean Ellis. The Board has
determined that each of the members of our Audit Committee is an independent director and additionally satisfies the heightened standards for audit
committee service under applicable SEC and Nasdaq rules. All designated members of our Audit Committee meet the requirements for financial literacy
under the applicable Nasdaq rules and SEC regulations. Our Board has determined that Gerald M. Ostrov is an audit committee financial expert.
Roles, Responsibilities and Procedures
Our Audit Committee assists our Board in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting,
cybersecurity, internal control and legal compliance functions by, among other things, pre-approving the services performed by our independent
accountants and reviewing their reports regarding our accounting practices. Our Audit Committee also oversees the audit efforts of our independent
accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.
Our Board has adopted an Audit Committee charter setting forth the responsibilities of the Audit Committee consistent with the applicable rules and
regulations of the SEC and Nasdaq, as well as the requirements for such committee under the Companies Law, including (a) oversight of our independent
registered public accounting firm and recommending the engagement, compensation or termination of engagement of our independent registered public
accounting firm to the Board in accordance with the Companies Law; (b) recommending the engagement or termination of our internal auditor; (c)
recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our Board; (d)
identifying deficiencies in the business management practices of our Company, including, inter alia, in consultation with our internal auditor or the
independent auditor, and making recommendations to the Board as to how to correct such practices; (e) reviewing and considering the approval of related
party transactions; (f) determining whether related party transactions are extraordinary or material under the Companies Law, including transactions in
which an Office Holder (as defined under the Companies Law, which includes directors, the CEO, other executive officers and any other managers directly
subordinate to the CEO) has a “personal interest”, under the Companies Law, and whether to approve such transactions; (g) establishing the approval
process for certain transactions with a controlling shareholder or in which the controlling shareholder has a “personal interest”; (h) examining and
approving the working plan of the internal auditor, subject to any modifications in its discretion; (i) examining our internal audit controls and internal
auditor’s performance, including whether the internal auditor has sufficient resources and tools to fulfill his or her responsibilities; (j) examining the scope
of our auditor’s work and compensation and submitting its recommendations with respect thereto to our Board or shareholders, depending on which of
them is considering the appointment of our auditor; (k) establishing procedures for the handling of employees’ complaints as to the management of our
business and the protection to be provided to such employees; and (l) reviewing the our annual audited financial statements and quarterly financial
statements with management and the independent auditor, including a review of our disclosures under “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” sections.
A copy of the Audit Committee Charter is available on our website at www.enterabio.com.
A “personal interest” under the Companies Law includes an interest of any person in an action or transaction of a company, excluding any interest arising
solely from holding the Company’s shares, but including the personal interest of such person’s spouse, sibling, parent, grandparent, descendant, spouse’s
descendant, sibling or parent or the spouse of any of such persons, and the personal interest of any entity in which such person or one of the aforementioned
relatives of such person serves as a director or Chief Executive Officer, owns 5% or more of such entity’s outstanding shares or voting rights or has the
right to appoint one or more directors or the Chief Executive Officer. Further, in the case of a person voting by proxy, “personal interest” includes the
personal interest of either the proxy holder or the shareholder granting the proxy, whether or not the proxy holder has discretion how to vote.
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Compensation Committee
Composition
We have a Compensation Committee, the members of which are Ron Mayron, who also serves as chairman of the committee, Gerald M. Ostrov and
Yonatan Malca. Each member of our Compensation Committee is independent under Nasdaq rules.
Roles, Responsibilities and Procedures
Our Board has adopted a charter setting forth the Compensation Committee’s roles and responsibilities, which include (a) recommending a compensation
policy regarding the terms of engagement of Office Holders, which is recommended to the Board for approval and subsequently to shareholders for their
approval, in accordance with the Companies Law, and reviewing such policy from time to time, (b) recommending to the Board periodic updates to the
compensation policy and whether the compensation policy should continue in effect every three years; (c) assessing the implementation of the
compensation policy; (d) reviewing and approving the granting of options, restricted share units, or RSUs, and other incentive awards to the extent such
authority is delegated by the Board; (e) reviewing, evaluating and making recommendations regarding the compensation and benefits for non-executive
directors, (f) determining whether to approve and recommend to the Board and shareholders to approve transactions with Office Holders relating to their
terms of compensation, as required under the Companies Law, (g) determining whether changes to the compensation terms of the Chief Executive Officer
of the Company are material and if the changes are required to be brought to the shareholders for approval, (h) overseeing compliance reporting
requirements of the SEC, (i) determining whether to recommend to the Board to adopt a share ownership policy for directors and executive officers, and (j)
performing such other activities as may be required.
A copy of the Compensation Committee Charter is available on our website at www.enterabio.com.
Under the Companies Law, the compensation policy must be adopted by the Board after considering the recommendations of the Compensation Committee
and then presented to, and approved by, the Company’s shareholders for approval.
The compensation policy must serve as the basis for decisions concerning the terms of employment or engagement of Office Holders, including
exculpation, insurance, indemnification and any monetary payment and obligation of payment in respect of employment or engagement. The compensation
policy must relate to certain factors, including advancement of the Company’s objectives, the Company’s business plan and its long-term strategy, and
creation of appropriate incentives for office holders. It must also consider, inter alia, the Company’s risk management, size and the nature of its operations.
The compensation policy must furthermore consider additional factors, as follows: (a) the knowledge, skills, expertise and accomplishments of the relevant
Office Holder; (b) the Office Holder’s roles and responsibilities and prior compensation agreements with him or her; (c) the ratio between the terms offered
and the average compensation of the other employees of the company, including those employed through manpower companies; (d) the impact of
disparities in salary upon work relationships in the company; (e) the possibility of reducing variable compensation at the discretion of the Board; (f) as to
variable compensation, the possibility of setting a limit on the exercise value of non-cash variable equity-based compensation; and (g) as to severance
compensation, the period of service of the Office Holder, the terms of his or her compensation during such service period, the company’s performance
during that period of service, the person’s contribution towards the company’s achievement of its goals and the maximization of its profits, and the
circumstances of termination of services.
The compensation policy must also include the following principles: (a) the link between variable compensation and long-term performance and
measurable criteria; (b) the ratio between variable and fixed compensation, and the ceiling for the value of variable compensation; (c) the conditions under
which an Office Holder would be required to repay compensation paid to him or her if it was later shown that the data upon which such compensation was
based was inaccurate and was required to be restated in the company’s financial statements; (d) the minimum holding or vesting period for variable, equity-
based compensation, including bonuses; and (e) maximum limits for severance.
Under the Companies Law, every three years we must obtain Compensation Committee, Board and shareholder approval for either the continuation of our
existing compensation policy or adoption of a new compensation policy. Our compensation policy was last approved by our shareholders on October 4,
2021, after having been recommended by our Compensation Committee and approved by our Board, and will therefore need to be either re-approved,
amended, or replaced by a new policy in 2024.
Our Compensation Committee may conduct or authorize investigations into, or studies of, matters within its scope of responsibilities, and may retain or
obtain the advice of a compensation consultant, legal counsel or other advisor in its sole discretion. The Compensation Committee is directly responsible
for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel or other advisor that it retains, at the expense
of the Company. The Compensation Committee may select, or receive advice from, a compensation consultant, legal counsel or other advisor to the
Compensation Committee, other than in-house legal counsel, only after conducting an assessment of, and determining, the advisor’s independence,
including whether the advisor’s work has raised any questions of independence or conflicts of interest, taking into consideration the Exchange Act, the
factors set forth in Nasdaq rules and any other factors that the committee deems relevant.
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In 2021 and 2023, in determining the compensation of certain non-executive directors and in determining our compensation policy, the Compensation
Committee retained the services of a compensation consultant, Brightman Almagor Zohar & co., a firm in the Deloitte Touche Tohmatsu Limited network,
to conduct a comparative survey of the compensation of such Office Holders. The 2021 and 2023 comparative studies consisted of: (i) executive
compensation benchmark analyses which included comparative data of the Company’s executive compensation, relative to the peer-group companies in
Israel and (ii) executive compensation benchmark analyses which included comparative data of the Company’s executive compensation, relative to the
peer-group companies in the United States.
Nominating and Corporate Governance Committee
Composition
Our Nominating and Corporate Governance Committee consists of Yonatan Malca, who also serves as chairman of the committee, and Sean Ellis. Each of
the members of our Nominating and Corporate Governance Committee is independent under Nasdaq rules.
Roles, Responsibilities and Procedures
Our Board has adopted a Nominating and Corporate Governance Committee Charter that sets forth the responsibilities of the Nominating and Governance
Committee consistent with the rules and regulations of the SEC and Nasdaq, including (a) assisting in identifying, recruiting and, if appropriate,
interviewing candidates to fill positions on the Board, including persons suggested by shareholders or others, (b) establishing procedures to be followed by
shareholders in submitting recommendations for Board candidates, if appropriate, (c) reviewing the background and qualifications of individuals being
considered as director candidates, while considering the candidate’s experience, skills, expertise, diversity, personal and professional integrity, character,
business judgment, time availability in light of other commitments, dedication, conflicts of interest and such other relevant factors that the committee
considers appropriate in the context of the needs of the Board, (d) recommending the Board nominees for election by shareholders or appointment by the
Board, as the case may be, in a manner consistent with the criteria for selecting directors, as established by the Board from time to time, (e) reviewing the
suitability for continued service as a director of each Board member, when the term of service of the director expires, and when the director has a change in
status (including, but not limited to, an employment change) and recommending whether or not the director should be re-nominated, (f) making
recommendations to the Board regarding the size and composition of each committee; and (g) overseeing the performance of the Board as a whole.
A copy of the Nominating and Corporate Governance Committee Charter is available on our website at www.enterabio.com.
The Nominating and Corporate Governance Committee believes that candidates for director should have certain minimum qualifications, including
sufficient scientific and/or medical expertise to review and evaluate appropriately the Company’s clinical programs, research and development programs
and licensing opportunities.
Scientific Advisory Committee
Our Scientific Advisory Committee consists of Roger Garceau, who also serves as chairman of the committee, along with Yonatan Malca, Miranda
Toledano, and Haya Taitel.
Our Board has adopted a Scientific Advisory Committee Charter that sets forth the responsibilities of the Scientific Advisory Committee, including (a)
reviewing, evaluating and reporting to the Board regarding strategy, plans and goals, as well as progress and performance, of the Company’s clinical
programs, licensing activities, and research and development activities, (b) meeting with the Company’s R&D and licensing teams to evaluate the plans,
goals and performance of the Company’s clinical programs and research and development projects, and make recommendations to the Board as appropriate
in the opinion of the committee to fulfill the company strategic goals, (c) identifying and discussing significant emerging regulatory, research and scientific
issues and trends and competitive activity, including their potential impacts on any Company programs, plans, or policies relating to its licensing
opportunities, clinical programs and research and development activities. (d) evaluating the performance of the committee, including a review of the
committee’s compliance with its charter, and review and reassess the charter and submit any recommended changes to the Board for its consideration and
approval, (e) forming external consulting panels to assist the committee in review of specific R&D programs either current or planned and (f) such other
duties and responsibilities as may be assigned to the committee, from time to time, by the Board.
A copy of the Scientific Advisory Committee Charter is available on our website at www.enterabio.com.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act and the rules thereunder require that our directors and executive officers and persons who beneficially own more than
10% of a registered class of our equity securities (collectively, “reporting persons”) file reports with the SEC relating to their share ownership and changes
in such ownership.
Delinquent Section 16(a) Reports
Based solely upon our review of copies of filings or written representations from the reporting persons, we believe that all reporting persons timely filed all
reports required by them under Section 16(a) of the Exchange Act with respect to the year ended December 31, 2023, other than Ms. Taitel, for whom her
Form 3 was filed late.
ITEM 11. EXECUTIVE COMPENSATION
Compensation Policy
Our compensation policy was adopted by our shareholders on October 4, 2021, after having been recommended by our Compensation Committee and
approved by our Board, and will therefore, under the Companies Law, need to be either re-approved, amended, or replaced by a new policy no later than
2024, and every three years thereafter. The compensation policy includes, among other matters prescribed by the Companies Law, a framework for
establishing the terms of office and employment of the directors and officers and guidelines with respect to the structure of the variable pay of officers.
Objectives
Our compensation policy is intended to align our objectives and work plans with appropriate goals and objectives of our officers and directors, and to
ensure that the overall financial and strategic objectives of the Company and its shareholders are met. We recognize that strong and effective leadership is
fundamental to our continued growth and success. Therefore, our compensation policy recognizes as a primary objective the need to attract, retain, reward
and motivate highly talented officers and directors in competitive labor markets.
Officer Compensation
With regard to our executive officers, or “Officers,” (which includes our Named Executive Officers, as defined below) our compensation policy is designed
to provide a mix of compensation to reward Officers for individual and company performance as well as to align their interests with the interests of
shareholders. We have also designed our compensation policy to provide flexibility. It must take into consideration the fact that the appropriate mix of
compensation may vary from period to period and from Officer to Officer. To achieve our goal of appropriately rewarding our Officers for their efforts, our
compensation policy generally includes: (i) short-term incentives, such as an annual base salary, benefits and perquisites; (ii) short to medium-term
incentives, such as an annual bonus based on target and above-target performance; and (iii) medium to long-term incentives, such as equity-based
compensation and retirement benefits.
Base Salary
Base salary compensates our Officers for the performance of their standard duties and reflects each Officer’s education, skills, qualifications, expertise,
professional experience and accomplishments, as well as the position, areas and scope of responsibilities of such Officer. Adjustments to base salary are
periodically reviewed by the Compensation Committee and the Board.
Bonuses
Cash bonuses are generally paid annually and are intended to reward Officers based on the performance of the Company and their individual contributions.
The target bonus amount and the performance measures and targets for each Officer are determined by the Compensation Committee and the Board at the
beginning of each year for which a bonus may be paid. Additionally, the CEO has the power to determine the annual bonus performance measures and
targets for all Officers other than for herself.
The performance measures and targets for receiving the annual bonus are intended to be measurable and quantifiable and may include, without limitation:
(i) objectives such as capital investment, cash balance relative to equity, obtaining approval from the authorities in the target markets; and (ii) key
performance indicators, determined for each Officer separately, according to the Officer's position. The annual bonus also includes a non-measurable,
qualitative component of up to 20% of an Officer’s annual bonus, which is based on an evaluation of such Officer in accordance with qualitative measures
provided in the annual bonus grant.
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In addition to the annual bonus, the Compensation Committee and the Board may elect to pay each Officer a special bonus, based on non-measurable
criteria (e.g., criteria or milestones not based on quantifiable measures), in recognition of a significant achievement or for completion of an assignment,
such as completion of a major transaction or achieving a major milestone with material impact on our business. Under our compensation policy, a special
bonus is limited to six times the monthly base salary for a given Officer, other than our CEO, for whom a special bonus is limited to three times the
monthly base salary, determined by non-measurable criteria.
Equity-based Compensation
Our compensation policy also includes an equity incentive component designed to retain Officers, align Officers and shareholders’ interests and incentivize
Officers to attain business achievements without taking unreasonable risk, under which the Company may grant Officers options to purchase shares, share
appreciation rights, restricted shares, restricted share units, performance awards or other share-based awards (collectively referred to as “equity awards”).
The equity awards are determined individually by our Compensation Committee and the Board and awarded from time to time based on, among other
elements, each Officer’s (a) contribution to the Company's performance, (b) ability to influence the Company's future and performance and (c) the Officer's
skills, qualifications, experience, roles and personal responsibilities. Additionally, the Compensation Committee and the Board award equity-based
compensation based upon the desired mix of compensation components and the mix of equity awards, as well as the desired competitive levels and dilution
or pool limits.
Our compensation policy limits the annual value of equity awards granted to an Officer, measured at the applicable grant date, to 18 times the monthly base
salary of such Officer. These equity awards must provide for a vesting period of not less than one year, and options may be granted with terms of not more
than 10 years following the grant date. For option grants and share appreciation rights, the exercise price shall be no less than the fair market value of the
underlying Ordinary Shares on the date of grant and subject to applicable law.
Hedging and Pledging
Pursuant to the terms of our compensation policy and insider trading policy, Officers and directors are prohibited from hedging or pledging their equity
awards and any other Company securities. The no-hedging policy applies to each director and Officer until one year following termination of such
director’s term of office or such Officer’s termination of employment, as applicable. Furthermore, Officers and directors may not pledge or use their equity
awards or any other Company securities held by them as collateral for loans unless otherwise approved by the Compensation Committee and Board.
Benefits and Perquisites
Under the compensation policy, our Officers are entitled to certain fringe benefits that we believe are commonly provided to similarly situated executives in
our industry. These benefits allow us to compete for talent and are therefore important to our ability to attract and retain top-level executive management.
This includes vacation days, paid sick leave, as well as additional benefits such as, but not limited to, health insurance, a company car and cell phone,
company-provided health insurance and meals.
