UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the fiscal year ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report____________________
Commission file number 001-36349
MEDIWOUND LTD.
(Exact name of Registrant as specified in its charter)
Not applicable
(Translation of Registrant’s name into English)
ISRAEL
(Jurisdiction of incorporation or organization)
42 Hayarkon Street
Yavne, 8122745 Israel
(Address of principal executive offices)
Yaron Meyer, Adv.
Executive Vice President, General Counsel and Corporate Secretary
Telephone: +972 (77) 971-4100
E-mail: yaronm@mediwound.com
MediWound Ltd.
42 Hayarkon Street
Yavne, 8122745 Israel
(Name, telephone, e-mail and/or facsimile number and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Ordinary shares, par value NIS 0.07 per share
Trading Symbol(s)
MDWD
Name of each exchange on which registered
Nasdaq Global Market
Securities registered or to be registered pursuant to Section 12(g) of the Act: None.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual
report: As of December 31, 2022, the registrant had 7,240,020 ordinary shares, par value NIS 0.07 per share, outstanding.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
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 file, a non-accelerated filer, or an emerging growth company. See
the definitions of “large accelerated filer,” and “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Emerging Growth Company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected
not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the
Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting
Standards Codification after April 5, 2012.
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 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. ☐
Indicate by check mark which basis for accounting the registrant has used to prepare the financing statements included in this filing:
U.S. GAAP ☐
International Financial Reporting Standards as issued
by the International Accounting Standards Board ☒
Other ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to
follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Item 17 ☐ Item 18
Yes ☐ No ☒
MEDIWOUND LTD.
FORM 20-F
ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022
TABLE OF CONTENTS
INTRODUCTION
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I
Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Item 3. KEY INFORMATION
Item 4. INFORMATION ON THE COMPANY
Item 4A. UNRESOLVED STAFF COMMENTS
Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Item 8. FINANCIAL INFORMATION
Item 9. THE OFFER AND LISTING
Item 10. ADDITIONAL INFORMATION
Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
PART II
Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Item 15. CONTROLS AND PROCEDURES
Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Item 16B. CODE OF ETHICS
Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Item 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Item 16G. CORPORATE GOVERNANCE
Item 16H. MINE SAFETY DISCLOSURE
Item 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
PART III
Item 17. FINANCIAL STATEMENTS
Item 18. FINANCIAL STATEMENTS
Item 19. EXHIBITS
SIGNATURES
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INTRODUCTION
In this annual report, the terms “MediWound,” “we,” “us,” “our” and “the company” refer to MediWound Ltd. and its subsidiaries.
This annual report includes other statistical, market and industry data and forecasts which we obtained from publicly available information and
independent industry publications and reports that we believe to be reliable sources. These publicly available industry publications and reports generally
state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy or completeness of the
information. Although we believe that these sources are reliable, we have not independently verified the information contained in such publications.
Certain estimates and forecasts involve uncertainties and risks and are subject to change based on various factors, including those discussed under the
headings “Special Note Regarding Forward-Looking Statements” and “ITEM 3.D. Risk Factors” in this annual report.
Throughout this annual report, we refer to various trademarks, service marks and tradenames that we use in our business. Solely for convenience,
the trademarks, service marks and trade names are referred to herein without the use of ® and ™ symbols. However, the omission of such symbols are not
intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these
trademarks, service marks and trade names. The “MediWound” design logo, “MediWound,” “NexoBrid,” “EscharEx” and other trademarks or service
marks of MediWound Ltd. appearing in this annual report are the property of MediWound Ltd. We have several other trademarks, service marks and
pending applications relating to our solutions. Other trademarks and service marks appearing in this annual report are the property of their respective
holders. Our use or display of other companies’ trademarks, service marks or trade names is not intended to imply a relationship with, or endorsement or
sponsorship of us by, any other companies.
All historical share and per-share numbers appearing in this annual report reflect a retroactive adjustment for our 1-for-7 reverse share split
effected on December 20, 2022.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical facts, this annual report on Form 20-F contains forward-looking statements within the meaning of Section 27A of the U.S.
Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) and
the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We make forward-looking statements in this annual report that are
subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial
condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as
“believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other
similar expressions. The statements we make regarding the following matters are forward-looking by their nature:
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our commercialization, marketing and manufacturing capabilities and strategy and the ability of our marketing team to cover European
regional burn centers and units;
the timing and conduct of our trials of NexoBrid, EscharEx and our other pipeline product candidates, including statements regarding the
timing, progress and results of current and future preclinical studies and clinical trials, and our research and development programs;
the clinical utility, potential advantages and timing or likelihood of regulatory filings and approvals of EscharEx and our other pipeline
products;
our expectations regarding future growth, including our ability to develop new products;
our estimates regarding expenses, future revenues, capital requirements and our need for additional financing;
anticipated funding under our contracts with the U.S. Biomedical Advanced Research and Development Authority;
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our ability to maintain adequate protection of our intellectual property;
our estimates regarding the market opportunity for NexoBrid, EscharEx and our other pipeline products;
our expectation regarding the duration of our inventory of intermediate drug substances and products;
the impact of our research and development expenses as we continue developing product candidates; and
the impact of government laws and regulations.
The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are based on
our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. These statements are only
predictions based upon our current expectations and projections about future events. These statements may be found in the sections of this annual report on
Form 20-F entitled “ITEM 3.D. Risk Factors,” “ITEM 4. Information on the Company,” “ITEM 5. Operating and Financial Review and Prospects,” “ITEM
10.E. Taxation—United States Federal Income Taxation—Passive Foreign Investment Company Considerations” and elsewhere in this annual report,
including the section entitled “ITEM 4.B. Business Overview” and “ITEM 4.B. Business Overview—Our Focus,” which contain information obtained
from independent industry sources. Actual results could differ materially from those anticipated in these forward-looking statements due to various
important factors, including all the risks discussed in “ITEM 3.D. Risk Factors” and information contained in other documents filed with or furnished to the
Securities and Exchange Commission.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected
in the forward-looking statements will be achieved or will occur. Except as required by law, we undertake no obligation to publicly update any forward-
looking statements for any reason after the date of this annual report to conform these statements to actual results or to changes in our expectations.
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Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
PART I
Not applicable.
Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
Item 3. KEY INFORMATION
A.
[Reserved]
B.
Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Our business faces significant risks. You should carefully consider all of the information set forth in this annual report and in our other filings with
the United States Securities and Exchange Commission (the “SEC”), including the following risk factors which we face and which are faced by our
industry. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks. In that event, the
trading price of our ordinary shares would likely decline and you might lose all or part of your investment. This report also contains forward-looking
statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a result of
certain important factors including the risks described below and elsewhere in this report and our other SEC filings. See “Special Note Regarding
Forward-Looking Statements” on page i.
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Risks Related to Development, Clinical Testing and Regulatory Approval
Product development is a lengthy and expensive process, with an uncertain outcome.
We intend to develop and commercialize pipeline product candidates based on our patented enzymatic technology platform for (i) marketing
authorization of EscharEx in the U.S. and other jurisdictions, (ii) NexoBrid in the U.S. for children and in other jurisdictions and (iii) MW005 in variety of
jurisdictions across the world. However, before obtaining regulatory approval for the sale of our pipeline product candidates in any jurisdiction, we must
conduct, at our own expense, clinical studies to demonstrate that the products are safe and effective.
Preclinical and clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome.
A failure of one or more of our clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of,
preclinical testing and the clinical trial process. Even if preclinical or clinical trials are successful, we still may be unable to commercialize the product, as
success in preclinical trials, clinical trials or previous clinical trials does not ensure that later clinical trials will be successful.