For Officers residing in Israel, these benefits may also include contributions to a pension fund, provident fund or insurance policy in accordance with
Israeli law, contributions to an education fund of 7.5% of the Officer’s monthly salary and recuperation pay as required under applicable law. An ‘education
fund’ is a medium-term savings scheme that takes advantage of a unique tax break granted under Israeli law, whereby a company’s contributions to such
fund (which, despite its misleading name, may be used by the employee for any purpose), as well as all capital gains accrued on such contributions, are free
of tax if (a) the company contributes an amount equal to 7.5% of the employee’s salary to such fund, up to a certain limit, and the employee further
contributes 2.5% of his salary at his expense, and (b) the fund remains undrawn for a period of at least six years from the time of the first contribution.
While some of these contributions and benefits are not mandatory under Israeli law, the nature and amount of the benefits provided to our Israeli Officers
are customary and prevalent in the Israeli high-tech and bio-pharma market, especially among executives. Non-Israeli Officers may receive similar,
comparable or customary benefits as applicable in the jurisdiction in which they are employed.
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Termination
Our Officers are further entitled to certain termination payments and benefits. Officers are entitled to an advance notice period, severance payments and
retirement and termination awards. The retirement and termination awards are subject to the Compensation Committee and the Board's approval, and may
be provided only: (a) in certain change of control related cases; (b) if the Officer has made a special contribution to the advancement of the Company’s
business during his employment period as shall be determined by the Compensation Committee; or (c) in respect of Officers other than the CEO, if the
CEO has recommended granting a retirement bonus.
Director Compensation
The compensation policy provides that non-employee directors’ compensation packages are determined pursuant to the provisions of the Companies Law
in accordance with the Company's objective to attract and retain talented directors with excellent educational background, qualifications, skills, expertise,
professional experience and achievements, by providing a fair and competitive compensation program. Our non-employee directors may be eligible to
receive an annual Board membership fee, annual Committee membership fee and equity-based compensation. Non-employee directors may also be entitled
to receive insurance, indemnification and release arrangements. The chair of the Board and the chairs of the Board committees may also receive additional
annual cash payments for their service in such capacities, subject to the provisions of applicable law.
In May 2021, we elected to be exempt from the Companies Law requirement that we appoint external directors or otherwise comply with the Companies
Law requirements related to the composition of the Audit Committee and Compensation Committee. Our eligibility for that exemption is conditioned upon:
(i) the continued listing of our Ordinary Shares on the Nasdaq Capital Market (or one of a few select other non-Israeli stock exchanges); (ii) there not being
a controlling shareholder of our company under the Companies Law; and (iii) our compliance with Nasdaq requirements as to the composition of (a) our
Board of Directors, which require that we maintain a majority of independent directors, and (b) the Audit and Compensation Committees, which require
that such committees consist solely of independent directors (at least three and two members, respectively). At the time that it was determined to exempt
our Company from the external director requirement, our Board affirmatively determined that we met the conditions for exemption from the external
director requirement. As of the date hereof, we continue to meet the conditions for exemption from the external director requirement.
As a result of our election to be exempt from the external director requirement under the Companies Law, none of our directors are categorized as external
directors; therefore, the requirements and restrictions relating to external directors (including certain compensation related provisions) do not apply.
Clawback Policy
On November 30, 2023, the Board adopted an Executive Officer Clawback Policy (the “Clawback Policy”) in compliance with Rule 10D-1 under the
Exchange Act and the appliable Nasdaq rules. In the event of an accounting restatement, under the Clawback Policy, the Board, or another committee
designated by the Board, is required to recover certain incentive-based compensation paid to an executive officer of the Company, subject to the terms of
the Clawback Policy, to the extent such incentive-based compensation was in excess of the compensation that would have otherwise been payable based
upon the restated financials. The Clawback period extends for three years prior to the restatement. The Clawback Policy is in addition to Section 304 of the
Sarbanes-Oxley Act of 2002, which permits the SEC to order the disgorgement of bonuses and incentive-based compensation earned by a registrant
issuer’s chief executive officer and chief financial officer in the year following the filing of any financial statement that the issuer is required to restate
because of misconduct, and the reimbursement of those funds to the issuer. A copy of the Clawback Policy has been filed herewith as Exhibit 97 to this
Annual Report.
Summary Compensation Table
The table and summary below outline the compensation granted to our named executive officers (“Named Executive Officers”) during our fiscal years
ended December 31, 2023 and December 31, 2022. As a “smaller reporting company,” we are required to provide executive compensation information for
the following individuals: (i) all individuals who served as the Company’s principal executive officer (“PEO”), during the last completed fiscal year,
regardless of compensation; (ii) the two most highly compensated executive officers (other than the PEO) who were serving as executive officers of the
Company at the end of the last completed fiscal year and whose total compensation was greater than $100,000; and (iii) up to two additional persons who
served as executive officers (other than as the PEO) during the last completed fiscal year but who were not serving in that capacity at the end of the fiscal
year if their total compensation is higher than any of the other two Named Executive Officers in the preceding group.
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The below figures are represented in thousands.
Name and Principal Position
Miranda Toledano (2)
Chief Executive Officer and director
Dr. Hillel Galitzer
Chief Operating Officer
Dana Yaacov-Garbeli
Chief Finance Officer
Year
2023
2022
2023
2022
2023
2022
Salary ($)
Bonus ($)
338
231
245
287
193
193
Option
Award(s)
($)(1)
All Other
Compensation
($)
Total ($)
-
-
-
63
-
32
532
382
163
234
118
156
80
66
51
37
-
-
950
679
459
621
311
381
(1)
(2)
Reflects the associated annual expense recorded in our financial statements based on the grant date fair value of the share-based compensation
granted in exchange for the directors’ and officers’ services computed in accordance with Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 718, Compensation - Stock Compensation (“ASC Topic 718”). The assumptions used in
calculating the amounts are discussed in Note 6 to the Company’s audited financial statements for the year ended December 31, 2023 included in
this Annual Report. The fair value amount is recognized as an expense over the course of the vesting period of the options (subject to any
applicable accounting adjustments during that period).
Ms. Toledano was appointed as our Chief Business Officer, Chief Financial Officer and Head of Corporate Strategy in May 2022. Ms. Toledano
was then appointed as our Chief Executive Officer in July 2022. The compensation for from January 2022 and until May 2022 represents her
compensation as a non-employee board member.
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Outstanding Equity Awards at Fiscal Year End
The following table sets forth the outstanding equity awards at December 31, 2023 for our Named Executive Officers.
Name
Miranda Toledano
Chief Executive Officer and director
Dr. Hillel Galitzer
Chief Operating Officer
Dana Yaacov-Garbeli
Chief Finance Officer
Number of Securities
Underlying
Unexercised Options
Exercisable Unexercisable
-
-
44,816(1)
312,500(2)
412,500(3)
350,000(4)
10,937(5)
46,875(6)
33,750(7)
210,000(8)
2,188(9)
45,000(10)
24,062(11)
190,000(12)
33,638
35,852
62,741
187,500
187,500
-
164,062
78,125
26,250
-
32,812
75,000
10,938
-
Option
Expiration
Date
17/1/2029
1/1/2031
1/1/2031
16/05/2032
15/07/2032
24/04/2033
16/3/2030
21/4/2031
24/3/2032
24/04/2033
25/06/2030
21/04/2031
31/03/2032
24/04/2033
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
The 44,816 unexercisable options as of December 31, 2023 will vest in five equal quarterly installments beginning on January 1, 2024.
The 312,500 unexercisable options as of December 31, 2023 will vest in ten equal quarterly installments beginning on February 16, 2024.
The 412,500 unexercisable options as of December 31, 2023 will vest in eleven equal quarterly installments beginning on March 9, 2024.
Of the 350,000 unexercisable options as of December 31, 2023, 25% vest on April 24, 2024, the first anniversary of the grant date, and the
remaining 75% vesting in 12 equal quarterly installments over the following three years.
The 10,937 unexercisable options as of December 31, 2023 will vest on March 16, 2024.
The 46,875 unexercisable options as of December 31, 2023 will vest in six equal quarterly installments beginning on January 20, 2024.
The 33,750 unexercisable options as of December 31, 2023 will vest in nine equal quarterly installments beginning on March 30, 2024.
Of the 210,000 unexercisable options as of December 31, 2023, 25% vest on April 24, 2024, the first anniversary of the grant date, and the
remaining 75% will vest in 12 equal quarterly installments over the following three years.
(9)
The 2,188 unexercisable options as of December 31, 2023 will vest on March 16, 2024.
(10)
The 45,000 unexercisable options as of December 31, 2023 will vest in six equal quarterly installments beginning on January 20, 2024.
(11)
The 24,062 unexercisable options as of December 31, 2023 will vest in eleven equal quarterly installments beginning March 8, 2024.
(12)
Of the 190,000 unexercisable options as of December 31, 2023, 25% vest on April 24, 2024, the first anniversary of the grant date, and the
remaining 75% will vest in 12 equal quarterly installments over the following three years.
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Director Compensation Table
Under the Companies Law, our directors can be paid for their services as directors to the extent such payments are in accordance with the compensation
policy adopted by the Company after approval by the Compensation Committee, our Board and our shareholders by ordinary majority, or, if their
compensation deviates from our compensation policy, after approval by the Compensation Committee, our Board and our shareholders by a special
majority, if necessary, provided that (i) the majority of the votes includes at least a majority of all the votes of shareholders who are not controlling
shareholders of the Company or who do not have a personal interest in the compensation paid to the directors and participating in the vote or (ii) the total of
opposing votes from among the shareholders described in subsection (i) above does not exceed 2% of all the voting rights in the Company.
The table below outlines compensation earned by our non-employee directors for the fiscal year ended December 31, 2023, including fees earned in cash
and options awarded for services provided as a director. In order to help the Company maintain sufficient cash for operations, all non-employee directors
agreed to forfeit receipt of all cash fees otherwise payable to them for the third and fourth quarters of 2023.
Name
Gerald Lieberman
Yonatan Malca
Gerald M. Ostrov
Sean Ellis
Dr. Roger J. Garceau
Ron Mayron
Haya Taitel
Fees
Earned
or Paid
in Cash
($)
Option
Awards
($)(1)
All Other
Compensation
($)
40,000
34,000
30,000
26,500
25,000
25,000
3,091
90,966
90,966
90,966
90,966
90,966
102,864
5,523
-
-
-
-
-
-
-
Total
($)
130,966
127,854
120,966
117,466
115,966
127,966
8,613
(1)
Reflects the associated annual expense recorded in our financial statements based on the grant date fair value of the share-based compensation
granted in exchange for the directors’ and officers’ services computed in accordance with Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation (“ASC Topic 718”). The assumptions used in
calculating the amounts are discussed in Note 6 of the Company’s audited financial statements for the year ended December 31, 2023 included in
this Annual Report. The fair value amount is recognized as an expense over the course of the vesting period of the options (subject to any
applicable accounting adjustments during that period).
126
The table below sets forth the aggregate number of share options of each non-employee director outstanding as of December 31, 2023:
Name
Gerald Lieberman
Dr. Roger J. Garceau
Yonatan Malca
Ron Mayron
Gerald M. Ostrov
Sean Ellis
Haya Taitel
Employment Agreements
Share Options
266,088
588,780
266,088
266,088
266,088
266,088
33,638
We have entered into employment agreements with our Named Executive Officers. A summary of the material terms of these agreements with each of our
Named Executive Officers is set forth below. The below descriptions of employment agreements and separation agreements, as applicable, are only
summaries and are qualified in their entirety by reference to the full text of the applicable agreement, which are filed as exhibits to this Annual Report.
Miranda Toledano
In connection with Ms. Toledano’s appointment as the Company’s Chief Business Officer, Chief Financial Officer and Head of Corporate Strategy in May
2022, Ms. Toledano entered into an employment agreement (the “Original Employment Agreement”) with the Company, providing for an annual employer
cost of $350,000 inclusive of base salary, pension payments, severance and disability benefits as required under Israeli law. Additionally, Ms. Toledano was
entitled to a grant of options pursuant to the Company’s 2018 Equity Incentive Plan to purchase 500,000 Ordinary Shares of the Company’s Ordinary
Shares at an exercise price of $2.02 per share, the closing price of the Ordinary Shares on the date the option was approved by the Board. The options vest
over four years, with 25% of the options vesting on May 16, 2023 and the remaining 75% vesting in quarterly increments over the remaining three-year
period, subject to Ms. Toledano’s continued employment. In addition, Ms. Toledano was eligible to receive an annual bonus in an amount equal to 50% of
her annual base salary. Under the Original Employment Agreement, Ms. Toledano also agreed to customary non-disclosure and non-competition covenants.
127
In connection with Ms. Toledano’s appointment as Chief Executive Officer, on July 15, 2022, Ms. Toledano and the Company entered into an amended and
restated employment agreement (the “A&R Employment Agreement”), which amends and restates the Original Employment Agreement. The material
terms of the Original Employment Agreement remain unchanged, except that the A&R Employment Agreement provides for (i) Ms. Toledano’s service as
Chief Executive Officer, (ii) an annual employer cost of $380,000 inclusive of base salary, pension payments, severance and disability benefits as required
under Israeli law, (iii) eligibility to receive an annual bonus in an amount equal to 60% of Ms. Toledano’s annual base salary, (iv) a one-time separation
payment in the total amount of 12 months of salary and an extension of the exercise period with respect to vested options for a period of up to two-years
post-termination, in each case in the event of the termination of Ms. Toledano’s employment by the Company for any reason other than for Cause (as
defined in the A&R Employment Agreement), (v) an additional grant of options (the “Options”) pursuant to the Company’s 2018 Equity Incentive Plan to
purchase 600,000 Ordinary Shares at an exercise price of $1.40, which was the closing price of the Ordinary Shares on the date the Board approved such
option grant and (vi), upon the Company’s achievement of certain performance or financial milestones, a grant of options (the “Additional Options”) to
purchase an additional 200,000 Ordinary Shares pursuant to the Company’s 2018 Equity Incentive Plan at an exercise price equal to the closing price of the
Ordinary Shares on the date the Board approves such option grant. The Options will vest over four years, with 25% of the Options vesting on July 15, 2023
and the remaining 75% vesting in quarterly increments over the remaining three-year period, subject to Ms. Toledano’s continued employment. The
Additional Options will vest over four years, with 25% of the Additional Options vesting on the first anniversary of the grant date and the remaining 75%
vesting in quarterly increments over the remaining three-year period, subject to Ms. Toledano’s continued employment.
On April 24, 2023, the Compensation Committee and the Board voted to approve, and on September 13, 2023, the shareholders of the Company ratified
and confirmed, (i) a salary increase for Ms. Toledano, according to which her annual employer cost would be increased to $480,000, and (ii) a one-time
grant of options to purchase 350,000 Ordinary Shares, at an option exercise price of $0.795 per Ordinary Share, under the Company’s 2018 Equity
Incentive Plan (the “2018 Plan”), both of which were deemed by the Board to be inside the respective ranges set in the Company's compensation policy.
For the sake of good corporate governance, the Company and Ms. Toledano executed an amendment to Ms. Toledano's employment agreement in January
2024, under the terms of which the salary increase became effective on January 1, 2024.
Hillel Galitzer
In March 2014, we entered into an employment agreement with our Chief Operating Officer, Dr. Hillel Galitzer. Pursuant to the terms of his employment,
and within the discretion granted to the Board, Dr. Galitzer was entitled to an annual gross base salary of $230,725 for both 2022 and 2023, which
represents an increase in base salary from the original terms of the employment agreement approved by the Board. In 2024, the Board approved an increase
to Dr. Galitzer's annual salary, and he is currently entitled to an annual gross base salary of $246,000. Additionally, pursuant to the terms of his employment
agreement, Dr. Galitzer is eligible to participate in the Company’s standard full-time employment benefits that are offered by the Company from time to
time, which currently include short-term disability and pension fund benefits. Dr. Galitzer is also generally entitled to reimbursement for travel and other
business expenses and other benefits, including, vacation, holidays, company car and sick leave. Subject to applicable law, Dr. Galitzer is also covered by
our D&O insurance policy. Pursuant to the terms of his employment agreement. Dr Galitzer is eligible to receive equity awards under the Company’s
existing and future incentive plans. Pursuant to the terms of his employment agreement, Dr. Galitzer also agreed to customary non-disclosure and non-
competition covenants.
Dana Yaacov-Garbeli
In June 2019, we entered into a consulting agreement with A2Z Finance Ltd. (“A2Z”), in connection with the appointment of Ms. Yaacov-Garbeli as our
Chief Financial Officer, which was further amended in June 2020, October 2021 and April 2023 (as amended, the (“consulting agreement”). Under the
terms of the consulting agreement, both parties may terminate the agreement for any reason upon 30 days’ notice. In addition, the Company has the ability
to terminate the agreement immediately upon the occurrence of certain limited circumstances, such as breach of contract. In 2022 and 2023, pursuant to the
terms of the consulting agreement, Ms. Yaacov-Garbeli was entitled to an annual payment of $193,200. Ms. Yaacov-Garbeli's annual payment was raised to
$225,000 for fiscal year 2024. In addition, Ms. Yaacov-Garbeli is reimbursed for reasonable out of pocket expenses which were pre-approved in writing in
connection with her duties as Chief Financial Officer. Pursuant to the terms the consulting agreement, Ms. Yaacov-Garbeli also agreed to customary non-
disclosure and non-competition covenants.
128
Employee Equity Incentive Plans
2013 Share Incentive Plan
On March 17, 2013, our Board approved our 2013 Plan for the granting of stock options, restricted share units, restricted share awards and performance-
based awards, in order to provide incentives to our employees, directors, consultants and/or service providers. As of December 31, 2023, 1,166,880
Ordinary Shares were issuable upon the exercise of outstanding awards under the 2013 Plan, at a weighted-average exercise price of $5.98 per share. As of
December 31, 2023, all of the foregoing outstanding options had vested under the 2013 Plan. The 2013 Plan is administered by our Board or by a
committee appointed by our Board. Upon the completion of our initial public offering, the remaining pool of reserved Ordinary Shares under the 2013 Plan
was cancelled, and the only reserved Ordinary Shares available for grants to our employees, directors, consultants and service providers in the future are
those under the 2018 Plan (which is described below).
2018 Equity Incentive Plan
On July 2, 2018, in connection with the consummation of our initial public offering, our Board approved our 2018 Plan, with the purpose of advancing the
interests of our shareholders by enhancing our ability to attract, retain and motivate individuals to perform at the highest level. The 2018 Plan governs
issuances of equity incentive awards from and after the closing of our initial public offering. The maximum number of Ordinary Shares initially available
for issuance under equity incentive awards granted pursuant to the 2018 Plan could not exceed 12% of the total outstanding Ordinary Shares as of the time
of adoption. On January 1, 2019 and on January 1 of each calendar year thereafter, an additional number of shares equal to 5% of the total outstanding
Ordinary Shares on such date (or any lower number of shares as determined by our Board) have and will become available for issuance under the 2018
Plan. In our shareholders meeting held September 7, 2022, our shareholders approved an amendment to the 2018 Plan to increase the number of Ordinary
Shares issuable under the 2018 Plan by a one-time additional amount of 576,188 Ordinary Shares. As of December 31, 2023, a total of 638,598 Ordinary
Shares representing 1.8% of the total outstanding shares as of that date remained available for issuance under the 2018 Plan. On January 1, 2024, pursuant
to the annual evergreen provision and following the approval of our Board, an additional 1,773,817 Ordinary Shares, equal to 5% of the total outstanding
shares as of January 1, 2024, became available for issuance under the 2018 Plan.
Equity incentive awards may be granted to our employees, non-employee directors, consultants or other advisors, as well as holders of equity compensation
awards granted by a company that may be acquired by us in the future. Awards under the 2018 Plan may be granted in the form of options, share
appreciation rights, restricted shares, restricted share units, performance awards or other share-based awards. Options and share appreciation rights will
have an exercise price determined by the administrator but that is no less than fair market value of the underlying Ordinary Shares on the date of grant.
As of December 31, 2023, 5,938,534 Ordinary Shares were issuable upon the exercise of outstanding awards under the 2018 Plan, at a weighted-average
exercise price of $1.90 per share. Of the foregoing outstanding awards, as of December 31, 2023, options to purchase 3,078,715 Ordinary Shares, in the
aggregate, had vested under the 2018 Plan, with a weighted-average exercise price of $3.63 per share.
The vesting conditions for grants under the 2018 Plan will be determined by the administrator and, in the case of restricted shares and restricted share units,
will be set forth in the applicable award documentation.
In the event of a participant’s termination of employment, the administrator may, in its discretion, determine the extent to which an equity incentive award
may be exercised, settled, vested, paid or forfeited. In the event of a change in control (as defined in the 2018 Plan) of the Company, the Compensation
Committee may, in its discretion, take a number of actions with respect to awards outstanding under the 2018 Plan, including the following: (i) continuing
awards or converting such awards into an award or right with respect to shares of the successor or surviving corporation; (ii) immediately vesting and
settling awards (or in the case of options and share appreciation rights, providing that such awards will become fully exercisable); (iii) cancelling unvested
awards for no consideration; (iv) terminating or cancelling awards in exchange for a cash payment; and (v) providing that awards may be assumed,
exchanged, replaced or continued by the successor or surviving corporation with cash, securities, rights or other property. In the event of a structural change
of the Company (i.e., a transaction in which the Company’s shares immediately prior to the transaction are converted into or exchanged for shares that
represent at least a majority of the share capital of the surviving corporation, such as a re-domestication of the Company or a share flip), outstanding
awards will be exchanged or converted into awards to acquire shares of the company (if it is the surviving corporation) or the successor company in
accordance with the applicable exchange ratio.
129
The 2018 Plan is administered by the Board, provided that the Board may delegate its authority to the Compensation Committee to administer the 2018
Plan.
The 2018 Plan provides for granting awards in compliance with Section 102 of the Ordinance, which provides to employees, directors and officers of the
Company, who are not controlling shareholders (as defined in the Ordinance) of the Company and are Israeli residents, potential favorable tax treatment for
compensation in the form of shares or equity awards issued or granted, as applicable, to a trustee under the Capital Gains Track for the benefit of the
relevant employee, director or officer, subject to compliance with the terms and conditions of such tax track. Under the Capital Gains Track, any accounting
expense with respect to the grant or issuance of such shares or awards which relates to gain taxed as capital gains is not allowed as a deduction for tax
purposes.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information known to us with respect to the beneficial ownership of our Ordinary Shares as of March 1, 2024 by:
•
•
•
each person or entity known by us to own beneficially 5% or more of our outstanding Ordinary Shares;
each of our directors and executive officers individually; and
all of our executive officers and directors as a group.
The beneficial ownership of our Ordinary Shares is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial ownership, generally, includes any shares over which a person exercises sole or
shared voting or investment power. For purposes of the table and the related footnotes, unless described otherwise within the footnotes, Ordinary Shares
issuable pursuant to options or warrants that are currently exercisable will become exercisable within 60 days following March 1, 2024 to be outstanding
and beneficially owned by the person holding the options or warrants for the purposes of computing the percentage ownership of that person, but we do not
treat them as outstanding for the purpose of computing the percentage ownership of any other person, except with respect to the percentage ownership of
all executive officers and directors as a group. The percentage of Ordinary Shares beneficially owned is based on 35,481,341 Ordinary Shares outstanding
as of March 1, 2024. The beneficial ownership data provided below is based solely on information available to our Company and, in the case of major
shareholders who are not otherwise officers or directors, has not been verified further. Except where otherwise indicated, we believe, based on information
furnished to us by such owners, that the beneficial owners of the Ordinary Shares listed below have sole investment and voting power with respect to such
shares.
Unless otherwise noted below, each shareholder’s address is c/o Entera Bio Ltd., Kiryat Hadassah, Minrav Building - Fifth Floor, Jerusalem, Israel.
130
Name
5% or Greater Shareholders (other than directors and executive officers)
D.N.A Biomedical Solutions Ltd.(1)
Gakasa Holdings LLC.(2)
Centillion Fund (3)
Executive Officers and Directors:
Miranda Toledano(4)
Dr. Roger J. Garceau(5)
Gerald Lieberman(6)
Dr. Hillel Galitzer(7)
Sean Ellis(8)
Gerald M. Ostrov(9)
Yonatan Malca(10)
Ron Mayron(11)
Dana Yaacov-Garbeli(12)
Dr. Arthur Santora(13)
Haya Taitel (14)
All Directors and Executive Officers as a Group (11 persons)(15)
* Less than 1%
Number and Percentage of
Ordinary Shares
Number
Percent
3,732,540
3,524,275
2,396,953
853,612
593,914
541,995
385,356
368,382
276,282
273,514
273,282
246,580
381,421
53,493
3,984,266
10.5%
9.9%
6.8%
2.4%
1.7%
1.5%
1.0%
1.0%
*
*
*
*
*
*
10.26%
(1) D.N.A Biomedical Solutions Ltd.’s holdings consisted of 3,762,960 Ordinary Shares. D.N.A’s address is at Shimon Hatarsi 43 St., Tel Aviv, Israel.
(2) Beneficial ownership includes 3,534,275 ordinary shares. This consists of: (i) 3,534,275 ordinary shares, (ii) 347,604 ordinary shares underlying Pre-
Funded Warrants and (iii) 1,197,604 shares underlying Ordinary Share Warrants. The Pre-Funded Warrants and Ordinary Share Warrants beneficially
owned by Gakasa Holdings LLC prohibit the exercise thereof if, after giving effect to such exercise, the holder, including any person whose
beneficial ownership would be attributable to the holder, would exceed 9.99%.
(3) Based on the Schedule 13G/A filed by Centillion Fund Inc. with the SEC on November 18, 2022 regarding its holdings as of August 31, 2022.
Centillion Fund Inc’s address is 10 Manoel Street, Castries, Saint Lucia LC04 101
(4) Consists of (i) 110,752 Ordinary Shares and (ii) 23,952 Ordinary Shares underlying warrants to acquire Ordinary Shares (iii) 718,908 Ordinary
Shares underlying options to acquire Ordinary Shares
(5) Consists of (i) 4,940 Ordinary Shares and (ii) 588,974 Ordinary Shares underlying options to acquire Ordinary Shares.
(6) Consists of (i) 251,761 Ordinary Shares and (ii) 23,952 Ordinary Shares underlying warrants to acquire Ordinary Shares (iii) 266,282 Ordinary
Shares underlying options to acquire Ordinary Shares
(7) Consists of (i) 34,106 Ordinary Shares and (ii) 351,250 Ordinary Shares underlying options to acquire Ordinary Shares.
(8) Consists of (i) 102,100 Ordinary Shares and (ii) 266,282 Ordinary Shares underlying options to acquire Ordinary Shares
(9) Consists of (i) 10,000 Ordinary Shares and (ii) 266,282 Ordinary Shares underlying options to acquire Ordinary Shares.
(10) Consists of (i) 7,232 Ordinary Shares and (ii) 266,282 Ordinary Shares underlying options to acquire Ordinary Shares.
(11) Consists of (i) 7,000 Ordinary Shares and (ii) 266,282 Ordinary Shares underlying options to acquire Ordinary Shares.
(12) Consists of (i) 56,580 Ordinary Shares and (ii) 190,000 Ordinary Shares underlying options to acquire Ordinary Shares.
(13) Consists of 83,750 Ordinary Shares underlying options to acquire Ordinary Shares.
(14) Consists of (i) 18,000 ordinary Shares (ii) 35,493 Ordinary Shares underlying options to acquire Ordinary Shares.
(15) Consists of (i) 602,471 ordinary Shares (ii) 47,904 Ordinary Shares underlying warrant to acquire Ordinary Shares and (iii) options to acquire
3,299,785 Ordinary Shares.
131
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides certain information as of December 31, 2023, with respect to our equity compensation plans under which our equity securities
are authorized for issuance:
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
(#)
Number of
securities to
be issued upon
exercise of
outstanding
options, RSUs,
warrants and
rights
(#)
Weighted-
average
exercise price
of outstanding
options,
RSUs,
warrants and
rights
($)
(a)
(b)
(c)
1,166,880 $
5,938,534 $
-
7,105,414 $
5.98
1.9
-
2.57
-
638,598
-
638,598
Plan Category
Equity compensation plans approved by security holders
2013 Plan
2018 Plan
Equity compensation plans not approved by security holders
Total
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Described below are any transactions occurring since January 1, 2022, and any currently proposed transactions to which either the Company was a party
and in which:
•
•
The amounts involved exceeded or will exceed the lesser of (i) $120,000 and (ii) one percent of the average of the Company’s total
assets at year-end for the last two completed fiscal years; and
A director, executive officer, holder of more than 5% of the outstanding share capital of the Company, or any member of such person’s
immediate family had or will have a direct or indirect material interest.
Indemnification Agreements with Directors
Our Articles provide that we may indemnify each of our directors and officers to the fullest extent permitted by the Companies Law. Accordingly, we have
entered into standard indemnification agreements with each of our directors, whereby we have undertaken to indemnify each such director, in advance, for
losses, damages, costs or expenses that such director may suffer or incur as a result of his or her actions or omissions in such capacity on behalf of the
Company in certain circumstances and events, subject to the terms, conditions and limitations set out in the indemnification agreement.
Approval of Related Party Transactions
The Companies Law requires that an Office Holder of a company promptly disclose any personal interest that he or she may have and all related material
information known to him or her, in connection with any existing or proposed transaction of the company.
132
Pursuant to the Companies Law, any transaction with an Office Holder or in which the Office Holder has a personal interest must be brought before the
Audit Committee, in order to determine whether such transaction is an Extraordinary Transaction (as defined in the Companies Law).
Pursuant to the Companies Law, our Articles and Entera written policy, in the event that the Audit Committee determines that the transaction is not an
Extraordinary Transaction, the transaction will require only Audit Committee approval; if, however, it is determined to be an Extraordinary Transaction,
Board approval is also required and, in some circumstances, shareholder approval may also be required. Such a transaction may only be approved if it is
determined to be in the best interests of Entera.
A person with a personal interest in the matter generally may not be present at meetings of the Board or certain committees where the matter is being
considered and, if a member of the Board or a committee, may generally not vote on the matter.
Transactions with Controlling Shareholders
Under the Companies law, Extraordinary Transactions with a controlling shareholder, or in which the controlling shareholder has a personal interest, and
any engagement with a controlling shareholder, or a controlling shareholder’s relative, with respect to the provision of services to the company or their
Terms of Office and Employment as an Office Holder or their employment, if they are not an Office Holder, generally require the approval of the Audit
Committee (or with respect to Terms of Office and Employment, the Compensation Committee), the Board of Directors and the shareholders. If required,
shareholder approval must include (i) at least a majority of the shareholders who do not have a personal interest in the transaction and are present and
voting at the meeting (abstentions are disregarded), or, alternatively, that (ii) the total shareholdings of the disinterested shareholders who vote against the
transaction do not represent more than two percent of the voting rights in the company. Transactions for a period of more than three years generally need to
be brought for approval in accordance with the above procedures every three years. A shareholder who holds 25% or more of the voting rights in a
company is considered a controlling shareholder for these purposes if no other shareholder holds more than 50% of the voting rights. If two or more
shareholders are interested parties in the same transaction, their shareholdings are combined for the purposes of calculating percentages.
Independent Directors
Our Board undertook a review of the independence of each director. Based on information provided by each director concerning his or her background,
employment, and affiliations, our Board has determined that the Board meets independence standards under the applicable rules and regulations of the SEC
and the listing standards of Nasdaq. The Board has affirmatively determined that the following Directors are “independent” as of the date of this Annual
Report as defined in the listing standards of Nasdaq: Gerald Lieberman, Ron Mayron, Gerald M. Ostrov, Sean Ellis, Yonatan Malca and Haya Taitel. 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 stock by each non-
employee director, and the transactions involving them described in this Item 13.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Kesselman & Kesselman (a member firm of PricewaterhouseCoopers International Limited) has served as our independent registered public accounting
firm for 2023 and 2022. The following table sets forth fees billed to us by our independent registered public accounting firm during the fiscal years ended
December 31, 2023 and 2022 for (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements;
and (ii) services rendered during the period in connection with tax compliance, tax advice and tax planning.
Audit fees (1)
Tax fees (2)
Total fees
Year Ended
December 31,
2023
2022
$
$
157,500 $
6,700
164,200 $
194,000
7,500
201,500
(1)
Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial
statements and services related to certain registration statements.
(2)
Tax consulting services.
Audit Committee Pre-approval Policies and Procedures
Our Audit Committee is responsible for pre-approving audit and non-audit services provided to us by our independent registered public accounting firm.
All of the non-audit services provided to us by the independent auditors following the formation of our Audit Committee were pre-approved by the Audit
Committee.
133
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
PART IV.
(a) Documents filed as part of this report:
(1) Financial statements
See Item 8 for Financial Statements included with this Annual Report.
(2) Financial Statement Schedules
None.
(3) Exhibits: See below.
Exhibit No.
3.1
4.1
4.2
4.3
4.4
4.5
10.1
10.2
10.3
10.4
10.5†
10.6†
10.7†
10.8†
10.9†
Description
Amended and Restated Articles of Association of Entera Bio Ltd. (incorporated by reference to Exhibit 1.1 to the Form 20-F, filed with
the SEC on March 18, 2021).
Description of rights of each applicable class of securities registered under Section 12 of the Securities Exchange Act of 1934
(incorporated by reference to Exhibit 2.2 to the Form 20-F filed with the SEC on March 18, 2021).