A number of events could delay or prevent our ability to complete necessary clinical trials for our pipeline product candidates, including:
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regulators may not authorize us to conduct a clinical trial within a country or at a prospective trial site or may require us to change the design
of a study;
delays may occur in reaching agreement on acceptable clinical trial terms with regulatory authorities or prospective sites, or obtaining
institutional review board or ethics committee approval or opinion;
our preclinical tests or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to
conduct additional trials or to abandon strategic projects;
the number of patients required for our clinical trials may be larger than we anticipate, enrollment in our clinical trials may be slower or more
difficult than we expect, or patients may not participate in necessary follow-up visits to obtain required data, any of which would result in
significant delays in our clinical testing process;
our third-party contractors, such as a research institute, may fail to comply with regulatory requirements or meet their contractual obligations
to us;
we may be forced to suspend or terminate our clinical trials if the participants are being exposed, or are thought to be exposed, to
unacceptable health risks or if any participant experiences an unexpected serious adverse event;
regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including
noncompliance with regulatory requirements;
undetected or concealed fraudulent activity by a clinical researcher, if discovered, could preclude the submission of clinical data prepared by
that researcher, lead to the suspension or substantive scientific review of one or more of our marketing applications by regulatory agencies,
and result in the recall of any approved product distributed pursuant to data determined to be fraudulent;
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the cost of our clinical trials may be greater than we anticipate;
an audit of preclinical or clinical studies by regulatory authorities may reveal noncompliance with applicable protocols or regulations, which
could lead to disqualification of the results and the need to perform additional studies;
political unrest and wars, such as the conflict between Russia and Ukraine, which could delay or disrupt business activity, and if such political
unrest escalates or spills over to or otherwise impacts additional regions, it could also heighten many of the other risk factors described in this
Annual Report;
delays may occur in obtaining our clinical materials; and
epidemics or pandemics, such as the COVID-19 pandemic that can affect the overall healthcare infrastructure, including the ability to recruit
patients, the ability to conduct studies at medical sites and the pace with which governmental agencies, such as the FDA and foreign
regulatory authorities, will review and approve regulatory submissions.
Moreover, we do not know whether preclinical tests or clinical trials will begin or be completed as planned or will need to be restructured.
Significant delays could also shorten the patent protection period during which we may have the exclusive right to commercialize our pipeline product
candidates or could allow our competitors to bring products to the market before we do, impairing our ability to commercialize our pipeline product
candidates.
Development and commercialization of EscharEx in the United States, NexoBrid in the United States and our pipeline product candidates worldwide
requires successful completion of the regulatory approval process, and may suffer delays or fail.
In the United States, as well as other jurisdictions, we are required to apply for and receive marketing authorization before we can market our
products, as we have already received for NexoBrid in the United States, the European Union and other international markets. This process can be time-
consuming and complicated and may result in unanticipated delays. To secure marketing authorization, an applicant generally is required to submit an
application that includes the data supporting preclinical and clinical safety and efficacy as well as detailed information on the manufacturing and control of
the product, proposed labeling and other information. Before marketing authorization is granted, regulatory authorities generally require the inspection of
the manufacturing facility or facilities and quality systems (including those of third parties) at which the product candidate is manufactured and tested, to
assess compliance with strictly enforced current good manufacturing practices (“cGMP”) and similar foreign requirements such as Good Manufacturing
Practices (“GMP”) in the European Union, as well as potential audits of the non-clinical and clinical trial sites that generated the data cited in the marketing
authorization application to assess compliance with requisite good clinical practices (“GCP”).
We cannot predict how long the applicable regulatory authority or agency will take to grant marketing authorization or whether any such
authorizations will ultimately be granted. Regulatory agencies, including the FDA and the European Medicines Agency (the “EMA”), have substantial
discretion in the approval process, and the approval process and the requirements governing clinical trials vary from country to country. The policies of the
FDA, the EMA or other regulatory authorities may change or may not be explicit, and additional government regulations may be enacted that could
prevent, limit or delay regulatory approval of EscharEx, NexoBrid or our pipeline product candidates. For instance, the regulatory landscape related to
clinical trials in the European Union (“EU”) recently evolved. The EU Clinical Trials Regulation (“CTR”) which was adopted in April 2014 and repeals the
EU Clinical Trials Directive, became applicable on January 31, 2022. While the Clinical Trials Directive required a separate clinical trial application
(“CTA”) to be submitted in each member state, to both the competent national health authority and an independent ethics committee, the CTR introduces a
centralized process and only requires the submission of a single application to all member states concerned. The CTR allows sponsors to make a single
submission to both the competent authority and an ethics committee in each member state, leading to a single decision per member state. The assessment
procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each
member state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s decision is communicated to the
sponsor via the centralized EU portal. Once the CTA is approved, clinical study development may proceed. The CTR foresees a three-year transition
period. The extent to which ongoing and new clinical trials will be governed by the CTR varies. Clinical trials for which an application was submitted (i)
prior to January 31, 2022 under the Clinical Trials Directive, or (ii) between January 31, 2022 and January 31, 2023 and for which the sponsor has opted for
the application of the Clinical Trials Directive remain governed by said Directive until January 31, 2025. After this date, all clinical trials (including those
which are ongoing) will become subject to the provisions of the CTR. Compliance with the CTR requirements may impact our development plans. It is
currently unclear to what extent the United Kingdom (“UK”) will seek to align its regulations with the EU. The UK regulatory framework in relation to
clinical trials is derived from existing EU legislation (as implemented into UK law, through secondary legislation). On January 17, 2022, the UK Medicines
and Healthcare products Regulatory Agency (“MHRA”) launched an eight-week consultation on reframing the UK legislation for clinical trials. The
consultation closed on March 14, 2022 and aims to streamline clinical trials approvals, enable innovation, enhance clinical trials transparency, enable
greater risk proportionality, and promote patient and public involvement in clinical trials. The outcome of the consultation is being closely watched and will
determine whether the UK chooses to align with the CTR or diverge from it to maintain regulatory flexibility. A decision by the UK not to closely align its
regulations with the new approach that has been adopted in the EU may have an effect on the cost of conducting clinical trials in the UK as opposed to
other countries and/or make it harder to seek a marketing authorization in the EU for our product candidates on the basis of clinical trials conducted in the
UK.
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Additionally, the EU pharmaceutical legislation is currently undergoing a complete review process, in the context of the Pharmaceutical Strategy
for Europe initiative, launched by the European Commission in November 2020. The European Commission’s proposal for revision of several legislative
instruments related to medicinal products (potentially revising the duration of regulatory exclusivity, eligibility for expedited pathways, etc.) is currently
expected in the first quarter of 2023. The proposed revisions, once they are agreed and adopted by the European Parliament and European Council (not
expected before the end of 2024) may have a significant impact on the biopharmaceutical industry in the long term. If we are slow or unable to adapt to
changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any
marketing authorization that we may have obtained and we may not achieve or sustain profitability. We also cannot predict the likelihood, nature or extent
of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. If such actions
impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, or if we are slow or unable to adapt to
changes in existing requirements or the adoption of new requirements or policies, or if we are unable to maintain regulatory compliance, we may be subject
to enforcement action and our business may be negatively impacted.
In addition, any regulatory approval that we will receive may also contain requirements for potentially costly post-marketing testing, including
Phase IV clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. For example, as part of the EMA regulatory approval
process, we agreed to provide further data from a post-marketing U.S. Phase III clinical trial of NexoBrid, which serves to address this post-marketing
commitment to EMA. Once a product is approved, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage,
advertising, promotion, import, export and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These
requirements include submission of safety and other post-marketing information and reports, registration and continued compliance with cGMP and similar
foreign requirements and GCP for any clinical trials that we conduct post-approval. Although our manufacturing facility is cGMP-certified, we may face
difficulties in obtaining regulatory approval for the manufacturing and quality control process of our pipeline product candidates.
Any delays or failures in obtaining regulatory and marketing authorization for EscharEx in the United States, or for NexoBrid or our pipeline
product candidates worldwide, would adversely affect our business, prospects, financial condition and results of operations.