Specimen Form of Ordinary Share Certificate (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form F-1 (File
No. 333-221472) filed with the SEC on November 9, 2017)
Form of Pre-Funded Warrant (incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on December 26, 2023)
Form of Ordinary Share Warrant (incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on December 26, 2023)
Form of Placement Agent Warrant (and Finder Warrant) (incorporated by reference to Exhibit 10.4 to the Form 8-K filed with the SEC
on December 26, 2023)
Patent Transfer Agreement, dated as of February 22, 2011, between the Registrant and Oramed Ltd. (incorporated by reference to
Exhibit 10.1 to the Registration Statement on Form F-1 (File No. 333-221472) filed with the SEC on November 9, 2017)
Sales Agreement, dated September 2, 2022, between Entera Bio. Ltd. and SVB Securities LLC (incorporated by reference to Exhibit
10.1 to the Form 8-K filed with the SEC on September 2, 2022)
Securities Purchase Agreement, dated as of December 20, 2023, by and among Entera Bio Ltd. and the purchasers party thereto
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on December 26, 2023)
Registration Rights Agreement, dated as of December 22, 2023, by and among Entera Bio Ltd. and the purchasers party thereto
(incorporated by reference to Exhibit 10.5 to the Form 8-K filed with the SEC on December 26, 2023)
Form of indemnification agreement between the Registrant and its directors and executive officers (incorporated by reference to Exhibit
10.12 to the Registration Statement on Form F-1 (File No. 333-221472) filed with the SEC on November 20, 2017)
The Entera Bio Ltd. Share Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form F-1 (File
No. 333-221472) filed with the SEC on November 9, 2017)
2018 Equity Incentive Plan (incorporated by reference to Exhibit 99 to the Registration Statement on Form S-8 (File No. 333-227488)
filed with the SEC on September 24, 2018)
Form of Stock Option Award Agreement under the 2018 Equity Incentive Plan (incorporated by reference to Exhibit 4.25 to the Annual
Report on Form 20-F (File No. 001-38556) filed with the SEC on March 28, 2019)
Amended and Restated Employment Agreement, dated July 15, 2022, by and between Entera Bio Ltd. and Miranda Toledano
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on July 18, 2022)
134
10.10†*
10.11†*
10.12†*
21.1*
23.1*
31.1*
31.2*
32.1**
32.2**
97*
Amendment to Employment Agreement, dated January 30, 2024, by and between Entera Bio Ltd. and Miranda Toledano.
Consulting agreement, dated June 2, 2019, between Entera Bio Ltd. and Dana Yaacov Garbeli (through A2Z Finance Ltd.), as amended.
Employment Agreement, dated as of June 8, 2014, between Entera Bio Ltd. and Dr. Hillel Galitzer, as amended.
List of Subsidiaries
Consent of Kesselman & Kesselman, an
PricewaterhouseCoopers International Limited.
independent registered public accounting firm
in Israel and a member of
Certification of Principal Executive Officer of Entera Bio Ltd. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial and Accounting Officer of Entera Bio Ltd. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Certification of Principal Executive Officer of Entera Bio Ltd. pursuant to Section 906 of the Sarbanes-Oxley act of 2002
Certification of Principal Financial and Accounting Officer of Entera Bio Ltd. pursuant to Section 906 of the Sarbanes-Oxley act of
2002
Entera Bio Ltd. Executive Officer Clawback Policy, effective as of November 30, 2023
Inline XBRL Instance Document
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Inline XBRL for the cover page of this Annual Report, included in the Exhibit 101 Inline XBRL Document Set.
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
_____________________
† Management contract or compensatory plan or arrangement.
* Filed herewith.
** Furnished herewith.
ITEM 16.
FORM 10-K SUMMARY
Not applicable.
135
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 8, 2024
ENTERA BIO LTD.
By: /s/ Miranda Toledano
Miranda Toledano
Chief Executive Officer
and Director
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and appoints each of Miranda Toledano and Dana Yaacov-
Garbelli, or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstituting, for such person
and in his name, place and stead, in any and all capacities, to sign this Annual Report, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and
authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming that any such attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name
Title
/s/ Miranda Toledano
Miranda Toledano
/s/ Dana Yaacov-Garbeli
Dana Yaacov-Garbeli
/s/ Gerald Lieberman
Gerald Lieberman
/s/ Roger J. Garceau
Roger J. Garceau
/s/ Ron Mayron
Ron Mayron
/s/ Yonatan Malca
Yonatan Malca
/s/ Sean Ellis
Sean Ellis
/s/ Gerald M. Ostrov
Gerald M. Ostrov
/s/ Haya Taitel
Haya Taitel
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
136
Date
March 8, 2024
March 8, 2024
March 8, 2024
March 8, 2024
March 8, 2024
March 8, 2024
March 8, 2024
March 8, 2024
March 8, 2024
AMENDMENT TO EMPLOYMENT AGREEMENT
Exhibit 10.10
This Amendment to Employment Agreement (“Amendment”) is made as of January 31, 2024 by and between Entera Bio Ltd. an Israeli company (the
“Company”) and Miranda Toledano (the “Employee”, and together with the Company, the “Parties”).
WHEREAS:
A.
B.
C.
The Company and the Employee entered into a personal employment agreement, as amended (the “Agreement”), pursuant to which the Employee
has been employed by the Company effective as of May 16, 2022;
The Company has lawfully approved the amendment of the Agreement according to the terms of this Amendment; and
The Parties desire to amend the Agreement in accordance with the provisions set forth herein, effective as of January 1, 2024 (the “Effective Date”);
NOW, THEREFORE, in consideration of the mutual promises, covenants and understandings contained herein, the Parties agree as follows:
1. As of the Effective Date, the Employee shall be entitled to a gross monthly Salary of $33,584 . The payment shall be made in NIS and shall be
calculated based on the last official exchange rate of NIS/US$ at the end of each calendar month, as published by the Bank of Israel.
2. All Salary-based benefits due to the Employee under the Agreement shall be adjusted according to the amended Salary as of the Effective date.
3. All other terms and conditions of the Agreement shall remain unchanged. In the event of any inconsistency between the terms of the Agreement and
this Amendment, the terms of this Amendment shall prevail.
4. Any capitalized terms not defined in this Amendment shall have the meaning attributable to them in the Agreement.
5. This Amendment may be executed in counterparts, each of which shall be deemed an original.
[Signature Page to Follow]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above.
/s/ Miranda Toledano
Miranda Toledano
/s/ Dana Yaacov-Garbeli
Entera Bio Ltd.
By: Dana Yaacov-Garbeli
Name & Title: CFO
[Signature Page to the Amendment to Employment Agreement]
Exhibit 10.11
CONSULTANCY AGREEMENT
This Consultancy Agreement ("Agreement") is entered into effective as of June 2, 2019, by and between Entera Bio Ltd., an Israeli company I.D. No.
514330604 ("Company"), and A2Z Finance Ltd., a company organized under the laws of the State of Israel ("Consultant").
WHEREAS,
the Consultant agrees to perform the Services for the interim period until the engagement by the Company of a new chief financial
officer for the Company on a permanent basis; and
WHEREAS,
the Consultant is ready, qualified, willing and able to carry out her obligations and undertakings towards the Company pursuant
hereto; and
WHEREAS,
the Services will be provided by the Consultant as an independent contractor, as per the Consultant's and the Designated Service
Provider's specific wish and requirement, made as a result of considerations and benefits personal to the Consultant and the
Designated Service Provider, that the Services shall be provided to the Company by the Consultant on an independent contractor
basis, absent an employment relationship between the Company and the Consultant or the Designated Service Provider; and
WHEREAS,
the parties hereto wish to regulate their relationship in accordance with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the parties do mutually agree as follows:
1. Engagement of Services.
1.1. Consultant will provide to the Company CFO services, which shall include, without limitation, the list of responsibilities described in
Exhibit A (the “Services”), in a scope and position expressly stated in Exhibit A. Consultant will perform Services faithfully, diligently and to the best of
Consultant’s skill and ability. The engagement hereunder is not exclusive, and shall not limit the Company from engaging a third party to provide services
which are the same as or similar to the Services.
1.2. Consultant will provide the Services commencing as of June 2, 2019 (the “Commencement Date”) until termination of this Agreement
in accordance with the terms of this Agreement. The provisions of this Section 1.2 and of Sections 2, and 4 through 9 of this Agreement shall survive any
termination of this Agreement indefinitely. Upon termination of this Agreement or at such other time as directed by the Company, the Consultant shall
immediately return to the Company all assets in the Consultant's possession or control which belong to, or have been entrusted to, the Company. The
Consultant shall neither have, nor retain, any proprietary interest or lien in such assets.
1.3. This Agreement will be in effect commencing on the Commencement Date, until terminated by either party as provided below. Either
party may terminate this Agreement immediately without cause upon prior written notice of 30 days to the other party.
1.4. Notwithstanding the above, the Company shall be entitled to terminate this Agreement with an immediate effect if: (i) the Consultant act
dishonestly, breach its duties (including the duty of loyalty) towards the Company and/or its subsidiaries (the “Group”), or breach the terms of this
Agreement, or other agreement with the Company relating to confidentiality, ownership or protection of proprietary rights, non-solicitation or non-
disparagement or in the event of any act or omission of the Consultant which would have entitled the Company legally to dismiss the Consultant without
severance pay, in whole or in part, had the Consultant or the Designated Service Provider been engaged as an employee of the Company; or (ii) the
Company has employed a new Chief Financial Officer (the “New CFO”) (for the avoidance of doubt, the Company shall be entitled to terminate this
Agreement with an immediate effect, at the Company's sole discretion, on the starting date of the New CFO with the Company.
1.5. Designated Service Provider. The Consultant undertakes that all of the Services shall be performed solely and exclusively by Dana
Yaacov (the “Designated Service Provider”) for the entire term of this Agreement, unless otherwise agreed in writing by the Company.
1.6. Corporate approvals. Notwithstanding anything to the contrary herein, the Consultant agrees and understands that this Agreement is
subject to, and shall only enter into effect upon the receipt of the approval by all corporate organs of the Company as required according to the applicable
law (as determined by the Company on its sole discretion).
2. Representations and Obligations. Consultant warrants and undertakes as follows:
2.1. Consultant has the ability, experience, expertise and resources to provide the Services and to perform all of its obligations hereunder.
Consultant shall perform all duties and obligations under this Agreement with the highest degree of professionalism, loyalty and to the full satisfaction of
the Company. Consultant is free to provide the Company with the Services, upon the terms contained in this Agreement, and there are no legal,
commercial or contractual restrictions preventing the Consultant from fully performing all duties hereunder. Designated Service Provider is an employee of
the Consultant (“Employer”). Consultant represents warrants and covenants that Consultant's performance of the obligations under this Agreement does not
and will not violate the terms of any of Designated Service Provider's agreements with Employer or any other party. Neither Consultant nor the Designated
Service Provider shall accept any Confidential Information (as defined in Section 5.1 below) if he believes, in her sole discretion, that such acceptance
might impair her ability to perform her duties of research and publication under her employment agreement with Employer.
2.2. Consultant shall provide the Company with the Services, in accordance with the directions of the Company’s Chief Executive Officer, or
such other person as directed.
2.3. Consultant will notify the Company immediately should anything occur or come to its attention which would or might prevent it from
providing the Services at the level required by the Company. In these circumstances, the Company may terminate this Agreement immediately, without any
advance notice, in respect of which the Consultant will not be entitled to any damages or payment other than the Fee (as defined below) for Services
provided to the Company prior to termination. Where the Consultant discovers that it has or might have at some point in the future, any personal interest in
Company business, or a conflict of interest arising out of or in connection with the Services then, immediately upon discovery, Consultant shall notify the
same to the Company in writing. Without derogating from any other rights under this Agreement or under law, the Company may require the Consultant to
cease to have any such personal interest or conflict of interest, as the case may be or to immediately terminate this Agreement as detailed in this Section
1.4.
2.4. Consultant shall be responsible, at its own expense, to obtain all of the equipment necessary for providing the Services, such as car,
phone, computer or other communications equipment.
2.5. Consultant shall comply with all of the Company's policies, as effective from time to time, and acknowledges that the Company is a
public company and further represents that Consultant shall at all times comply with all applicable laws, including any applicable securities laws.
2.6. The Consultant has, and will have throughout the term of this Agreement, all approvals, permits and licenses required pursuant to any
law to provide the Services in accordance with this Agreement (if required).
- 2 -
2.7. The Consultant shall not, directly or indirectly, accept any commission, rebate, discount or gratuity in cash or in kind, from any person
who has or is likely to have a business relationship with the Group related in any way to the Services provided by the Consultant.
3. Consideration
3.1. Subject to the fulfillment of the Consultant's obligations hereunder, and contingent upon the performance of the Services by it, the
Company shall pay the Consultant a gross service fee (and expense reimbursement, if applicable) as (and only as) expressly stated in Exhibit A (“Fee”).
Payment of the Fee by the Company will be made within 30 days following the receipt by the Company of a valid tax invoice issued by the Consultant.
3.2. Subject to and without derogating from Section 2.4, the Company will reimburse the Consultant for reasonable out of pocket expenses
which were pre-approved in writing in connection with its duties hereunder (at the Company's sole discretion), all subject to any Company policies as may
be in force from time to time and against the provision of proper receipts. For the avoidance of doubt, it is hereby clarified that the Company will not
reimburse the Consultant for any car expenses or other similar expenses according to this Section 3.2.
3.3. The Consultant shall not be entitled to any further compensation in connection with the Services except as otherwise stated in this
Agreement.
4. Taxes. Consultant shall bear any and all taxes and national insurance contributions (as applicable) which may be payable in connection with any
consideration payable to, or benefit receivable by, Consultant and/or Designated Service Provider pursuant to this Agreement. Consultant declares that it
maintains financial books in accordance with applicable law and that it is duly registered with the income tax, VAT and national insurance authorities (if
and as applicable). Consultant shall bear and be responsible for, and shall indemnify and hold the Company harmless from, all payments required to be
made to any such applicable national insurance institute, taxation body or other third party in consequence of the provision of the Services or the
remuneration provided in connection therewith. Notwithstanding the above, the Company shall withhold at source all taxes and compulsory payments on
any payment to the Consultant to the extent that such taxes and compulsory payments are required by any applicable law to be withheld at source.
5. Status of Parties
5.1. The relationship between the Consultant and the Designated Service Provider and the Company, in compliance with the Consultant's
request, is one of principal and independent contractor. The Consultant declares that he maintains financial books in accordance with the applicable law and
that it is duly registered with the income tax, VAT and National Insurance authorities, and that he must perform and continue to perform all actions legally
required to establish and maintain its status as an independent contractor with an independent business. The parties expressly declare that no employment
relationship exists between the Company and the Consultant and/or the Designated Service Provider.
5.2. If, notwithstanding anything contained in this Agreement any person shall claim, or a judicial authority shall determine, that the
Consultant and/or the Designated Service Provider provided the Services under this Agreement as an employee of the Company, then the following
provisions shall apply:
(a)
(b)
For the period as to which it is claimed or determined that an employment relationship existed between the Company and the
Consultant (the “Relevant Period”), the Consultant shall not be entitled to the Fee, but only 60% thereof (the “Reduced Fee”).
The Reduced Fee shall constitute the full Fee payable to the Consultant as salary in connection with said employment
relationship, on which basis any social benefits will be calculated - to the extent that such social benefits are required to be paid
to or in respect of the Consultant pursuant to any third party authority's decision reclassifying the Consultant as an employee.
- 3 -
(c)
In view thereof, an accounting shall be conducted between the parties, and the Consultant shall immediately return and pay to
the Company all amounts paid to him in excess of the Reduced Fee for the Relevant Period, along with linkage differentials and
interest from the date of payment of each amount by the Company to the Consultant and up to the date upon which actual return
and payment of the funds is made by the Consultant, all based on the Consumer Price Indices known at the relevant dates and as
provided by the Adjudication of Interest and Linkage Law, 1961.
5.3. In addition, in the event that the relationship between the Company and the Consultant shall be claimed, regarded or determined by any
third party, including any governmental or judicial or tax authority to be an employment relationship, the Consultant shall reimburse and indemnify the
Company for any expense and payment incurred by or demanded of the Company as a consequence, no later than seven days of its receipt of such demand.
5.4. The Company shall be entitled to offset any amounts due to it under this Section 5 from any amounts payable to the Consultant under
this Agreement.
6. Confidentiality and Assignment of IP. Each of Consultant and Designated Service Provider shall sign and comply with the Company's standard
Proprietary Information and Inventions Agreement attached hereto as Exhibit B, which requires, among other things, the assignment of Consultant and
Designated Service Provider rights to any intellectual property made during Consultant and Designated Service Provider Services at the Company and the
nondisclosure of proprietary information.
7.
Non-Competition and Non-Solicitation.
7.1. During the term of this Agreement and for a period of twelve (12) months following its termination, the Consultant and the Designated
Service Provider shall not:
7.1.1.
7.1.2.
7.1.3.
directly or indirectly, in any capacity whatsoever, whether independently or as a shareholder, an employee, consultant, an officer or
any managerial capacity, carry on, set up, own, manage, control or operate, be employed, engaged or interested in a business,
anywhere in the world, which competes with, or proposes to compete with the Group.
directly or indirectly, in any way (i) offer, solicit or attempt to solicit, induce or attempt to induce or endeavor to entice away, any
person with whom any member of the Group has or had or shall have any contractual or commercial relationship as a consultant,
licensor, joint venturer, supplier, customer, distributor, agent or contractor of whatsoever nature, existing or under negotiation on or
prior to date of termination of this Agreement, to cease his, her or its relationship with that member of the Group, or otherwise
interfere in any way with the relationship between that member of the Group and such person or (ii) have any business dealings
with any such person.
directly or indirectly, in any way (i) offer, solicit or attempt to solicit for employment or other engagement, or otherwise contract
or seek to contract the services of, any individual who is, at the effective date of termination of this Agreement, employed or
engaged (whether directly or indirectly) by any member of the Group or induce or entice or attempt to induce or entice such
individual to leave such employment or other engagement or otherwise interfere in its, his or her relationship with any member of
the Group.
7.2. The Consultant acknowledges that its obligations under this Section are reasonable, in light of knowledge it will gain of the Group’s
Confidential Information and that the consideration it receives hereunder is paid, inter alia, as consideration for its undertaking under this
Section.
- 4 -
8.
9.
No Conflicting Obligations. The Consultant and the Designated Service Provider will not, at any time during the term of the Agreement, use or
disclose any trade secrets or proprietary or confidential information in such manner that may breach any confidentiality or other obligation that the
Consultant owes to any third party (including to any other employer or other clients of the Consultant and the Designated Service Provider),
without their prior written consent.
General. This Agreement inures to the benefit of the parties hereto and their permitted assigns and successors, and will not inure to the benefit of
any third party (such as the Designated Service Provider). The Consultant shall not assign any of its rights and obligations hereunder without the
prior written consent of the Company, and any attempt to do so shall be null and void. This Agreement shall be interpreted, construed, governed
and enforced according to the laws of the State of Israel, regardless of any conflicts of laws provisions. The competent courts of Tel-Aviv, Israel
shall have exclusive jurisdiction to hear any such dispute and no other courts shall have any jurisdiction whatsoever in respect of such disputes.
This Agreement contains the entire agreement and understanding between the parties with respect to the subject matter hereof, and supersedes all
prior discussions, agreements, representations and understandings in this regard. No amendment or modification of the terms or conditions of this
Agreement shall be valid unless in writing and signed by the Company and Consultant. Each notice given by one party to the other pursuant to this
Agreement shall be given in writing, correctly addressed to the relevant party's address as set forth below (unless another address has been notified
in accordance with this clause), and will be deemed to have been duly served with immediate effect at the time of hand delivery (or refusal to
receive) or email receipt, on the next business day (being a day in which the banks are open to the public in Israel) following transmission by
facsimile (and electronic confirmation of receipt), three business days after posting for delivery with a first class registered or recorded delivery
post, or on the second business day after posting with an overnight courier. Without derogating from any relief to which the Company is entitled to
pursuant to any law and/or agreement, the Company may set off any amount which the Consultant owes it pursuant to this Agreement and/or any
other source from any sum that the Consultant is entitled to receive from the Company, from whatever source. No behaviour by either party hereto
shall be deemed to constitute a waiver of any rights according to this Agreement, and/or a waiver of or consent to any breach or default in respect
of any of the terms hereof, or a change, invalidation or addition to any term, unless expressly made in writing. The Consultant hereby declares that
this Agreement is signed by it upon its request, after it has checked all its rights and obligations deriving from this Agreement, according to any
law and after it has investigated all its rights pursuant to this Agreement against the Company.
[Signature Page to Follow]
- 5 -
IN WITNESS WHEREOF, the parties have executed this Consultancy Agreement effective as of the date first written above. This Consultancy
Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and such
counterparts shall together constitute one and the same instrument.
Company:
Entera Bio Ltd.
By: /s/_Phillip Schwartz
Phillip Schwartz, CEO
Consultant:
/s/Dana Yaacov-Garbeli
A2Z Finance Ltd.
Address:
Hadassah Medical Center, Kiryat Hadassa, PO Box 12117, Jerusalem, Israel
Attention: Chief Executive Officer
e-mail: phillip@enterabio.com
Address:
Haplech 7, Tel Aviv
Israel
e-mail: dana@a2z-finance.co.il
-----------------------
In connection with the above Consultancy Agreement, as may be amended from time to time, the undersigned hereby irrevocably agrees and
undertakes to exclusively perform the Services thereunder on behalf of the Consultant (as defined therein), and to comply with and be bound by the
provisions of this Consultancy Agreement, as if a party thereto.
Designated Service Provider:
/s/Dana Yaacov-Garbeli
Dana Yaacov-Garbeli
[Signature Page to Consultancy Agreement/ June 2019]
- 6 -
AMENDMENT NO. 1 TO CONSULTING AGREEMENT
This Amendment to the Consulting Agreement (the "Amendment"), is made as of June 25, 2020 , by and between Entera Bio Ltd. (the
"Company") and A2Z Finance Ltd. (the "Consultant"). Each of the Company and the Consultant shall be referred to as a "Party" and collectively as the
"Parties". Capitalized terms used but not defined herein shall have the meaning assigned to them in the Consulting Agreement (as defined below).
WHEREAS,
the Company and the Consultant have entered into that certain Consulting Agreement, dated June 2, 2019, as amended (the "Consulting
Agreement") pursuant to which the Designated Service Provider is providing the Company with CFO Services;
WHEREAS,
the Company has lawfully approved the amendment of the Consulting Agreement according to the terms of this Amendment; and
WHEREAS,
the Parties have mutually agreed to amend the Consulting Agreement in accordance with the provisions of this Amendment, effective as
of January 1, 2020 (the “Effective Date”);
NOW THEREFORE, the Parties hereby agree as follows:
1. Fee. As of the Effective Date, the Consultant's Fee as mentioned in Exhibit A to the Consulting Agreement shall be amend to $14,000 plus VAT.
2. Unless otherwise specifically provided for herein, all other terms and conditions of the Consulting Agreement remain in full force and effect, and this
Amendment shall be deemed an integral part of the Consulting Agreement for all intents and purposes.
3.
In case of any conflict or inconsistency between the terms of this Amendment and the terms of the Consulting Agreement, this Amendment shall
prevail.
4. This Amendment may not be amended, other than by written instrument executed by both Parties.
[Signature Page to Follow]
- 7 -
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed and delivered by their duly authorized representatives, as of the date
hereof.
Company:
/s/ Yonatan Malca
Entera Bio Ltd.
Name: Yonatan Malca
Title: Director
Consultant:
/s/ Dana Yaacov-Garbeli
A2Z Finance Ltd.
Name: Dana Yaacov-Garbeli
Title: Partner
Designated Service Provider:
/s/ Dana Yaacov-Garbeli
Dana Yaacov-Garbeli
- 8 -
AMENDMENT NO. 2 TO CONSULTING AGREEMENT
This Amendment to the Consulting Agreement (the "Amendment"), is made as of October 4, 2021 , by and between Entera Bio Ltd. (the
"Company") and A2Z Finance Ltd. (the "Consultant"). Each of the Company and the Consultant shall be referred to as a "Party" and collectively as the
"Parties". Capitalized terms used but not defined herein shall have the meaning assigned to them in the Consulting Agreement (as defined below).
WHEREAS,
the Company and the Consultant have entered into that certain Consulting Agreement, dated June 2, 2019, as amended (the "Consulting
Agreement") pursuant to which the Designated Service Provider is providing the Company with CFO Services;
WHEREAS,
the Company has lawfully approved the amendment of the Consulting Agreement according to the terms of this Amendment; and
WHEREAS,
the Parties have mutually agreed to amend the Consulting Agreement in accordance with the provisions of this Amendment, effective as
of January 1, 2021 (the “Effective Date”);
NOW THEREFORE, the Parties hereby agree as follows:
5. Fee. As of the Effective Date, the Consultant's Fee as mentioned in Exhibit A to the Consulting Agreement shall be amend to $16,100 plus VAT.
6. Unless otherwise specifically provided for herein, all other terms and conditions of the Consulting Agreement remain in full force and effect, and this
Amendment shall be deemed an integral part of the Consulting Agreement for all intents and purposes.
7.
In case of any conflict or inconsistency between the terms of this Amendment and the terms of the Consulting Agreement, this Amendment shall
prevail.
8. This Amendment may not be amended, other than by written instrument executed by both Parties.
[Signature Page to Follow]
- 9 -
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed and delivered by their duly authorized representatives, as of the date
hereof.
Company:
/s/ Yonatan Malca
Entera Bio Ltd.
Name: Yonatan Malca
Title: Director
Consultant:
/s/ Dana Yaacov-Garbeli
A2Z Finance Ltd.
Name: Dana Yaacov-Garbeli
Title: Partner
Designated Service Provider:
/s/ Dana Yaacov-Garbeli
Dana Yaacov-Garbeli
- 10 -
AMENDMENT NO. 3 TO CONSULTING AGREEMENT
This Amendment to the Consulting Agreement (the "Amendment"), is made as of January 22, 2024 , by and between Entera Bio Ltd. (the
"Company") and A2Z Finance Ltd. (the "Consultant"). Each of the Company and the Consultant shall be referred to as a "Party" and collectively as the
"Parties". Capitalized terms used but not defined herein shall have the meaning assigned to them in the Consulting Agreement (as defined below).
WHEREAS,
the Company and the Consultant have entered into that certain Consulting Agreement, dated June 2, 2019, as amended (the "Consulting
Agreement") pursuant to which the Designated Service Provider is providing the Company with CFO Services;
WHEREAS,
the Company has lawfully approved the amendment of the Consulting Agreement according to the terms of this Amendment; and
WHEREAS,
the Parties have mutually agreed to amend the Consulting Agreement in accordance with the provisions of this Amendment, effective as of
January 1, 2024 (the “Effective Date”);
NOW THEREFORE, the Parties hereby agree as follows:
1. Fee. As of the Effective Date, the Consultant's Fee as mentioned in Exhibit A to the Consulting Agreement and its amendments shall be amend to
$18,750 plus VAT.
2. Unless otherwise specifically provided for herein, all other terms and conditions of the Consulting Agreement remain in full force and effect, and this
Amendment shall be deemed an integral part of the Consulting Agreement for all intents and purposes.
3.
In case of any conflict or inconsistency between the terms of this Amendment and the terms of the Consulting Agreement, this Amendment shall
prevail.
4. This Amendment may not be amended, other than by written instrument executed by both Parties.
[Signature Page to Follow]
- 11 -
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed and delivered by their duly authorized representatives, as of the date
hereof.
Company:
/s/ Miranda Toledano
Entera Bio Ltd.
Name: Miranda Toledano
Title: Chief Executive Officer
Consultant:
/s/ Dana Yaacov-Garbeli
A2Z Finance Ltd.
Name: Dana Yaacov-Garbeli
Title: Partner
Designated Service Provider:
/s/ Dana Yaacov-Garbeli
Dana Yaacov-Garbeli
- 12 -
Personal Employment Agreement
Exhibit 10.12
This Personal Employment Agreement (this “Agreement”), is entered into at Hadassah, J-m on 8 June 2014 this effective as of March, 2014, by and
between:
Entera Bio Ltd.
of Kiryat Hadassah, Minrav Building – Fifth Floor,
POB 12117, Jerusalem 91220, Israel
(the “Company”);
and
Hillel Galitzer (ID No. 015346109)
of Slav 43, Yad Binyamin
(the “Executive”).
WHEREAS,
the Company and the Employee have entered into a prior Employment Agreement, dated July 20, 2012, and a new employment
agreement on May 1, 2013 (collectively, the “Prior Employment Agreement”); and
WHEREAS,
the parties hereto wish to amend the Prior Employment Agreement in its entirety and enter into this Agreement to set forth the terms and
conditions of Executive’s employment by the Company;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1.
Recitals, Headings and Interpretation
1.1
1.2
1.3
The recitals to this Agreement constitute an integral part hereof.
The division of the terms of this Agreement into clauses and the headings is solely for convenience of reference and shall not affect its
interpretation.
For the purposes of this Agreement, the “Effective Date” shall mean February 1, 2014. As of the Effective Date, this Agreement shall
replace the Prior Employment Agreement in its entirety.
2.
Exclusivity of the Agreement
2.1
2.2
2.3
2.4
This Agreement is personal and the terms and conditions of the employment of the Executive shall be solely as set forth in this
Agreement.
Except as provided in this Agreement, no provisions of any collective bargaining agreement (“Heskem Kibbutzi”), collective
arrangement (“Hesder Kibutsi”) or other industry practice or custom of any kind shall apply.
This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior
understandings, agreements, representations and discussions between them, oral or written.
Except as expressly provided in this Agreement, the Executive shall not be entitled to any payments or other benefits in respect of his
employment and the termination of his employment with the Company. This Agreement may only be modified by an agreement in
writing duly signed by both parties hereto.
3.
Absence of Impediment to the Executive’s Employment
3.1
3.2
The Executive warrants, confirms and undertakes that he is entitled to enter into this Agreement and to assume all of the obligations
pursuant hereto, that there is no contractual or other impediment to his entering into this Agreement, fulfilling his obligations hereunder
or to his employment with the Company and that in entering into this Agreement he is not in breach of any other agreement or obligation
to which he is or was a party.
The Executive hereby warrants that he has no medical or other problems, which might prevent him from performing his obligations to
work for the Company. The Executive shall notify the Company of any change in his state of health, which has the potential to affect his
ability to perform his obligations under this Agreement.
4.
Position and Duties
4.1
4.2
4.3
4.4
4.5
4.6
The Executive shall be employed by the Company in the position of Chief Operating Officer. The Executive shall be subject and report to
the Company’s CEO or any other officer as the Company decides and directs from time to time. For the avoidance of any doubt, it is
hereby expressed that the Company may alter the Executive position and subordination, at its discretion.
During the course of his employment with the Company, the Executive shall honestly, diligently, skillfully and faithfully serve the
Company. The Executive undertakes to devote all his working time, efforts and the best of his qualifications and skills to promoting the
business and affairs of the Company, and further undertakes to comply with the policies and working arrangements of the Company, to
loyally and fully comply with the decisions of the Company, its management and his supervisors in Israel and abroad, to follow the
Company procedures as established from time to time, to carry out the duties imposed upon him, whenever established and whatever they
shall be.
The Executive shall at all times act in a manner suitable for his position and status in the Company.
The Executive shall not, without the prior written authorization of the Company, directly or indirectly undertake any other employment,
whether as an Executive of another employer or independently as an agent or consultant or in any other manner (whether for
compensation or otherwise), and shall not assume any position or render services in any of the above-stated manners to any other entity.
Notwithstanding the aforesaid, the Company agrees that the Executive is authorized to provide third parties with consulting services of
not more than 10 hours per calendar month (the “Additional Engagement”), provided that such Additional Engagement shall not (a) be
likely to create a conflict of interest with the Executive position, duties and responsibilities at the Company and (b) derogate from any of
his undertaking and obligations according to this Agreement (including as described in Section 18 below with respect to confidentiality,
non-competition and protection of intellectual property).
The Executive undertakes to notify the Company immediately and without delay regarding any matter or subject in respect of which he
has a personal interest and/or which might create a conflict of interest with his position in the Company.
The Executive undertakes to fulfill the responsibilities described in this Agreement and assist the Company, its affiliates, subsidiaries,
related corporations and parent company now or hereafter existing (collectively, “Affiliates”) and to make himself available to it, even
after the termination of his employment relations with the Company, for any reason, in any matter which the Company may reasonably
request his assistance, including for the purpose of providing any information relating to his work or actions taken by him and including
in the framework of disputes (including legal or quasi-legal proceedings). If the Company requires the Executive’s services after the
termination of the employment relations with him, for any reason, it shall reimburse the Executive for his expenses in connection with
performing the provisions of this Section 4.6.
- 2 -
4.7
The Executive shall be based in the Company’s Israeli offices, but he understands that his position involves international and local travel
as required to discharge his responsibilities hereunder.
5.
Employment Term and Termination
5.1
5.2
5.3
5.4
5.5
5.6
The Executive’s employment by the Company commenced on July 20th 2010.
The Executive’s employment may be terminated by either party subject to the delivery of thirty (30) days prior written notice by the
terminating party (the “Notice Period”).
During the Notice Period the Executive shall continue to perform his duties until the conclusion of the Notice Period. Nevertheless, the
Company shall have the right not to take advantage of the full Notice Period. In the event of such termination, the Company shall pay the
Executive his Salary for the remainder of the Notice Period (as payment in lieu of prior notice period).
It is hereby expressly stated that the Company reserves the right to terminate the Executive’s employment at any time during the Notice
Period, regardless of whether notice of termination of employment was delivered by the Company or whether such notice was delivered
by the Executive. In the latter case such termination shall not constitute a dismissal of the Executive by the Company.
Notwithstanding the foregoing, the Company may terminate the Executive’s employment without the delivery of prior written notice, in
the event of termination under circumstances which deprive the Executive of severance pay under Israeli law, and/or a breach of trust,
and/or the Executive’s breach of the terms and conditions of Section 18 of this Agreement all at the discretion of the Company.
In the event that the Executive terminates his employment with the Company, for any reason, without the delivery of a written notice in
accordance with Section 5.2 above, or without the completion of the Notice Period or any part thereof, the Company will be entitled to
deduct from any debt which it may owe the Executive an amount equal to the salary that would have been paid to the Executive during
the Notice Period, had he worked.
The Executive undertakes that immediately upon the termination of his employment with the Company, for any reason, he shall act as
follows:
5.6.1
He shall deliver and/or return to the Company all the documents, diskettes or other magnetic media, letters, notes, reports and
other papers in his possession and relating to his employment with the Company and the fulfillment of his duties, as well as any
equipment and/or other property belonging to the Company which was placed at his disposal, including any Company car,
computer equipment, telephone equipment, Executive ID badge or other equipment;
- 3 -
5.6.2
He shall delete any information relating to the Company or its business from his personal computer, if any; and
5.6.3
He shall coordinate the termination of his employment with his supervisors, and he shall transfer in an orderly fashion and in
accordance with Company procedures and in accordance with the timetable determined by his supervisors, all documents and
information and all matters with which he dealt, to whomever the Company instructs, all in a manner satisfactory to the
Company.