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Even though the FDA has approved NexoBrid for eschar removal in adults with deep partial thickness and/or full thickness thermal burns, we will still
face extensive and ongoing regulatory requirements and obligations for EscharEx, NexoBrid, and for any product candidates for which we obtain
approval.
Any regulatory approvals that we have received for NexoBrid and may receive for NexoBrid, EscharEx or any of our product candidates will
require the submission of reports to regulatory authorities and surveillance to monitor the safety and efficacy of the product, may contain significant
limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, and may include burdensome post-approval study
or risk management requirements. For example, the FDA-approved label for NexoBrid includes certain warnings and precautions regarding
hypersensitivity reactions, pain management, proteolytic injury to non-target tissue and coagulopathy. The FDA may also require a Risk Evaluation and
Mitigation Strategies (REMS) program in order to approve a product candidate, which could entail requirements for a medication guide, physician training
and communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization
tools.
In addition, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export
and recordkeeping for NexoBrid are and will remain subject to extensive and ongoing regulatory requirements. These requirements include submissions of
safety and other post-marketing information and reports, registration, as well as on-going compliance with cGMPs, and GCPs for any clinical trials that we
conduct post-approval. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic, unannounced
inspections by the FDA and other regulatory authorities for compliance with cGMP regulations and standards. If we or a regulatory authority discover
previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facilities where the
product is manufactured, a regulatory authority may impose restrictions on that product, the manufacturing facility or us, including requiring recall or
withdrawal of the product from the market or suspension of manufacturing.
In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes
or failure to comply with regulatory requirements, may yield various results, including:
• restrictions on manufacturing such products;
• restrictions on the labeling or marketing of products;
• restrictions on product manufacturing, distribution or use;
• requirements to conduct post-marketing studies or clinical trials;
• warning letters or untitled letters;
• withdrawal of the products from the market;
• refusal to approve pending applications or supplements to approved applications that we submit;
• recall of products;
• fines, restitution or disgorgement of profits or revenues;
• suspension or withdrawal of marketing authorizations;
• refusal to permit the import or export of our products;
• product seizure; or
• injunctions or the imposition of civil or criminal penalties.
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Further, the policies of the FDA and other regulatory authorities may change, and additional government regulations may be enacted that could
impose extensive and ongoing regulatory requirements and obligations on any product candidate for which we obtain marketing authorization. We also
cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either
in the United States or abroad.
Changes in funding or disruptions at FDA and other government agencies caused by funding shortages or global health concerns could hinder their
ability to hire and retain key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or
commercialized in a timely manner or at all, or otherwise prevent those agencies from performing normal business functions on which the operation of
our business may rely, which could negatively impact our business.
The ability of FDA and foreign regulatory authorities to review and approve new products can be affected by a variety of factors, including
government budget and funding levels, statutory, regulatory, and policy changes, FDA’s and foreign regulatory authorities’ ability to hire and retain key
personnel and accept the payment of user fees, and other events that may otherwise affect FDA’s and foreign regulatory authorities’ ability to perform
routine functions. Average review times at the FDA and foreign regulatory authorities have fluctuated in recent years as a result. In addition, government
funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and
unpredictable. Disruptions at FDA and other agencies such as the EMA, following its relocation to Amsterdam and resulting staff changes, may also slow
the time necessary for new drugs and biologics to be reviewed and/or approved by necessary regulatory authorities, which would adversely affect our
business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several
times and certain regulatory agencies, such as FDA, have had to furlough critical FDA employees and stop critical activities.
Separately, in response to the COVID-19 pandemic, the FDA postponed most inspections of domestic and foreign manufacturing facilities at
various points. Even though the FDA has since resumed standard inspection operations of domestic facilities where feasible, the FDA has continued to
monitor and implement changes to its inspectional activities to ensure the safety of its employees and those of the firms it regulates as it adapts to the
evolving COVID-19 pandemic, and any resurgence of the virus or emergence of new variants may lead to further inspectional delays. Regulatory
authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged
government shutdown occurs, or if global health concerns continue to prevent FDA, other regulatory authorities, or notified bodies from conducting their
regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of FDA, other regulatory authorities, or notified bodies to
timely review and process our regulatory submissions, which could have a material adverse effect on our business.
NexoBrid, EscharEx or our pipeline product candidates may cause unanticipated and undesirable side effects or have other properties, which are
currently unknown to us.
NexoBrid, EscharEx and all of our current pipeline product candidates rely on our patented enzymatic platform technology, although their specific
formulations or mode of applications may vary. Like most pharmaceutical products, our approval labels for NexoBrid in the United States, Europe and
other international markets list certain side effects. If we or others identify previously unknown problems with NexoBrid, EscharEx or their underlying
proteolytic enzymes, including adverse events of unanticipated severity or frequency, problems with our manufacturers or manufacturing processes, or
failure to comply with regulatory requirements, the following consequences, among others, may result, including, without limitation:
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restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market or voluntary or mandatory product
recalls;
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fines, warning letters or holds on clinical trials;
harm to our reputation, reduced demand for our products and loss of market acceptance;
refusal by the applicable regulatory authority to approve pending applications or supplements to approved applications filed by us, or
suspension or revocation of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; and
injunctions or the imposition of civil or criminal penalties.
Any of these events could prevent us from achieving or maintaining market acceptance of NexoBrid, and future market acceptance of EscharEx,
our pipeline product candidates or future product candidates, which would adversely affect our business, prospects, financial condition and results of
operations.
Regulatory approval for NexoBrid, EscharEx and other pipeline product candidates is and may be limited to specific indications and conditions for
which clinical safety and efficacy have been demonstrated, and the prescription of off-label uses could adversely affect our business.
The marketing authorization for NexoBrid in the European Union and other international markets is limited to the treatment of deep partial- and
full-thickness burns in adults. In the United States, the marketing authorization for NexoBrid is limited to eschar removal in adults with deep partial
thickness and/or full thickness thermal burns. Any additional regulatory approval of NexoBrid for severe burns and any regulatory approval we may
receive for any of our pipeline product candidates in the future, would be limited to those specific indications for which such pipeline product candidate
had been deemed safe and effective by the FDA, EMA, or another regulatory authority Additionally, labeling restrictions in the U.S. and EU limit the
manner in which a product may be used. For example, NexoBrid’s label in the U.S. and EU provides that it may only be used in specialized burns centers
or by burn specialists and that it is not to be applied to more than 30% and 15% of the patient’s total body surface area, respectively. If physicians prescribe
the medication for unapproved, or “off-label,” uses or in a manner that is inconsistent with the manufacturer’s labeling, it could produce results such as
reduced efficacy or other adverse effects, and the reputation of our products in the marketplace may suffer. In addition, should any of our future products
have a significant price difference and if they are used interchangeably, off-label uses may cause a decline in our revenues or potential revenues.
Furthermore, while physicians may choose to prescribe treatments for uses that are not described in the product’s labeling and for uses that differ from
those approved by regulatory authorities, we cannot promote the products for any indications other than those that are specifically approved by the
European Commission, the FDA or other regulatory authorities. Regulatory authorities restrict communications by companies on the subject of off-label
use. If our promotional activities fail to comply with these regulations or guidelines, we may be subject to enforcement actions by those authorities. In the
United States, “off-label promotion” by pharmaceutical companies has resulted in significant litigation under the Federal False Claims Act, violations of
which may result in substantial civil penalties and fines as well as exclusion from government health care programs. More generally, failure to follow the
rules and guidelines of regulatory agencies relating to promotion and advertising, such as that promotional materials not be false or misleading, can result
in refusal to approve a product, the suspension or withdrawal of an approved product from the market, product recalls, fines, disgorgement of money,
operating restrictions, injunctions or criminal prosecution.
We may rely on the Animal Rule in conducting trials, which could be time consuming and expensive.