6.
Working Hours
For the period of February 2014 and March 2014 your working hours shall be as customary for employees of your position, however no less than
25.5 hours per week, reflecting a 60% job basis.
Starting April 1, 2014 your working hours will reflect a full time (100%) basis and shall be as follows: The working hours of the Executive shall
be as required by the nature of the Executive’s position in the Company, however no less than 9 hours per day, 5 days per week.
The weekly day of rest of the Company shall be Saturday. The Executive may be required, from time to time and according to the work load
demanded of him/her, to work beyond the regular working hours and days in order to fulfill his obligations according to this Agreement.
The position the Executive is to hold within the Company is a management position which requires a special measure of personal trust. Therefore,
the provisions of the Hours of Work and Rest Law - 1951 (“Hours of Work Law”) shall not apply to the Executive. The Executive acknowledges
that the consideration set for him hereunder nevertheless includes within it consideration that would otherwise have been due to him pursuant to
such law
7.
Salary
7.1
For the period of February 2014 and March 2014:
As compensation for the Executive’s performance, the Company shall pay the Executive a basic gross monthly salary of NIS 14,000 (the
“Base Salary”). In light of the aforesaid, in addition to the Base Salary the Executive shall be entitled to a global monthly consideration
for working overtime in the gross amount of NIS 6,000 per month (“Global Overtime Consideration”).
7.2
7.3
Starting April 1, 2014 your gross monthly salary will change as follows: Base salary will increase to NIS 24,500 and Global Overtime
Consideration will increase to NIS 10,500.
In the event that it is claimed or determined that the Hours of Work Law is applicabl to the Executive’s employment under this
Agreement despite the specific agreement between him and the Company, the Global Overtime Consideration represents any amounts
payable under such law. The above-mentioned Salary and Global Overtime Consideration are defined together the “Salary”.
The Salary is to be paid to the Executive in accordance with the Company’s normal and reasonable payroll practices, no later than the 9th
day of each month. For the avoidance of any doubt, it is hereby expressed that the Salary constitutes the overall consideration for the
Executive’s work and in view of his position and status.
- 4 -
8.
Manager’s Insurance/Pension Fund and Severance Pay
The Executive shall be entitled to a Managers’ Insurance Policy (the “Policy”) and/or Pension Fund (the “Pension Fund”), and the Company
encourages the Executive to tailor a plan or a combination of plans which best suit the Executive’s anticipated future needs. For the avoidance of
doubt, in the event the Executive chooses to combine plans, the contributions percentages will relate to such portion of Salary which the Executive
has allocated towards each benefit plan as follows:
8.1.
8.2.
8.3.
8.4.
The Company shall pay into the Policy an aggregate amount representing 13.33% of the Salary as follows: 8.33% for severance
compensation (“Company’s Severance Contribution”) and 5% for pension compensation (which shall be 6% if made to a Pension
Fund) (“Tagmulim”). In addition, the Company shall deduct 5% (which shall be 5.5% if made to a Pension Fund) of the Salary and
transfer that amount to the Policy. The Company shall also obtain disability insurance, which may be included within the Policy, for the
exclusive benefit of the Executive. The Company shall contribute in respect of such disability insurance an amount up to 2.5% of the
Salary.
The instructions of “The General Approval Regarding Employers’ Payments to Pension Fund and Insurance Fund Instead of Severance
Pay” (the “General Approval” a copy of which is attached hereto as Schedule A), as amended from time to time, shall apply to the
contributions referred to above.
The Executive hereby agrees and approves that Company’s Severance Contribution, as detailed and defined in the General Approval,
shall come in lieu of the Executive’s severance pay, and shall therefore constitute the full and final severance pay as stated above.
The Company hereby waives any of its rights to refund of monies from the payments it has transferred according to the General
Approval, unless the Executive’s right to severance pay is denied by virtue of a court order, under Sections 16 or 17 of the Severance Pay
Law 5723-1963, and in the same amount which was denied, or the Executive had withdrawn monies from the Policy and/or the Pension
Fund not due to a Granting Event. The term ’‘Granting Event’’ shall mean death, disability or retirement at the age of sixty or more.
9.
Advanced Study Fund (Keren Hishtalmut)
The Company shall make monthly contributions on the Executive’s behalf to a recognized advanced study fund (the “Study Fund” (“Keren
Hishtalmut”)) in an amount equal to 7.5% of the Salary. In addition, the Company shall deduct 2.5% from the Salary and transfer those monies to
the Study Fund. Said contributions shall not exceed the tax-exempt ceiling set by the applicable law for tax purposes.
10.
Vacation
10.1
The Executive shall be entitled to 16 business days of paid vacation each year (“Annual Vacation”).
10.2
It is hereby expressed that the Executive must make every effort to exercise his Annual Vacation; however, if he/she is unable to utilize
all the vacation days, the Executive shall be entitled to accumulate the unused balance of the vacation days standing to his credit up to a
ceiling of double the number of the Annual Vacation (the “Ceiling”), provided that the Executive takes at least seven consecutive annual
working days vacation. If the Executive accumulates vacation days exceeding the Ceiling, the balance shall be deleted.
- 5 -
10.3
The Company may instruct the Executive to use his Annual Vacation, in the event that Company employees are sent by the Company on
an organized vacation.
11.
Convalescence
The Executive shall be entitled to convalescence (“Havra’ah”) pay in accordance with Israeli law.
12.
Sick Pay
The Executive shall be entitled to 18 annual paid sick days according to the Company’s policy. Sick leave may be accumulated up to a ceiling of
90 days, but may not be redeemed on a cash basis under any circumstances.
13.
Reserve Duty
The Company shall pay the Executive his entire Salary for periods that he performs reserve duty, provided that he delivers to the Company all
official documents necessary for the Company to obtain reimbursement from the National Insurance Institute.
14.
Expenses
The Executive will be reimbursed by the Company for pre-approved business expenses incurred by him in connection with his duties and against
valid receipts furnished by the Executive to the Company, all in accordance with Company’s policy, as may be amended from time to time.
15.
Company Car
15.1
For February 2014 the Company shall pay the Executive monthly travel expenses of 833 N1S.
15.2
.153
.154
.155
Starting March 1, 2014 Company shall provide Executive with a Car from class 2 (i.e, a price of up to NIS135,000) (the “Company
Car”) to be placed at Executive’s disposal, for his business and personal use, and for the use of his spouse and any children over the age
of 24 holding valid driver’s licenses for at least two years (“Authorized Drivers”), provided that Company’s procedures in respect of
said use are followed. Company Car may also be used by Company personnel.
Executive shall maintain the Company Car in a good state of repair, and take all necessary steps so as to ensure that the Company’s rules
relating to Company Car, and the provisions of the insurance policy relating to the use of the Company Car, are strictly and carefully
observed.
Executive hereby declares that he is aware that in order to provide him with the Company Car, Company intends to rent or lease the
Company Car, pursuant to a car rent/lease agreement. Executive undertakes to strictly comply with all of the provisions of said agreement
relating to the use of the Company Car.
Executive shall bear and pay all expenses relating to any violation of law committed in connection with the use of the Company Car, and
shall indemnify and/or reimburse Company, upon its first demand for all expenses incurred by it as a result of such violations as well as
with respect to charges made by the leasing Company with respect to road accidents or other damages to the car. Executive shall sign a
declaration allowing the Company to endorse any tickets received to his name as described in Schedule B.
- 6 -
.156
Executive shall bear and pay all taxes applicable to Executive in connection with the Company Car.
.157
.158
.159
Executive hereby irrevocably authorizes Company to set off all amounts, which the Company may have to pay under this Section
(including early return fees which the Company may have to pay according the car rent/lease agreement), against any and all amounts
due to Executive from Company under this Agreement.
without derogating the above mentioned, Executive hereby irrevocably authorizes Company to set off all excess amounts, which the
Company may have to pay according to the terms set forth in Schedule C, against any and all amounts due to Executive from Company
under this Agreement.
Executive shall return the Company Car (together with its keys and any other equipment supplied and/or installed therein by Company,
but free of any of Executive’s belongings) to Company’s principal office at the earliest of (a) immediately upon termination of
Executive’s employment or (b) within 7 days from the Company’s demand, in proper working order and in the condition in which he
received it, taking into account normal wear and tear resulting from reasonable use of the Company Car. Executive shall have no rights of
lien with respect to the Company Car and/or any of said other equipment.
.1510
To remove any doubt, it is hereby clarified that the Executive shall be liable under the provisions of this Section for any actions of the
Authorized Drivers relating to the Company Car and shall cause said Authorized Drivers to fulfill all of the provisions of this Section.
15.11
For the avoidance of doubt it is hereby clarified that the Car shall come in lieu of any payment in respect of travel expenses in accordance
with the Law.
16.
Cellular Phone and Lap TOP
16.1
16.2
16.3
The Company shall provide Executive with a cellular phone (the “Cellular Phone”) and a Lap Top (the “Lap Top”) to be placed at
Executive’s disposal for Executive ’s use in the course of performing Executive’s obligations under this Agreement, provided that the
Company’s procedures in respect thereof are followed. Executive shall bear all taxes applicable to Executive in connection with the
Cellular Phone and the Lap Top.
Executive shall return the Cellular Phone and the Lap Top (together with any other equipment supplied) to the Company’s principal
office at the earliest of (a) immediately upon termination of Executive’s employment or (b) within 7 days from the Company’s demand.
Executive shall have no rights of lien with respect to the Cellular Phone, the Lap Top and/or any of said other equipment.
In Case Executive damages or loses the cellular phone than Executive shall bear the cost of a replacement phone or the deductible that
the Cellular Company requires (Hishtatfut Azmit). In case the Cellular Phone is stolen than the Company shall bear half of the cost and
the Executive half of the cost of a replacement phone or the deductible that the Cellular Company requires (Hishtatfut Azmit).
17.
Share Options
In accordance with the Company’s policy and subject to prior approval of the Board of Directors of the Company, the Company shall
consider making a grant of options to Executive to purchase ordinary shares of the Company, all on such amounts and terms as to be
approved by the Board of Directors of the Company. The grant of options shall be subject to Executive’s separate execution of the
Company’s standard option agreement.
- 7 -
18.
Confidentiality, Non-Competition and Intellectual Property
The Executive warrants and undertakes that for as long as he is employed by the Company, and upon termination of employment thereafter, for
any reason, he shall maintain in complete confidence any matters that relate to the Company, its affairs and/or business, including regarding the
terms and conditions of his employment pursuant to this Agreement, and that he shall not harm its goodwill or reputation, and he agrees to the
provisions of the confidentiality, non-competition and intellectual property clauses as specified below.
The Executive’s obligations pursuant to this Section derive from his status and his position in the Company, along with all matters connected
therewith, and the terms and conditions of the Executive’s employment pursuant to this Agreement, including his Salary, have been determined in
part, inter alia, in consideration of this undertaking and constitute sufficient consideration for his obligations hereunder.
18.1
Confidentiality
18.1.1 The Executive undertakes to maintain the Confidential Information (as defined below) of the Company, including its Affiliates,
during the term of his employment with the Company and after the termination of such employment, for any reason.
18.1.2 Without derogating from the generality of the foregoing, the Executive hereby agrees that he shall not, directly or indirectly,
disclose or transfer to any person or entity, at any time, either during or subsequent to his employment period, any trade secrets
or other confidential information, whether patentable or not, of the Company and/or its Affiliates, including but not limited to,
any (i) processes, formulas, trade secrets, innovations, inventions, discoveries, improvements, research or development and test
results, survey, specifications, data and know-how; (ii) marketing plans, business plans, strategies, forecasts, unpublished
financial information, budgets, projections, product plans and pricing; (iii) personnel information, including organizational
structure, salary, and qualifications of Executives; (iv) customer and supplier information, including identities, product sales and
purchase history or forecasts and agreements; and (v) any other information which is not known to the public (collectively,
“Confidential Information”), of which the Executive is or becomes informed or aware during the employment period, whether
or not developed by the Executive.
18.1.3 The Executive undertakes not to directly or indirectly give and/or transfer, directly or indirectly, to any person or entity, any
material and/or raw material and/or product and/or part of a product and/or model and/or document and/or diskette and/or other
information storage media and/or photocopied and/or printed and/or duplicated object containing any or all of the Confidential
Information.
18.1.4 The Executive undertakes not to make any use, including duplication, production, sale, transfer, imitation and distribution, of all
or any of the Confidential Information, without the prior written consent of the Company.
18.1.5
In the event the Executive is in breach of any of his above obligations, he shall be liable to compensate the Company in respect
of all damages and/or expenses incurred by the Company as a result of such breach, including trial costs and legal fees and
statutory VAT, and such being without derogating from any other relief and/or remedy available to the Company by virtue of any
law
- 8 -
18.2
Non-Competition/ Non-Solicitation
18.2.1 The Executive undertakes that during the period of his employment with the Company and for a period of (12) months from the
termination of his employment therewith, for any reason, he shall not, anywhere in the world, do business, as an Executive,
independent contractor, consultant or otherwise, and shall not directly or indirectly participate in or accept any Position, proposal
or job offer that may directly or indirectly compete with or harm the Company, or in the field in which the Company engages, is
engaged or is about to engaged (the “Competitive Occupation”).
18.2.2 Without derogating from the generality of the foregoing, the Executive undertakes not to maintain any business relations of any
type whatsoever, including a proposal to conduct business relations, directly or indirectly, with any of the Company’s customers
and/or suppliers and/or agents, including customers and/or suppliers and/or agents with whom the Company conducted
negotiations towards an agreement at the time of the termination of his employment with the Company or prior thereto. In
addition, the Executive undertakes not to approach and/or solicit and/or recruit any employee of the Company to leave the
Company for a period of (12) months from the date of the termination of the employment relationship.
18.2.3 The foregoing shall apply irrespective of whether the Competitive Occupation is carried out by the Executive alone or in
cooperation with others and shall apply to the participation of the Executive in a Competitive Occupation, whether as a
Controlling shareholder or as an interested party.
18.3
Intellectual Property. Copyright and Patents
18.3.1 The Executive hereby acknowledges and agrees that the Company owns and shall own any and all Intellectual Property Rights
created, made or discovered by the Executive or employee (whether solely or jointly with others) related to the company’s
activity (Drug Development and Manufacturing) either: during the term of employment; and/or in connection therewith; and/or
in connection with the Company, its business (actual and/ or contemplated), products, technology and/or know how (“Company
IPR”). Intellectual Property Rights means all worldwide (a) patents, patent applications and patent rights; (b) rights associated
with works of authorship, including Copyrights, Copyrights applications, Copyrights restrictions, mask work rights, mask work
applications and mask work registrations; (c) rights relating to the protection of trade secrets and confidential information; (d)
moral rights; (e) rights analogous to those set forth herein and any other proprietary rights relating to intangible property
including ideas; and (f) divisions, continuations, renewals, reissues and extensions of the foregoing (as applicable) now existing
or hereafter filed, issued, or acquired.
18.3.2 The Executive acknowledges and agrees that all Company IPR belong to, and shall be the sole property of, the Company and
shall be Company IPR of the Company upon creation thereof. The Executive hereby irrevocably assigns to the Company and/or
its designee, all right, title and interest the Executive may have or may acquire in and to Company IPR upon its creation. The
Executive acknowledges and agrees that no rights relating to any Company IPR are reserved to Executive. The Executive will
assist the Company to obtain, and from time to time enforce, any Company IPR worldwide, including without limitation,
executing, verifying and delivering such documents and performing such other acts as the Company may reasonably request for
use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Company IPR. Such Obligation shall
remain in effect beyond the termination of the Executive’s relationship with the Company, all for no additional consideration
provided that Executive shall not be required to bear any expenses as a result of such assignment. In the event the Company is
unable for any reason, after reasonable effort, to secure Executive’s signature on any document required, Executive hereby
irrevocably designate and appoint the Company and its duly authorized officers and agents as its agent and attorney in fact to act
for and in its behalf to further the above purposes.
- 9 -
18.3.3 The Executive irrevocably confirms that the consideration explicitly set forth in the employment agreement between the
Executive and the Company is inclusive of any and all rights for compensation that may arise in connection with the Company
IPR under applicable law and the Executive waives any legal right he may have in connection with the Company IPR including
without limitation any moral rights and/or right to claim royalties or any other additional consideration from the Company with
regard to the assigned Company IPR, including without limitation, in respect of Section 134 of the Patent Law 5727-1967 and/or
other applicable laws.
18.3.4 The Executive represents and warrants that upon execution hereof it has not created and does not have any right, title or interest
in and to any Intellectual Property Rights related and/or similar to Company’s business, products or Intellectual Property Rights,
other than those set forth in Schedule A1 hereto (“Prior Inventions”). The Executive undertakes not to incorporate any Prior
Inventions in any Company IPR.
18.3.5 The Executive undertakes to immediately inform and deliver IN WRITING to the Company, written notice of any Company IPR
conceived/ invented by him and/or personal of the Company and/or its successors who are subordinate to him, immediately
upon the discovery thereof.
18.3.6 The Executive’s obligations pursuant to this Section shall survive the termination of his employment with the Company and/or
its successors and assigns with respect to inventions conceived by him during the term of his employment or as a result of his
employment with the Company.
18.4
Executive acknowledges that the restricted period of time and geographical area specified hereunder are reasonable, in view of his
position and the nature of the business in which the Company is engaged, the Executive’s knowledge of the Company’s business and the
compensation he receives. Notwithstanding anything contained herein to the contrary, if the period of time or the geographical area
specified herein should be determined to be unreasonable in any judicial proceeding, then the period of time and area of the restriction
shall be reduced so that this Agreement may be enforced in such area and during such period of time as shall be determined to be
reasonable by such judicial proceeding. The Executive acknowledges that the compensation and benefits granted to him by the Company
under this Agreement were determined, inter alia, in consideration for his obligations under this Section 18.
- 10 -
19.
General
19.1
19.2
The Executive shall bear all the taxes deriving from the rights and benefits received by him pursuant hereto. It is hereby expressed that all
the amounts specified in this Agreement are gross, and statutory tax and all the other compulsory payments, including health insurance
contributions and national insurance contributions, shall be deducted from them and from all the rights and benefits received by the
Executive pursuant hereto.
This Agreement and all rights and duties of the parties hereunder shall be exclusively governed by and interpreted in accordance with the
laws of the State of Israel. The competent courts of the State of Israel, Tel Aviv Jaffa district, shall have the exclusive jurisdiction over the
parties with regard to this Agreement, its execution, Interpretation and performance.
19.3
Any modification or amendment to the provisions of this Agreement and the appendices hereto shall only be valid if effected in writing
and signed by the parties hereto.
19.4
This Agreement is subject to all the applicable approvals according to applicable law.
19.5
19.6
Any notice sent by prepaid registered mail by one party to the other shall be deemed to have been received by the addressee within three
business days of its dispatch, and if delivered by hand, at the time of its delivery.
This Agreement shall be deemed due notification regarding the Employee’s employment terms in accordance with the provisions of the
Notice of Employment Terms Law (Employment Terms), 2002 and the regulations thereunder.
IN WITNESS WHEREOF THE PARTIES HAVE SET THEIR HANDS HERETO AS OF THE DATE FIRST WRITTEN ABOVE:
Enterabio
By:
Name: Phillip Schwartz
Title: CEO
The Executive
- 11 -
SCHEDUALE A
[TRANSLATED FROM HEBREW]
GENERAL APPROVAL REGARDINC PAYMENTS BY EMPLOYERS
TO A PENSION FUND AND INSURANCE FUND IN LIEH OF SEVERANCE PAY
By virtue of my power under section 14 of the Severance Pay Law, 5723-1963 (hereinafter: the “Law”), I certify that payments made by an
employer commencing from the date of the publication of this approval for his employee to a comprehensive pension benefit fund that is not an
insurance fund within the meaning thereof in the Income Tax (Rules for the Approval and Conduct of Benefit Funds) Regulations, 5724-1964
(hereinafter: the “Pension Fund”) or to managers insurance including the possibility to receive annuity payment under an insurance fund as
aforesaid (hereinafter: the “Insurance Fund”), including payments made by the employer by a combination of payments to a Pension Fund and
an Insurance Fund (hereinafter: the “Employer’s Payments”), shall be made in lieu of the severance pay due to the said employee in respect of
the salary from which the said payments were made and for the period they were paid (hereinafter: the “Exempt Salary”), provided that all the
following conditions are fulfilled:
(1)
The Employer’s Payments -
(a)
to the Pension Fund are not less than 141/3% of the Exempt Salary or 12% of the Exempt Salary if the employer pays, his employee’s
benefit in addition thereto payments to Supplement severance pay to a benefit fund for severance pay or to an Insurance Fund in the
employee’s name in an amount of 21/3% of the Exempt Salary. In the event the employer has not paid the above 21/3% in addition to the
said 12%, his payments shall be only in lieu of 72% of the employee’s severance pay;
(b)
to the Insurance Fund are not less than one of the following:
(1)
(2)
131/3% of the Exempt Salary, if the employer pays for his employee in addition thereto also payments to secure monthly income
in the event of disability, in a plan approved by the Commissioner of the Capital Market, Insurance and Savings Department of
the Ministry of Finance, in an amount required to secure at least 75% of the Exempt Salary or in an amount of 21/2% of the
Exempt Salary, the lower of the two (hereinafter: “Disability Insurance”);
11% of the Exempt Salary, if the employer paid, in addition, a payment to the Disability Insurance, and in such case the
Employer’s Payments shall be only in lieu of 72% of the Employee’s severance pay;
In the event the employer has made payments in addition to the foregoing payments to supplement severance pay to a benefit fund for severance
pay or to an Insurance Fund in the employee’s name in an amount of 21/3% of the Exempt Salary, the Employer’s Payments shall replace 100% of
the employee’s severance pay.
(2)
No later than three months from the commencement of the Employer’s Payments, a written agreement was executed between the employer and the
employee which included:
(a)
(b)
the employee’s consent to an arrangement pursuant to this approval in a text specifying the Employer’s Payments, the Pension
Fund and Insurance Fund, as the case may be; the said agreement shall also include the text of this approval;
an advance waiver by the employer of any right which he may have to a refund of monies from its payments, except in cases in
which the employee’s right to severance pay was denied by a final judgement pursuant to sections 16 or 17 to the Law and/or in
cases in which if such severance pay was denied the employee has withdrawn monies from the Pension Fund or Insurance Fund
other than by reason of an entitling event; for these purposes “Entitling Event” means death, disability or retirement at or after
the age of 60.
(3)
This approval is not such as to derogate from the employee’s right to severance pay pursuant to any law, collective agreement, extension order or
employment agreement, in respect of salary over and above the Exempt Salary.
15th Sivan 5758 (9th June 1998).
- 12 -
THERE ARE NO PRIOR INVENTIONS
SCHEDUALE A-1 PRIOR INVENTIONS
- 13 -
Entera Bio Ltd.
The Jerusalem Bio Park, Hadassah Ein Kerem,
Minrav Building F. 5,
P.O. box 12117
Jerusalem, Israel 9112002
June 21, 2016
Dr. Hillel Galitzer
Dear Hillel,
Re: Amendment to Agreement
Further to that certain agreement between Entera Bio Ltd. (the “Company”) and you dated June 8, 2014 (the “Agreement”), this letter shall confirm our
mutual agreement to amend the Agreement as provided herein. Unless otherwise defined herein, capitalized terms used herein shall have the meaning
ascribed to them in the Agreement.
Effective as of June 1, 2016 you shall be entitled to a gross monthly salary of NIS 48,460, which includes Global Overtime Consideration in the gross
amount of NIS 14,500.
Except as set forth herein, this letter shall not affect any provisions in the Agreement, which shall remain in full force and effect, with the necessary
changes. In the event of inconsistency between the provisions of this letter and the Agreement, the provisions of this letter shall prevail.
Please confirm the above agreement by signing and dating this amendment and the enclosed duplicate original copy of this amendment, and returning one
such duplicate original to the undersigned.
[Signature page to follow]
Entera Bio Ltd.
The Jerusalem Bio Park, Hadassah Ein Kerem,
Minrav Building F. 5,
P.O. box 12117
Jerusalem, Israel 9112002
Very truly yours,
Entera Bio Ltd.
By:
Phillip Schwartz
CEO
Acknowledged and Agreed by:
Hillel Galitzer
Date: 30/4/17
[Signature page – Amendment to Agreement]
Entera Bio Ltd.
The Jerusalem Bio Park, Hadassah Ein Kerem,
Minrav Building F. 5,
P.O. box 12117
Jerusalem, Israel 9112002
March 2, 2017
Dr. Hillel Galitzer
Dear Hillel,
Re: Amendment to Agreement
Further to that certain agreement between Entera Bio Ltd. (the “Company”) and you dated June 8, 2014 (the “Agreement”), this letter shall confirm our
mutual agreement to amend the Agreement, as provided herein. Unless otherwise defined herein, capitalized terms used herein shall have the meaning
ascribed to them in the Agreement.
Effective as of March 2,2017 the Notice Period shall be 90 days.
Except as set forth herein, this letter shall not affect any provisions in the Agreement, which shall remain in full force and effect, with the necessary
changes. In the event of inconsistency between the provisions of this letter and the Agreement, the provisions of this letter shall prevail.
Please confirm the above agreement by signing and dating this amendment and the enclosed duplicate original copy of this amendment, and returning one
such duplicate original to the undersigned.
[Signature page to follow]
Entera Bio Ltd.
The Jerusalem Bio Park, Hadassah Ein Kerem,
Minrav Building F. 5,
P.O. box 12117
Jerusalem, Israel 9112002
Very truly yours,
Entera Bio Ltd.
By:
Phillip Schwartz
CEO
Acknowledged and Agreed by:
Hillel Galitzer
Date: 30/4/17
[Signature page – Amendment to Agreement]
Amendment to the Employment Agreement
This Amendment (the “Amendment”) to the Employment Agreement by and between Entera Bio Ltd. (the “Company”), and Hillel Galitzer (the
“Employee”) is entered into between the Company and the Employee on June 25, 2020.
The Parties have mutually agreed to amend certain terms of the Employment Agreement form June 8 2014, and its amendments, as follows:
1. This Amendment shall enter into effect as of January 1,2020 (the “Effective Date”).
2. Section 7.2 of the Employment agreement with the following:
The Employee shall be entitled to a gross monthly salary of 42,980 NIS (the “Base Salary”). In consideration for overtime hours the Employee shall
receive a global payment of 18,420 NIS per month (the “Overtime Payment “, and together with the Base Salary, the “Salary”). A total increase of
8,470 NIS. The Overtime Payment shall be adjusted simultaneously with the adjustment of the Base Salary and the ratio of adjustment as that of the
Base Salary, unless specifically stated otherwise.
3. Section 10.1 of the Employment agreement with the following:
Subject to the provisions of the Annual Vacation Law-1951 (the “Vacation Law”), the Employee shall be entitled to 16 vacation days (the “Vacation
Days”), with respect to each twelve (12) months’ period of continuous employment with the Company. These Vacation Days include the number of
paid vacation days to which the Employee is entitled in accordance with the Vacation Law (the “Vacation Law Days”). Any Vacation Days shall be
first credited on account of Vacation Days which are not Vacation Law Days (if any).
4. All other provisions of the Employment Agreement (including any Appendices or Exhibits thereto) shall remain unchanged.
The parties have caused this Amendment to be executed and delivered by their duly authorized representatives, as of the date hereof.
COMPANY
ENTERA BIO LTD.
Name: Adam Gridley
Title: CEO
EMPLOYEE
Name: Hillel Galitzer
Title: COO
May 9, 2022
Amendment to the Employment Agreement
Effective as of January 1, 2021 Appendix A to the Employment Agreement from June 8, 2014 and its amendments shall be amended as follows:
1.
Item 1 shall be replaced by the following:
1. Salary
The Employee shall be entitled to a gross monthly salary of 49,420 NIS (the “Base Salary”). In consideration for overtime hours the Employee
shall receive a global payment of 21,180 NIS per month (the “Overtime Payment “, and together with the Base Salary, the “Salary”). A total
increase of 9,200 NIS. The Overtime Payment shall be adjusted simultaneously with the adjustment of the Base Salary and the ratio of adjustment
as that of the Base Salary, unless specifically stated otherwise.
2. All other provisions of the Appendix A and of the Employment Agreement (including any Appendices or Exhibits thereto) shall remain unchanged.
Entera Bio Ltd.
By : Spiros Jamas
Title: CEO
Employee: Galitzer Hillel
January 30, 2024
Amendment to the Employment Agreement
Effective January 1, 2024, Appendix A to the Employment Agreement from October 27, 2010, and its amendments shall be amended as
follows:
1.
Item 1 shall be replaced by the following:
Salary
The Employee shall be entitled to a gross monthly salary of 52,385.2 NIS (the "Base Salary"). In consideration for overtime
hours the Employee shall receive a global payment of 22,450.8 NIS per month (the "Overtime Payment ", and together with the
Base Salary, the "Salary"). A total increase of 4,236 NIS. The Overtime Payment shall be adjusted simultaneously with the
adjustment of the Base Salary and the ratio of adjustment as that of the Base Salary, unless specifically stated otherwise.
2. All other provisions of the Appendix A and of the Employment Agreement (including any Appendices or Exhibits thereto) shall
remain unchanged.
/s/ Miranda Toledano
Entera Bio Ltd.
/s/ Hillel Galitzer
Employee: Hillel Galitzer
By : Miranda Toledano
Title: CEO
The following is a list of subsidiaries of Entera Bio Ltd. as of December 31, 2023:
Entera Bio Ltd.
STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION
Delaware
SUBSIDIARY
Entera Bio Inc.
Exhibit 21.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-272373 and 333-227488) and Form S-3 (Nos.
333-276844, 333-265291 and 333-265286) of Entera Bio Ltd. of our report dated March 8, 2024 relating to the financial statements, which appears in this
Form 10-K.
Exhibit 23.1
/s/ Kesselman & Kesselman
Certified Public Accountants (lsr.)
A member firm of PricewaterhouseCoopers International Limited
Tel-Aviv, Israel
March 8, 2024
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Miranda Toledano, certify that:
1.
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2023 of Entera Bio Ltd.;
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 registrant as of, and for, the periods presented in this report;
4. The registrant’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 registrant 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 registrant, 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 registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’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 registrant’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 registrant’s internal
control over financial reporting.
Date: March 8, 2024
/s/ Miranda Toledano
Miranda Toledano
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Dana Yaacov-Garbeli, certify that:
1.
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2023 of Entera Bio Ltd.;
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 registrant as of, and for, the periods presented in this report;
4. The registrant’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 registrant 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 registrant, 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 registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’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 registrant’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 registrant’s internal
control over financial reporting.
Date: March 8, 2024
/s/ Dana Yaacov Garbeli
Dana Yaacov-Garbeli
Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
I, Miranda Toledano, Chief Executive Officer of Entera Bio Ltd. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18
U.S.C. Section 1350 that, to the best of my knowledge:
1.
the Annual Report on Form 10-K of the Company for the year ended December 31, 2023 (the “Report”) fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Exhibit 32.1
Date: March 8, 2024
/s/ Miranda Toledano
Miranda Toledano
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
I, Dana Yaacov-Garbeli, Chief Financial Officer of Entera Bio Ltd. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350 that, to the best of my knowledge:
1.
the Annual Report on Form 10-K of the Company for the year ended December 31, 2023 (the “Report”) fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Exhibit 32.2
Date: March 8, 2024
/s/ Dana Yaacov Garbeli
Dana Yaacov-Garbeli
Chief Financial Officer
(Principal Financial and Accounting Officer)
Entera Bio Ltd.
Executive Officer Clawback Policy
Approved by the Board of Directors on November 30, 2023 (the “Adoption Date”)
Exhibit 97
I.
Purpose
This Executive Officer Clawback Policy describes the circumstances under which Covered Persons of Entera Bio Ltd., a company organized under the laws
of the State of Israel, and any of its direct or indirect subsidiaries (collectively, the “Company”) will be required to repay or return Erroneously-Awarded
Compensation to the Company.
This Policy and any terms used in this Policy shall be construed in accordance with all applicable SEC regulations promulgated to comply with Section 954
of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), including, without limitation, Rule 10D-1
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the rules adopted by Nasdaq and all applicable provisions of
the Israeli Companies Law of 1999 and the applicable regulations (collectively, the “Companies Law”). For the avoidance of doubt, this Policy is adopted
in order to accommodate the requirements and restrictions of the Dodd-Frank Act, and shall not be construed to grant any additional rights to any Covered
Person that he or she did not have prior to the date hereof.
Each Covered Person shall sign an Acknowledgement and Agreement to the Clawback Policy in the form attached hereto as Exhibit A as a condition to his
or her participation in any of the Company’s incentive-based compensation programs; provided, that, this Policy shall apply to each Covered Person,
irrespective of whether such Covered Person shall have failed, for any reason, to have executed such acknowledgment and agreement.
II.
Definitions
For purposes of this Policy, the following capitalized terms shall have the respective meanings set forth below:
(a) “Accounting Restatement” means an accounting restatement (i) due to the material noncompliance of the Company with any financial reporting
requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial restatements that
is material to the previously issued financial statements (a “Big R” restatement), or (ii) that corrects an error that is not material to previously issued
financial statements, but would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current
period (a “little r” restatement). Notwithstanding the foregoing, none of the following changes to the Company’s financial statements represent error
corrections and shall not be deemed an Accounting Restatement: (a) retrospective application of a change in accounting principle; (b) retrospective
revision to reportable segment information due to a change in the structure of the Company’s internal organization; (c) retrospective reclassification
due to a discontinued operation; (d) retrospective application of a change in reporting entity, such as from a reorganization of entities under common
control; and (e) retrospective revision for share splits, reverse share splits, share dividends or other changes in capital structure.
(b) “Administrator” means the Committee or any other committee designated by the Board, unless the Board determines to administer this Clawback
Policy itself.
(c) “Board” means the Board of Directors of the Company.
(d) “Clawback-Eligible Incentive Compensation” means, in connection with an Accounting Restatement, any Incentive-Based Compensation Received
by a Covered Person (regardless of whether such Covered Person was serving at the time that Erroneously-Awarded Compensation is required to be
repaid) (i) on or after the Nasdaq Effective Date, (ii) after beginning service as a Covered Person, (iii) while the Company has a class of securities
listed on a national securities exchange or national securities association and (iv) during the Clawback Period.