To obtain FDA approval for our product candidates, we may obtain clinical data from trials in healthy human subjects that demonstrate adequate
safety, and efficacy data from adequate and well-controlled animal studies under regulations issued by the FDA in 2002, often referred to as the “Animal
Rule.” Among other requirements, the animal studies must establish that the drug or biological product is reasonably likely to produce clinical benefits in
humans. If we use this approach we may not be able to sufficiently demonstrate this correlation to the satisfaction of the FDA, as these corollaries are
difficult to establish and are often unclear. Because the FDA must agree that data derived from animal studies may be extrapolated to establish safety and
effectiveness in humans, seeking approval under the Animal Rule may add significant time, complexity and uncertainty to the testing and approval process.
The FDA may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies, refuse to approve our product
candidates, or place restrictions on our ability to commercialize the products. In addition, products approved under the Animal Rule are subject to
additional requirements, including post-marketing study requirements, restrictions imposed on marketing or distribution, or requirements to provide
information to patients. Further, regulatory authorities in other countries may not have established an “Animal Rule” equivalent, and, consequently, there
can be no assurance that we will be able to make a submission for marketing authorization in foreign countries based on such animal data.
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Risks Related to Manufacturing
We may not be able to expand our production or processing capabilities or satisfy future demand.
We are currently seeking to expand our manufacturing capabilities in order to increase our capacity to manufacture NexoBrid and future product
candidates and satisfy near term demand. We cannot guarantee that we will be able to obtain the requisite approvals, including meeting regulatory and
quality requirements, or if we do, that the facility will satisfy additional growing demand. Conversely, there can be no assurance that even if we obtain a
new facility, demand for our products will increase proportionately to the increased production capability. Furthermore, we cannot assure that this or similar
projects will be implemented in a timely and cost-efficient manner, and that our current production will not be adversely affected by the operational
challenges of implementing the expansion project.
If our manufacturing facility in Yavne, Israel was to suffer a serious accident, or if a force majeure event were to materially affect our ability to operate
and produce NexoBrid, EscharEx and our pipeline product candidates, all of our manufacturing capacity could be shut down for an extended period.
We currently rely on a single manufacturing facility in Yavne, Israel, and we expect that all of our revenues in the near future will be derived from
products manufactured at this facility. If this facility were to suffer an accident or a force majeure event such as war, missile or terrorist attack, earthquake,
major fire or explosion, major equipment failure or power failure lasting beyond the capabilities of our backup generators or similar event, our revenues
would be materially adversely affected and any of our clinical trials could be materially delayed. In this situation, our manufacturing capacity could be shut
down for an extended period, we could experience a loss of raw materials, work in process or finished goods inventory and our ability to operate our
business would be harmed. In addition, in any such event, the reconstruction of our manufacturing facility and storage facilities, and obtaining regulatory
approval for the new facilities could be time-consuming. During this period, we would be unable to manufacture NexoBrid or our pipeline product
candidates. In addition, we currently have limited inventory of NexoBrid that we can supply to our customers if we are unable to further manufacture
NexoBrid.
Moreover, our business insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle
East. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we
cannot assure you that this government coverage will be maintained, or if maintained, will be sufficient to compensate us fully for damages incurred. Any
losses or damages incurred by us could have a material adverse effect on our business.
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We are subject to a number of other manufacturing risks, any of which could substantially increase our costs and limit supply of NexoBrid, EscharEx
and our pipeline product candidates.
The process of manufacturing NexoBrid, EscharEx and our pipeline product candidates is complex, highly regulated and subject to the risk of
product loss due to contamination, equipment failure or improper installation or operation of equipment, or vendor or operator error. Even minor deviations
from normal manufacturing processes or quality requirements for our products could result in reduced production yields, product defects and other supply
disruptions. If microbial, viral or other contaminations are discovered in NexoBrid, EscharEx or our pipeline product candidates or in the manufacturing
facilities in which NexoBrid, EscharEx or our pipeline product candidates are or will be made, such manufacturing facilities may need to be closed to
investigate and remedy the contamination.
Aside from the significant COVID-19 impact, we may experience any contaminations, major equipment failures, or other similar manufacturing
problems of such magnitude, any adverse developments affecting manufacturing operations for NexoBrid, EscharEx or our pipeline product candidates
which may result in additional shipment delays, inventory shortages, lot failures, withdrawals or recalls, or other interruptions in the supply of NexoBrid,
EscharEx or our pipeline product candidates. We may also have to take inventory write-offs and incur other charges and expenses for our products that fail
to meet specifications, undertake costly remediation efforts, or seek costlier manufacturing alternatives.
Our ability to continue manufacturing and distributing our products depends on our continued adherence to cGMP regulations.
The manufacturing processes for our products are governed by detailed cGMP and similar foreign regulations, both for our marketed products in
the EU and the U.S. and product candidates in clinical testing in the U.S., EU and Israel. Failure by our manufacturing and quality operations unit to adhere
to established regulations or to meet a specification or procedure set forth in cGMP and similar foreign requirements could require that a product or
material be rejected and destroyed. Our adherence to cGMP and similar foreign regulations and the effectiveness of our quality control systems are
periodically assessed through inspections of our manufacturing facility by regulatory authorities. Such inspections could result in deficiency citations,
which would require us to take action to correct those deficiencies to the satisfaction of the applicable regulatory authorities. If critical deficiencies are
noted or if we are unable to prevent recurrences, we may have to recall products or suspend operations until appropriate measures can be implemented.
Since cGMP and similar foreign regulations reflect ever-evolving standards, we need to regularly update our manufacturing processes and procedures to
comply with cGMP and similar foreign regulations. These changes may cause us to incur additional costs and may adversely impact our profitability. For
example, more sensitive testing assays (if and when they become available, or due to the discontinuation of the availability of the disposables currently
used in production) may be required, or existing procedures or processes may require revalidation, all of which may be costly and time-consuming and
could delay or prevent the manufacturing of NexoBrid or launch of a new product.
We depend on a sole supplier to obtain our intermediate drug substance, bromelain SP, which is necessary for the production of our products.
We currently procure bromelain SP, a key substance starting material in the manufacturing of NexoBrid, EscharEx and our pipeline product
candidates, from a single supplier, Challenge Bioproducts Corporation Ltd. (“CBC”). CBC’s manufacturing facilities are located in the Republic of China
and it uses proprietary methods to manufacture bromelain SP. Our supply agreement with CBC has no fixed expiration date and can be voluntarily
terminated by us, with at least six months’ advance written notice, or by CBC, with at least 24 months’ advance written notice.
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Although we have a contractual right to procure this material from other suppliers, subject to payment of a one-time, non-material licensing fee to
CBC, procuring this material from any other source would require time and effort which may interrupt our supply of bromelain SP and may cause an
interruption of the supply of NexoBrid, EscharEx and our pipeline product candidates to the marketplace and for future clinical trials or other development
purposes. Regulatory authorities could require that we conduct additional studies in support of a new supplier, which could result in significant additional
costs or delays. Furthermore, there can be no assurance that we would be able to procure alternative supplies of bromelain SP at all or at comparable quality
or competitive prices or upon fair and reasonable contractual terms and conditions. Although we believe that we currently store sufficient inventory of
bromelain SP in our warehouse and CBC warehouse to continue full capacity operations for approximately two years, this inventory may prove
insufficient, and any interruption or failure to source additional bromelain SP from CBC or other third parties in a timely manner, or at all, would adversely
affect our business, prospects, financial condition and results of operations.
In addition, if CBC experiences any closures and labor shortages as a result of the COVID-19 pandemic or as a result of rising tensions between
the People’s Republic of China and Taiwan, we may face difficulty sourcing bromelain SP, which could negatively affect our revenues.
Our sole supplier of intermediate drug substance, bromelain SP, is located in Taiwan, which exposes us to risks that harm our ability to manufacture
NexoBrid, EscharEx and our pipeline product candidates and substantially harm our business.
The manufacturing facilities of CBC, our sole supplier of bromelain SP, a key substance as starting material in the manufacturing of NexoBrid,
EscharEx and our pipeline product candidates, are located in Taiwan. We believe one of the most significant risks associated with these facilities being
located in Taiwan is the risk that production may be interrupted or limited due to strains on the local infrastructure. In addition, facilities located in Taiwan
may be adversely affected by tensions, hostilities or trade disputes involving China, the United States or other countries. There is considerable potential
political instability in Taiwan related to its disputes with China. Although we do not do business in North Korea, any future increase in tensions between
South Korea and North Korea, such as an outbreak or escalation of military hostilities, or between Taiwan and China could materially adversely affect our
operations in Asia or the global economy, which in turn may seriously harm our business.
Risks Related to Commercialization
Our revenue growth depends initially on our ability to commercialize NexoBrid.
We currently have a marketing authorization in the United States, the European Economic Area (“EEA”) (which consists of the 27 EU member
states plus Norway, Liechtenstein, Switzerland and Iceland), U.K., Israel, Argentina, Russia, Ukraine, South Korea, Peru, Chile, Taiwan, United Arab
Emirates Eurasian countries, Japan and India for a single product, NexoBrid for eschar removal in adults with deep partial thickness and/or full thickness
thermal burns, which we refer to as severe burns. We are currently relying, for a significant portion of our revenues from sales of products, on sales of
NexoBrid in Europe and in other international markets for the treatment of severe burns We anticipate that, for at least the next several years, our ability to
generate revenues and become profitable will depend on the commercial success of NexoBrid in these markets, BARDA’s procurement as well as
successful launches in new markets such as the U.S.
The commercialization success of NexoBrid in the U.S. is dependent on the actions of our partner Vericel.
On May 6, 2019, we entered into an exclusive license and supply agreements with Vericel Corporation (”Vericel”) to commercialize NexoBrid in all
countries of North America (the “Vericel License Agreement”). In accordance with the Vericel License Agreement, Vericel paid us $17.5 million in cash as
an upfront payment at the execution of the Vericel License Agreement and an additional milestone payment of $7.5 million upon the achievement of BLA
approval for NexoBrid. Vericel is obligated to pay us up to $125 million, in the aggregate, upon attainment of certain sales milestones. Vericel is also
obligated to pay us tiered royalties on net sales of NexoBrid ranging from mid-high single-digit to mid-teen percentages, subject to certain customary
reductions, as well as a percentage of gross profits on committed purchases by BARDA and a royalty on additional sales to BARDA. The success of our
business depends largely on Vericel's success in commercializing NexoBrid. If Vericel does not succeed in launching and commercializing NexoBrid in the
U.S. or does not comply with the terms of our agreement, and as a result a dispute between us and Vericel arises, our ability to generate revenues from
NexoBrid will be substantially harmed.
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The commercial success of NexoBrid, EscharEx and our pipeline product candidates will depend upon their degree of market acceptance.
NexoBrid, EscharEx and our pipeline product candidates may not gain market acceptance by physicians and their teams, healthcare payors,
patients and others in the medical community. Although many physicians in burn centers throughout Europe, the United States and other international
markets have used NexoBrid for severe burns as part of our clinical trials or since NexoBrid’s commercial launch in Europe, and other international
markets, we cannot guarantee that use of NexoBrid will be accepted in the market. We need to successfully integrate NexoBrid into the overall treatment of
burns in burn centers. If NexoBrid, EscharEx and our pipeline product candidates do not achieve an adequate level of acceptance, we may not generate
revenue and we may not achieve or sustain profitability. The degree of market acceptance of NexoBrid in U.S., Europe and in other international countries
where we receive marketing authorization, and of EscharEx and our pipeline product candidates, will depend on a number of factors, some of which are
beyond our control, including:
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the willingness of physicians, burn care teams and hospital administrators to administer our products and the acceptance of our products as
part of the medical department routine;
the consent of hospitals to fund/purchase NexoBrid or obtain third-party coverage or reimbursement for our products;
the ability to offer NexoBrid, EscharEx and our pipeline product candidates for sale at an attractive value;
the efficacy and potential advantages of NexoBrid, EscharEx and our pipeline product candidates relative to current standard of care;
the prevalence and severity of any side effects; and
the efficacy, potential advantages and timing of introduction to the market of alternative treatments.
Failure to achieve market acceptance for NexoBrid, EscharEx or any of our pipeline product candidates, if and when they are approved for
commercial sale, will have a material adverse effect on our business, financial condition and results of operations.
We may be unsuccessful in commercializing our products due to unfavorable pricing regulations or third-party coverage and reimbursement policies.
We cannot predict the pricing and reimbursement of NexoBrid, EscharEx or our pipeline product candidates. The regulations that govern
marketing authorizations, pricing and reimbursement for new products vary widely from country to country, among regions within some countries and
among some hospitals. In some foreign jurisdictions, including the EU, the pricing of prescription pharmaceuticals is subject to governmental control. In
other countries, coverage negotiations must occur at the regional or hospital level in order to be included in the hospital formulary. Pricing negotiations
with governmental authorities at the regional or hospital level can take considerable time after the receipt of marketing authorization for a product
candidate. Additionally, while we are executing a country-specific market access strategy, which includes pricing and/or reimbursement targets for
NexoBrid in most of Europe, we cannot guarantee that we will receive favorable hospital, regional or national funding or pricing and reimbursement.
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As a result, even after obtaining regulatory approval for a product in a particular country, we may be subject to price regulations or denied or
limited by reimbursement or formulary inclusion, which may delay or limit our commercial launch of the product and negatively impact the revenue we are
able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in NexoBrid,
EscharEx or our pipeline product candidates, even after obtaining regulatory approval.
Additionally, we cannot be sure that coverage and reimbursement will be available for NexoBrid, EscharEx or any pipeline product candidate that
we commercialize in the future, and, if reimbursement is available, whether the level of reimbursement will be adequate. Coverage and reimbursement may
affect the demand for, the price of, or the budget allocated for reimbursement for any product for which we obtain marketing authorization. Obtaining
coverage and adequate reimbursement for our products may be particularly difficult because of the higher prices often associated with products
administered under the supervision of a physician. If coverage and reimbursement are not available or are available only at limited levels, we may not be
able to successfully commercialize NexoBrid, EscharEx or any pipeline product candidate that we successfully develop. Eligibility for reimbursement does
not guarantee that any product will be paid for in all cases or at a rate that covers our costs. Interim payments for new products, if applicable, may also not
be sufficient to cover our costs and may not be made permanent. Payment rates may vary according to the use of the product and the clinical setting in
which it is used, may be based on payments allowed for lower cost products that are already reimbursed and may be incorporated into existing payments
for other services. Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private
payors and by any future relaxation of laws that presently restrict imports of products from countries where they may be sold at lower prices than in certain
other countries, such as the United States. In the United States, third-party payors often rely on the coverage policies and payment limitations imposed by
Medicare and other government payors, in setting their own coverage policies and reimbursement rates. Our inability to promptly obtain coverage and
profitable payment rates from hospital budget, government-funded and private payors for NexoBrid, EscharEx or any pipeline product candidate could
have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
Recently enacted and future legislation in the United States may increase the difficulty and cost for us to commercialize NexoBrid and seek marketing
authorizations for and, if approved, commercialize EscharEx and our pipeline product candidates in the United States and in foreign jurisdictions and
affect the prices at which our products may be sold.