(e) “Clawback Period” means, with respect to any Accounting Restatement, the three completed fiscal years immediately preceding the Restatement
Date and any transition period (that results from a change in the Company’s fiscal year) of less than nine months within or immediately following
those three completed fiscal years.
(f) “Committee” means the Compensation Committee of the Board.
(g) “Compensation Policy” means the Company’s compensation policy for officers and directors, as adopted in accordance with the Companies Law.
(h) “Covered Person” means any person who is, or was at any time, during the Clawback Period, an Executive Officer. For the elimination of doubt,
Covered Person may include a former Executive Officer who left the Company, retired or transitioned to a non-Executive Officer role (including after
serving as an Executive Officer in an interim capacity) during the Clawback Period, and this Policy applies regardless of whether the Covered Person
was at fault for an accounting error that resulted in, or contributed to, the Accounting Restatement.
(i) “Erroneously-Awarded Compensation” means the amount of Clawback-Eligible Incentive Compensation that exceeded the amount of Incentive-
Based Compensation that otherwise would have been Received had it been determined based on the restated amounts set forth in the Accounting
Restatement. This amount must be computed without regard to any taxes paid.
(j) “Executive Officer” means (i) the Company’s president, principal financial officer, principal accounting officer (or if there is no such accounting
officer, the controller), any vice-president in charge of a principal business unit, division, or function (such as sales, administration, or finance), any
other officer who performs a policy-making function, or any other person (including an officer of the Company’s parent(s) or subsidiaries) who
performs similar policy-making functions for the Company, or (ii) an “Officer” within the meaning set forth in the Companies Law. For the sake of
clarity, at a minimum, all persons who are executive officers pursuant to Item 401(b) of Regulation S-K shall be deemed “Executive Officers”.
(k) “Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles used in preparing
the Company’s financial statements, and all other measures that are derived wholly or in part from such measures, including, without limitation,
measures that are “non-GAAP financial measures” for purposes of Exchange Act Regulation G and Item 10(e) of Regulation S-K, as well as other
measures, metrics and ratios that are not non- GAAP measures. For purposes of this Policy, Financial Reporting Measures shall include share price and
total shareholder return (and any measures that are derived wholly or in part from share price or total shareholder return). A Financial Reporting
Measure need not be presented within the Company’s financial statements or included in a Company filing with the SEC.
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(l) “Incentive-Based Compensation” has the meaning set forth in Section III below.
(m) “Nasdaq” means The Nasdaq Stock Market LLC.
(n) “Nasdaq Effective Date” means October 2, 2023.
(o) “Policy” means this Executive Officer Clawback Policy, as the same may be amended or restated from time to time.
(p) “Received” means Incentive-Based Compensation received, or deemed to be received, in the Company’s fiscal period during which the Financial
Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant occurs after such fiscal period.
(q) “Repayment Agreement” has the meaning set forth in Section V below.
(r) “Restatement Date” means the earlier of (i) the date the Board, a committee of the Board or the officers of the Company authorized to take such
action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting
Restatement and (ii) the date that a court, regulator or other legally authorized body directs the Company to prepare an Accounting Restatement.
(s) “RSUs” means restricted share units.
(t) “SARs” means share appreciation rights.
(u) “SEC” means the U.S. Securities and Exchange Commission.
III.
Incentive-Based Compensation
“Incentive-Based Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a Financial
Reporting Measure.
For purposes of this Policy, specific examples of Incentive-Based Compensation include, but are not limited to:
•
•
Non-equity incentive plan awards that are earned based, wholly or in part, based on satisfaction of a Financial Reporting Measure-based
performance goal;
Bonuses paid from a “bonus pool,” the size of which is determined, wholly or in part, based on satisfaction of a Financial Reporting Measure-
based performance goal;
3
•
•
•
Other cash awards based on satisfaction of a Financial Reporting Measure-based performance goal;
Restricted shares, RSUs, performance share units, share options and SARs that are granted or become vested, wholly or in part, on satisfaction of a
Financial Reporting Measure-based performance goal; and
Proceeds Received upon the sale of shares acquired through an incentive plan that were granted or vested based, wholly or in part, on satisfaction
of a Financial Reporting Measure-based performance goal.
For purposes of this Policy, Incentive-Based Compensation excludes:
•
•
•
•
•
Base salaries (except with respect to any salary increases earned, wholly or in part, based on satisfaction of a Financial Reporting Measure-based
performance goal);
Bonuses paid solely at the discretion of the Committee or Board that are not paid from a “bonus pool” that is determined by satisfying a Financial
Reporting Measure-based performance goal;
Bonuses paid solely upon satisfying one or more subjective standards or completion of a specified employment period;
Non-equity incentive plan awards earned solely upon satisfying one or more strategic measures or operational measures; and
Equity awards that vest solely based on the passage of time or satisfaction of one or more non-Financial Reporting Measures.
IV.
Determination and Calculation of Erroneously-Awarded Compensation
In the event of an Accounting Restatement, the Committee shall promptly determine the amount of any Erroneously-Awarded Compensation for each
Executive Officer in connection with such Accounting Restatement and shall promptly thereafter provide each Executive Officer with a written notice
containing the amount of Erroneously-Awarded Compensation and a demand for repayment, return or forfeiture thereof, as applicable.
(a) Cash Awards. With respect to cash awards, the Erroneously-Awarded Compensation is the difference between the amount of the cash award (whether
payable as a lump sum or over time) that was Received and the amount that should have been Received applying the restated Financial Reporting
Measure.
(b) Cash Awards Paid From Bonus Pools. With respect to cash awards paid from bonus pools, the Erroneously-Awarded Compensation is the pro rata
portion of any deficiency that results from the aggregate bonus pool that is reduced based on applying the restated Financial Reporting Measure.
(c) Equity Awards. With respect to equity awards, if the shares, options, RSUs, SARs or other equity awards are still held at the time of recovery, the
Erroneously-Awarded Compensation is the number of such securities Received in excess of the number that should have been Received applying the
restated Financial Reporting Measure (or the value in excess of that number). If the restricted shares, options, RSUs, SARs or other equity awards have
been exercised, vested, settled, or otherwise been converted into the underlying shares, but the underlying shares have not been sold, the Erroneously-
Awarded Compensation is the number of shares underlying the excess shares, options, SARs, RSUs or other equity awards (or the value thereof). If the
underlying shares have already been sold, then [the Administrator shall determine the amount that most reasonably estimates the Erroneously-
Awarded Compensation and retain documentation reflecting the estimate analysis and provide to Nasdaq if deemed appropriate by the Board or
requested by Nasdaq.
4
(d) Compensation Based on Share Price or Total Shareholder Return. For Incentive-Based Compensation based on (or derived from) share price or
total shareholder return, where the amount of Erroneously-Awarded Compensation is not subject to mathematical recalculation directly from the
information in the applicable Accounting Restatement, the amount shall be determined by the Administrator based on a reasonable estimate of the
effect of the Accounting Restatement on the share price or total shareholder return upon which the Incentive-Based Compensation was Received (in
which case, the Administrator shall maintain documentation of such determination of that reasonable estimate and provide such documentation to
Nasdaq in accordance with applicable listing standards).
V.
Recovery of Erroneously-Awarded Compensation
Once the Administrator has determined the amount of Erroneously-Awarded Compensation recoverable from the applicable Covered Person, the
Administrator shall take action to recover the Erroneously-Awarded Compensation reasonably promptly. The Company’s obligation to recover
Erroneously-Awarded Compensation is not dependent on if or when the restated financial statements pursuant to the applicable Accounting Restatement are
filed with the SEC. Unless otherwise determined by the Administrator, the Administrator shall pursue the recovery of Erroneously-Awarded Compensation
as set forth below:
(a) Cash Awards. With respect to cash awards, the Administrator shall either (i) require the Covered Person to repay the Erroneously-Awarded
Compensation in a lump sum in cash (or such property as the Administrator agrees to accept with a value equal to such Erroneously-Awarded
Compensation) or (ii) if approved by the Administrator, offer to enter into a Repayment Agreement. If the Covered Person accepts such offer and signs
the Repayment Agreement within a reasonable time as determined by the Committee, the Company shall countersign such Repayment Agreement.
(b) Unvested Equity Awards. With respect to those equity awards that have not yet vested, the Administrator shall take such action as is necessary to
cancel, or otherwise cause to be forfeited, the awards in the amount of the Erroneously-Awarded Compensation.
(c) Vested Equity Awards. With respect to those equity awards that have vested or exercised and the underlying shares have not been sold, the
Administrator shall take such action as is necessary to cause the Covered Person to deliver and surrender the underlying shares in the amount of the
Erroneously-Awarded Compensation.
In the event that the Covered Person has sold the underlying shares, the Administrator shall either (i) require the Covered Person to repay the
Erroneously-Awarded Compensation in a lump sum in cash (or such property as the Administrator agrees to accept with a value equal to such
Erroneously-Awarded Compensation) or (ii) if approved by the Administrator, offer to enter into a Repayment Agreement. If the Covered Person
accepts such offer and signs the Repayment Agreement within a reasonable time as determined by the Administrator, the Company shall countersign
such Repayment Agreement.
5
(d) Repayment Agreement. “Repayment Agreement” means a written agreement (in a form reasonably acceptable to the Committee) with the Covered
Person that provides for the Covered Person’s repayment of the Erroneously-Awarded Compensation as promptly as possible without unreasonable
economic hardship to the Covered Person.
(e) Effect of Non-Repayment. To the extent that a Covered Person fails to repay all Erroneously-Awarded Compensation to the Company when due (as
determined in accordance with this Policy), the Company shall take all actions reasonable and appropriate to recover such outstanding Erroneously-
Awarded Compensation from the applicable Covered Person. Unless otherwise determined by the Committee in its sole discretion, the applicable
Covered Person shall be required to reimburse the Company for any and all expenses reasonably incurred (including legal fees) by the Company in
recovering such Erroneously-Awarded Compensation in accordance with the immediately preceding sentence.
The Administrator shall have broad discretion to determine the appropriate means of recovery of Erroneously-Awarded Compensation based on all
applicable facts and circumstances and taking into account the time value of money and the cost to shareholders of delaying recovery. However, in no
event may the Company accept an amount that is less than the amount of Erroneously-Awarded Compensation in satisfaction of a Covered Person’s
obligations hereunder.
For clarity, the recovery of Erroneously-Awarded Compensation under this Policy will not give rise to any Executive Officer’s right to voluntarily terminate
employment for “good reason” or due to a “constructive termination” (or any similar term of like effect) under any plan, program or policy of or agreement
with the Company or any of its affiliates.
VI.
Discretionary Recovery
Notwithstanding anything herein to the contrary, the Company shall not be required to take action to recover Erroneously-Awarded Compensation if any
one of the following conditions are met and the Administrator determines that recovery would be impracticable:
(i)
(ii)
The direct expenses paid to a third party to assist in enforcing this Policy against a Covered Person would exceed the amount to be recovered,
after the Company has made a reasonable attempt to recover the applicable Erroneously-Awarded Compensation, documented such attempts
and provided such documentation to Nasdaq;
Recovery would violate home country law where that law was adopted prior to November 28, 2022, provided that, before determining that it
would be impracticable to recover any amount of Erroneously-Awarded Compensation based on violation of home country law, the Company
has obtained an opinion of home country counsel, acceptable to Nasdaq, that recovery would result in such a violation and a copy of the
opinion is provided to Nasdaq; or
6
(iii)
Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the
Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
VII.
Reporting and Disclosure Requirements
The Company shall file all disclosures with respect to this Policy in accordance with the requirements of the U.S. federal securities laws, including the
disclosure required by the applicable filings required to be made with the SEC.
VIII.
Effective Date
This Policy shall apply to all Incentive-Based Compensation Received on or after the Nasdaq Effective Date.
IX.
No Indemnification; No Liability
The Company shall not indemnify any Covered Person against the loss of Erroneously-Awarded Compensation and shall not pay, or reimburse any
Covered Persons for premiums, for any insurance policy to fund such Covered Person’s potential recovery obligations. None of the Company, an affiliate
of the Company, or any member of the Committee or the Board shall have any liability to any person as a result of actions taken under this Policy.
X.
Administration
The Administrator has the sole discretion to administer this Policy and ensure compliance with Nasdaq listing rules and any other applicable law,
regulation, rule or interpretation of the SEC or Nasdaq promulgated or issued in connection therewith. Actions of the Committee pursuant to this Policy
shall be taken by the vote of a majority of its members. The Administrator shall, subject to the provisions of this Policy, make such determinations and
interpretations and take such actions as it deems necessary, appropriate or advisable. All determinations and interpretations made by the Administrator shall
be final, binding and conclusive. Any action or inaction by the Administrator with respect to a Covered Person under this Policy in no way limits the
actions or decisions of the Administrator not to act with respect to any other Covered Person under this Policy or under any similar policy, agreement or
arrangement, nor shall any such action or inaction serve as a waiver of any rights the Company may have against any Covered Person other than as set forth
in this Policy.
XI.
Amendment; Termination
The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary, including as and when it
determines that it is legally required by the Companies Law, any U.S. federal securities laws, SEC rule or the rules of any national securities exchange or
national securities association on which the Company’s securities are then listed. The Board may terminate this Policy at any time. Notwithstanding
anything in this Section XI to the contrary, no amendment or termination of this Policy shall be effective if such amendment or termination would (after
taking into account any actions taken by the Company contemporaneously with such amendment or termination) cause the Company to violate the
Companies Law, any U.S. federal securities laws, SEC rule, or the rules of any national securities exchange or national securities association on which the
Company’s securities are then listed.
XII.
Other Recoupment Rights; No Additional Payments
The Board intends that this Policy will be applied to the fullest extent of the law. The Administrator may require that any employment agreement, equity
award agreement or any other agreement entered into on or after the Adoption Date shall, as a condition to the grant of any benefit thereunder, require a
Covered Person to agree to abide by the terms of this Policy; provided, that, this Policy shall apply to all Covered Persons irrespective of any such explicit
agreement. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other rights under applicable law, regulation or rule or
pursuant to any similar policy in any employment agreement, equity plan, equity award agreement or similar arrangement and any other legal remedies
available to the Company. However, unless otherwise prohibited by applicable law, this Policy shall not provide for recovery of Incentive-Based
Compensation that the Company has already recovered pursuant to Section 304 of the Sarbanes-Oxley Act or Other Recovery Obligations.
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XIII.
Severability
The provisions in this Policy are intended to be applied to the fullest extent of the law; provided, however, to the extent that any provision of this Policy is
found to be unenforceable or invalid under any applicable law, such provision will be applied to the maximum extent permitted, and shall automatically be
deemed amended in a manner consistent with its objectives to the extent necessary to conform to any limitations required under applicable law.
XIV.
Application; Enforceability
Except as otherwise determined by the Administrator, the adoption of this Policy does not limit, and is intended to apply in addition to any recovery
arrangements or clawback provisions contained in any employment agreement, bonus plan, incentive plan, equity-based plan, and, for the avoidance of
doubt, the Compensation Policy (“Other Recovery Arrangements”). Without limiting the foregoing, in the event of a conflict between this Policy and the
Compensation Policy, the latter shall prevail, except with respect to: (a) the recovery of any portion of Clawback-Eligible Incentive Compensation that is
Erroneously-Awarded Compensation that would not be recoverable under the Other Recovery Arrangements, or (b) the recovery of any portion of
Clawback-Eligible Incentive Compensation that is Erroneously-Awarded Compensation that is covered under this Policy or that is subject to any of the
applicable SEC regulations promulgated to comply with Section 954 of the Dodd-Frank Act, where in each case, this Policy shall prevail.
XV.
Successors
This Policy shall be binding and enforceable against all Covered Persons and their beneficiaries, heirs, executors, administrators or other legal
representatives.
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Exhibit A
ACKNOWLEDGEMENT AND AGREEMENT
TO THE
EXECUTIVE OFFICER CLAWBACK POLICY
OF
ENTERA BIO LTD.
By signing below, the undersigned acknowledges and confirms that the undersigned has received and reviewed a copy of Entera Bio Ltd.’s Executive
Officer Clawback Policy (the “Policy”). Capitalized terms used but not otherwise defined in this Acknowledgement Form (this “Acknowledgement
Form”) shall have the meanings ascribed to such terms in the Policy.
By signing this Acknowledgement Form, the undersigned acknowledges and agrees that the undersigned is and will continue to be subject to the Policy and
that the Policy will apply both during and after the undersigned’s employment with the Company. Further, by signing below, the undersigned agrees to
abide by the terms of the Policy, including, without limitation, by returning any Erroneously-Awarded Compensation (as defined in the Policy) to the
Company to the extent required by, and in a manner permitted by, the Policy.
By signing this Acknowledgement Form, the undersigned acknowledges and agrees that any debt he or she shall have toward the Company pursuant to the
Policy shall be regarded as an agreed-upon debt, including according to the Israeli Wage Protection Law-1958 (to the extent applicable to the undersigned),
and that the Company may deduct the amount of such debt from any amount due to the undersigned from any source whatsoever.
Signature
Name
Date
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