The United States and several other jurisdictions are considering, or have already enacted, a number of legislative and regulatory proposals to
change the healthcare system in ways that may affect the ability to sell NexoBrid, EscharEx or any of our pipeline product candidates profitably, if
approved. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of hospitals, governments, insurance companies,
managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect:
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the market acceptance or demand for NexoBrid, EscharEx or any of our pipeline product candidates, if approved;
the ability to set a price that we believe is fair for NexoBrid, EscharEx or any of our pipeline product candidates, if approved;
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our ability to generate revenues and achieve or maintain profitability;
the level of taxes that we are required to pay; and
the availability of capital.
Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with
the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a
particular focus of these efforts and has been significantly affected by major legislative initiatives. In March 2010, the Patient Protection and Affordable
Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act(the “ACA”) was signed into law and
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 the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health
policy reforms.
Among the provisions of the ACA of importance to our potential product candidates are the following:
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an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned
among these entities according to their market share in certain government healthcare programs;
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the
average manufacturer price for branded and generic drugs, respectively;
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;
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off
negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s
outpatient drugs to be covered under Medicare Part D;
extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care
organizations;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional
individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty
Level, thereby potentially increasing manufacturers’ Medicaid rebate liability;
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
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a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research.
Since its enactment, there have been judicial, executive and congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S.
Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the
ACA. Thus, the ACA will remain in effect in its current form. Further, prior to the U.S. Supreme Court ruling, President Biden issued an executive order
that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace from February 15, 2021
through August 15, 2021. The executive order instructed certain governmental agencies to review and reconsider their existing policies and rules that limit
access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and
policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.
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, which went into effect in April 2013 and, due to subsequent legislative amendments, will stay in
effect through 2031, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is
taken. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further 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 negatively impact the market for NexoBrid, EscharEx and
our other product candidates, if approved, and, accordingly, our financial operations.
There has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products,
which have resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing,
review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug
products. In March 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminates the statutory Medicaid drug rebate cap, currently
set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. In August 2022, the
Inflation Reduction Act of 2022, or IRA, was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price
negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare
Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting
program (beginning in 2025). The IRA permits the Secretary of the Department of Health and Human Services to implement many of these provisions
through guidance, as opposed to regulation, for the initial years. For that and other reasons, it is currently unclear how the IRA will be effectuated, or the
impact of the IRA on our business. 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.
We expect that other possible healthcare reform measures may result in additional reductions in Medicare and other healthcare funding, more
rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product. Any
reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The
implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or
commercialize our drugs.
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Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for drugs.
We cannot be sure whether additional legislative changes will be enacted, or whether the FDA or comparable regulations, guidance or interpretations will
be changed, or what the impact of such changes on the marketing authorizations of our product candidates, if any, may be. In addition, increased scrutiny
by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing authorization, as well as subject us to more stringent
product labeling and post-marketing testing and other requirements.
In the EU, similar developments may affect our ability to profitably commercialize our product candidates, if approved. In addition to continuing
pressure on prices and cost containment measures, legislative developments at the EU or member state level may result in significant additional
requirements or obstacles that may increase our operating costs. 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 authorization of our product candidates, restrict or regulate post-approval activities and affect our
ability to commercialize our product candidates, if approved. In markets outside of the United States and EU, reimbursement and healthcare payment
systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.
In December 2021, Regulation No 2021/2282 on Health Technology Assessment (“HTA”) amending Directive 2011/24/EU, was adopted. This
regulation which entered into force in January 2022 intends to boost cooperation among EU member states in assessing health technologies, including new
medicinal products, and providing the basis for cooperation at the EU level for joint clinical assessments in these areas. The regulation foresees a three-year
transitional period and will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four
main areas, including joint clinical assessment of the innovative health technologies with the most potential impact for patients, joint scientific
consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies
early, and continuing voluntary cooperation in other areas. Individual EU member states will continue to be responsible for assessing non-clinical (e.g.,
economic, social, ethical) aspects of health technology, and making decisions on pricing and reimbursement.
We face competition from the existing standard of care, and we are furthermore subject to the risk that potential changes in medical practice and
technology, or the development by our competitors of products, treatments or procedures that are similar, more advanced, safer or more effective than
ours, will render our product candidates obsolete.
The medical, biotechnology and pharmaceutical industries are intensely competitive and subject to significant technological and practice changes.
We may face competition from many different sources with respect to NexoBrid, EscharEx and our pipeline product candidates or any product candidates
that we may seek to develop or commercialize in the future. Possible competitors may be medical practitioners, pharmaceutical and wound care companies,
academic and medical institutions, governmental agencies and public and private research institutions, among others. Should any competitor’s product
candidates receive regulatory or marketing authorization prior to ours, they may establish a strong market position and be difficult to displace, or may
diminish the need for our products.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products, treatments or procedures that
are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any product that we may develop. In
addition, we face competition from the current standard of care for eschar removal in severe burns, which includes surgery, where eschar removal can occur
by tangential excision, dermabrasion or hydro jet, and non-surgical alternatives, such as topical medications applied to the eschar to facilitate the natural
healing process. In chronic and other hard-to-heal wounds, we expect to face competition from current standard of care for debridement via sharp
debridement or from the current non-surgical standard of care, either enzymatic debridement, primarily Smith & Nephew Plc’s Santyl, a collagenase-based
product indicated for debriding chronic dermal ulcers and severely burned areas, or autolytic debridement.
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Many of our current or future competitors may have significantly greater financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we may have. Mergers
and acquisitions in the pharmaceutical and biotechnology industries or wound care markets may result in even more resources being concentrated among a
smaller number of our competitors. For example, Healthpoint Biotherapeutics, which marketed Santyl, was acquired by Smith & Nephew Plc in 2012.
Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and
established companies. These companies compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical
trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs
Risks Related to Our Financial Position and Need for Additional Capital
If we fail to manage our growth effectively, our business could be disrupted.
Our future financial performance and ability to successfully commercialize our products and to compete effectively will depend, in part, on our
ability to manage any future growth effectively. We have made and expect to continue to make significant investments to enable our future growth through,
among other things, new product development, clinical trials for new indications, expansion of our marketing and sales infrastructure and continued
exploring for potential business development opportunities. While we believe that our current manufacturing capacity is sufficient to meet the expected
near-term commercial demand for NexoBrid, we initiated a facility scale-up in 2022 to meet the growing global demand for NexoBrid. We expect the cost
will be approximately $10-12 million. We must also be prepared to expand our workforce and train, motivate and manage additional employees as the need
for additional personnel arises. Even following expansion, our facilities, personnel, systems, procedures and controls may not be adequate to support our
future operations, or we may expand, but then fail to grow our sales of NexoBrid or our pipeline product candidates sufficiently to support such operational
growth. Any failure to manage future growth effectively could have a material adverse effect on our business and results of operations.
We have a history of net losses. We expect to continue to incur substantial and increasing net losses for the foreseeable future, and we may never
achieve or maintain profitability.
We have incurred significant net losses, including a net loss of $19.6 million for the year ended December 31, 2022 and $13.6 million for the year
ended December 31, 2021. As of December 31, 2022, we had an accumulated deficit of $168.1 million. We expect to incur substantial net losses for the
foreseeable future. These losses and negative cash flows have had, and will continue to have, an adverse effect on our shareholder's equity and working
capital.
We expect to incur significant expenses and increasing operating losses for the foreseeable future.
We anticipate that our expenses and future capital requirements may increase if and as we:
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accelerate our clinical development activities, particularly with respect to our clinical development of EscharEx for the debridement of
chronic and other hard-to-heal wounds and our clinical trials for our other pipeline product candidates;
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further scale-up the manufacturing process for NexoBrid;
seek regulatory and marketing authorizations for our products and any pipeline product candidate that successfully completes clinical trials;
initiate additional preclinical, clinical or other studies for NexoBrid, EscharEx and our pipeline product candidates, and seek to identify and
validate new products;
commercialize NexoBrid and any pipeline product candidates for which we obtain marketing authorization;
acquire rights to other product candidates and technologies;
change or add suppliers;
maintain, expand and protect our intellectual property portfolio;
attract and retain skilled personnel; and
experience any delays or encounter issues with any of the above.
We may need substantial additional capital in the future, which may cause dilution to our existing shareholders, restrict our operations or require us to
relinquish rights to our pipeline product candidates or intellectual property. If additional capital is not available, we may have to delay, reduce or cease
operations.
We may seek additional funding in the future, which may consist of equity offerings, collaborations, licensing arrangements or any other means to
develop our pipeline product candidates, increase our commercial manufacturing capabilities, operate our sales and marketing capabilities or other general
corporate purposes.
Our prior registered equity offerings diluted then-existing shareholders, and to the extent that we raise additional capital through, for example, the
sale of equity or convertible debt securities under our shelf registration statement, our existing shareholders’ ownership interest will be further diluted, and
the terms may include liquidation or other preferences that adversely affect our shareholders’ rights. The incurrence of indebtedness or the issuance of
certain equity securities could result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our
ability to incur additional debt or to issue additional equity, limitations on our ability to acquire or license intellectual property rights and other operating
restrictions that could adversely impact our ability to conduct our business. In addition, the issuance of additional equity securities by us, or the possibility
of such issuance, may cause the market price of our ordinary shares to decline. Securing additional financing may also divert our management’s attention
from our day-to-day activities, which may adversely affect our ability to develop and commercialize NexoBrid, EscharEx and our pipeline product
candidates.
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Additional funding may not be available to us on acceptable terms, or at all. In the event that we enter into collaborations or licensing
arrangements in order to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third party on unfavorable
terms our rights to product candidates or intellectual property that we otherwise would seek to develop or commercialize ourselves or reserve for future
potential arrangements when we might be able to achieve more favorable terms.
If we are unable to raise additional capital when required or on acceptable terms, we may be required to:
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delay, scale back or discontinue the development, manufacturing scale-up or commercialization of NexoBrid, EscharEx or our pipeline
product candidates;
seek additional corporate partners for NexoBrid, EscharEx or one or more of our pipeline product candidates on terms that are less favorable
than might otherwise be available; or
relinquish or license to additional parties, on unfavorable terms, our rights to NexoBrid, EscharEx or our pipeline product candidates that we
otherwise would seek to develop or commercialize ourselves.
any such consequence will have a material adverse effect on our business, operating results and prospects and on our ability to develop our
pipeline product candidates.
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into
2026. Our estimates may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing
circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may
need to seek additional funds sooner than planned.
We are dependent on our contract with BARDA to fund our development activities for NexoBrid in the United States and to procure from us NexoBrid
(and to thereby provide us with revenues). If we do not continue to receive funding under this contract, we may need to obtain alternative sources of
funding. In addition, if BARDA will suspend or terminate its procurement obligation of NexoBrid it will adversely impact our future revenues.
We have a contract with BARDA, valued at up to $168 million, for the advancement of the development and manufacturing, as well as the
procurement, of NexoBrid in the United States (the “First BARDA Contract”). Under the First BARDA Contract, BARDA has agreed to fund $91 million
of the development costs of NexoBrid required to obtain marketing authorization in the United States and the emergency readiness for NexoBrid
deployment. Under the First BARDA Contract, BARDA is procuring from us emergency stockpile of NexoBrid valued at $16.5 million as part of the HHS
mission to build national preparedness for public health medical emergencies. The First BARDA Contract also includes options for BARDA (i) to further
fund $10 million in development activities for other potential NexoBrid indications, and (ii) to further fund $50 million for additional procurement of
NexoBrid. As of December 31, 2022, the Company has received from BARDA approximately $78 million in the aggregate pursuant to the First BARDA
Contract, and an additional $16.5 million for procurement of NexoBrid for U.S. emergency preparedness.
However, BARDA may terminate the contract at any time, at its convenience, without any further funding obligations. There can be no assurances
that BARDA will not terminate the contract. Changes in government budgets and agendas may result in a decreased and de-prioritized emphasis on
supporting the development of products for the treatment of severe burns such as NexoBrid and the cessation of the procurement. Any reduction or delay in
BARDA funding may force us to suspend the program or seek alternative funding, which may not be available on non-dilutive terms, terms favorable to us
or at all. Further, we cannot provide any assurances as to when or whether BARDA’s commitment for procurement of NexoBrid will continue or whether
BARDA's options to fund additional development activities for NexoBrid and further fund $50 million for additional procurement of NexoBrid will be
exercised.
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We make business decisions based on forecasts of future sales of our products and pipeline product candidates that may be inaccurate.
Our market estimates are based on many assumptions, including, but not limited to, reliance on external market research, our own internal
research, population estimates, estimates of disease diagnostic rates, treatment trends, and market estimates by third parties. Any of these assumptions can
materially impact our forecasts and we cannot be assured that the assumptions are accurate. If the market for any of our products or product candidates is
less than this data would suggest, the potential sales for the product or pipeline product candidates in question could be adversely affected, and our
inventories and net losses could increase.
Because of the numerous risks and uncertainties associated with biopharmaceutical product development and commercialization, we are unable to
accurately predict the timing or amount of future expenses or when, or if, we will be able to achieve or maintain profitability. We have financed our
operations primarily through the sale of equity securities, licensing agreements and government grants. The size of our future net losses will depend, in
part, on the rate of growth or contraction of our expenses and the level and rate of growth, if any, of our revenues. If we are unable to successfully
commercialize NexoBrid, EscharEx or one or more of our pipeline product candidates or if revenue from NexoBrid, EscharEx or any pipeline product
candidate that receives marketing authorization is insufficient, we will not achieve profitability. Even if we do achieve profitability, we may not be able to
sustain or increase profitability.
Exchange rate fluctuations between the U.S. dollar and the Israeli shekel, the Euro and other non-U.S. currencies may negatively affect our earnings.
The dollar is our functional and reporting currency. However, a significant portion of our operating expenses are incurred in Israeli shekels and
Euros. As a result, we are exposed to the risks that the shekel may appreciate relative to the dollar, or, if the shekel instead devalues relative to the dollar,
that the inflation rate in Israel may exceed such rate of devaluation of the shekel, or that the timing of such devaluation may lag behind inflation in Israel. In
any such event, the dollar cost of our operations in Israel would increase and our dollar-denominated results of operations would be adversely affected. We
cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation (if any) of the shekel against the dollar. For example, the shekel
depreciated relative to the dollar, on average, by 13.2% in 2022 and appreciated relative to the dollar, on average, by 3.3% and 7.0% in 2021 and 2020,
respectively. If the dollar or Euro cost of our operations in Israel increases, our dollar- and Euro-measured results of operations will be adversely affected.
Our operations also could be adversely affected if we are unable to effectively hedge against currency fluctuations in the future.
To the extent that we may receive revenues from sales in certain countries, such as certain countries in the Asia Pacific region, where our sales are
expected to be denominated in dollars, a strengthening of the dollar in relation to other currencies could make our products less competitive in those foreign
markets and collection of receivables more difficult. For further information, see “ITEM 11. Quantitative and Qualitative Disclosures About Market Risk”
elsewhere in this annual report.
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Risks Related to Healthcare Laws and Other Legal Compliance Matters
Certain of our business practices could become subject to scrutiny by regulatory authorities, as well as to lawsuits brought by private citizens. Failure to
comply with applicable law or an adverse decision in lawsuits may result in adverse consequences to us.
The laws governing our conduct in the United States and in foreign jurisdictions are enforceable by criminal, civil and administrative penalties. In
the United States, violations of laws such as the Federal Food, Drug and Cosmetic Act (the “FDCA”), the Public Health Service Act, the Federal False
Claims Act, provisions of the U.S. Social Security Act, including the “Anti-Kickback Statute,” or any regulations promulgated under their authority, may
result in significant administrative, civil and criminal sanctions, jail sentences, fines or exclusion from federal and state programs, as may be determined by
the U.S. Department of Justice, the Office of Inspector General of the U.S. Department of Health and Human Services (the “OIG”), the Centers for
Medicare & Medicaid Services, (“CMS“) other regulatory authorities and the courts. There can be no assurance that our activities will not come under the
scrutiny of regulators and other government authorities or that our practices will not be found to violate applicable laws, rules and regulations or prompt
lawsuits by private citizen “relators” under federal or state false claims laws.
The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving any
remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering or
arranging for or recommending the purchase, lease or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare,
Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value. Although there are a
number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn
narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to
scrutiny if they do not qualify for an exception or safe harbor.
For example, even common business arrangements, such as discounted terms and volume incentives for customers in a position to recommend or
choose drugs and devices for patients, such as physicians and hospitals, can result in substantial legal penalties, including, among other things, exclusion
from Medicare and Medicaid programs if not carefully structured to comply with applicable requirements. Also, certain business practices, such as
payment of consulting fees to healthcare providers, sponsorship of educational or research grants, charitable donations, interactions with healthcare
providers and financial support for continuing medical education programs, must be conducted within narrowly prescribed and controlled limits to avoid
any possibility of unlawfully inducing healthcare providers to prescribe or purchase particular products or rewarding past prescribing. Failure to meet all of
the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback
Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances.
Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce
referrals of federal healthcare covered business, the Anti-Kickback Statute has been violated. In addition, 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. Violations of the federal Anti-Kickback Statute may result in
significant civil monetary penalties for each violation, plus up to three times the remuneration involved. Moreover, a claim including items or services
resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.
Accordingly, civil penalties for such conduct can further be assessed under the federal False Claims Act. Violations can also result in criminal penalties,
including criminal fines and imprisonment. Similarly, violations can result in exclusion from participation in government healthcare programs, including
Medicare and Medicaid.
Significant enforcement activity has also taken place under federal and state false claims act statutes. Violations of the federal False Claims Act
can result in treble damages, and a penalty for each false claim submitted for payment. Pharmaceutical, device and other healthcare companies have been
prosecuted under these laws for, among other things, allegedly providing free product to customers with the expectation that the customers would bill
federal programs for the product. Companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of
products for unapproved, and thus non-covered, uses. The government may further prosecute conduct constituting a false claim under the criminal False
Claims Act. The criminal False Claims Act prohibits the making or presenting of a claim to the government knowing such claim to be false, fictitious, or
fraudulent and, unlike the civil False Claims Act, requires proof of intent to submit a false claim.
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The federal False Claims Act, as well as certain state false claims acts, also permits relators to file complaints in the name of the United States
(and if applicable, particular states). These relators may be entitled to receive up to 30% of total recoveries and have been active in pursuing cases against
pharmaceutical companies. Where practices have been found to involve improper incentives to use products, the submission of false claims, or other
improper conduct, government investigations and assessments of penalties against manufacturers have resulted in substantial damages and fines. In
addition, to avoid exclusion from participation in federal healthcare programs, many manufacturers have been required to enter into Corporate Integrity
Agreements that prescribe allowable corporate conduct and impose reporting and disclosure obligations by the manufacturer to the government. Failure to
satisfy requirements under the FDCA can also result in a variety of administrative, civil and criminal penalties, including injunctions or consent decrees
that prescribe allowable corporate conduct.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit,
among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private
third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a
healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the 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.
Additionally, there has been a recent trend of increased federal and state regulation of payments and transfers of value provided to healthcare
professionals and/or entities. The ACA, among other things, imposed annual reporting requirements on certain manufacturers of drugs, devices, biologicals
and medical supplies for payments and other transfers of value provided by them, directly or indirectly, to physicians (defined to include doctors, dentists,
optometrists, podiatrists and chiropractors), certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified
registered nurse anesthetists, anesthesiologist assistants, and certified nurse midwives), and teaching hospitals, as well as ownership and investment
interests held by physicians and their family members. A manufacturer’s failure to submit timely, accurately and completely the required information for all
payments, transfers of value or ownership or investment interests may result in significant civil monetary penalties.
In addition, we are subject to analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply
to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private
insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and
the relevant compliance guidance promulgated by the governments or otherwise restrict payments that may be made to healthcare providers. For instance,
payments made to physicians in certain EU member states must be publicly disclosed. Moreover, agreements with physicians must often be subject of prior
notification and/or approval by the physician’s employer, their competent professional organization, and/or the competent authorities of the individual EU
member states, state and foreign 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 and foreign laws requiring the registration of pharmaceutical sales representatives.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve
substantial costs. It is possible that governmental authorities will conclude that our business practices do 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,
including, without limitation, damages, fines, imprisonment, exclusion from participation in government healthcare programs, such as Medicare and
Medicaid, and the curtailment or restructuring of our operations, which could have a material adverse effect on our business. If any of the physicians or
other healthcare providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, it may be subject to
criminal, civil or administrative sanctions, including exclusions from participation in government healthcare programs, which could also materially affect
our business.
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As a public company with securities registered under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are subject
to the U.S. Foreign Corrupt Practices Act (the “FCPA”). The FCPA and similar worldwide anti-bribery laws generally prohibit companies and their
intermediaries from making improper payments to officials for the purpose of obtaining or retaining business. While we continue to maintain and enhance
internal policies mandating compliance with these anti-bribery laws, we may operate in parts of the world that have experienced governmental corruption
to some degree and in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices or may require us to
interact with doctors and hospitals, some of which may be state controlled, in a manner that is different than in the United States. Our internal control
policies and procedures may not be sufficient to effectively protect us against reckless or criminal acts committed by our employees or agents. Violations of
these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of
operations and cash flows.
Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could
adversely affect our business, results of operations, and financial condition.
The global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws,
requirements and regulations governing the collection, use, disclosure, retention, and security of personal information, such as information that we may
collect in connection with clinical trials. Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and
we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on our business. This evolution may
create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information,
necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost of compliance with
these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply with federal, state or
foreign laws or regulations, our internal policies and procedures or our contracts governing our processing of personal information could result in negative
publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material
adverse effect on our operations, financial performance and business.
In the United States, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its
implementing regulations, or collectively HIPAA, imposes, among other things, certain standards relating to the privacy, security, transmission and breach
reporting of individually identifiable health information. While we do not believe that we are currently acting as a covered entity or business associate
under HIPAA and thus are not directly regulated under HIPAA, any person may be prosecuted under HIPAA’s criminal provisions either directly or under
aiding-and-abetting or conspiracy principles. Consequently, depending on the facts and circumstances, we could face substantial criminal penalties if we
knowingly receive individually identifiable health information from a HIPAA-covered healthcare provider or research institution that has not satisfied
HIPAA’s requirements for disclosure of individually identifiable health information. Certain states have also adopted comparable privacy and security laws
and regulations, some of which may be more stringent than HIPAA. Such laws and regulations will be subject to interpretation by various courts and other
governmental authorities, thus creating potentially complex compliance issues for us and our customers and strategic partners. For example, the California
Consumer Privacy Act (“CCPA”), which went into effect on January 1, 2020, among other things, creates new data privacy obligations for covered
companies and provides individual privacy rights to California residents, including the right to opt out of certain disclosures of their information. The
CCPA also creates a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data
breach. Although the law includes limited exceptions, including for “protected health information” maintained by a covered entity or business associate, it
may regulate or impact our processing of personal information depending on the context. Further, the California Privacy Rights Act (“CPRA”) recently
passed in California. The CPRA will impose additional data protection obligations on covered businesses, including additional consumer rights processes,
limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a new California data
protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The majority of
the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.
Similar laws have passed in Virginia, Connecticut, Utah and Colorado, and have been proposed in other states and at the federal level, reflecting a trend
toward more stringent privacy legislation in the United States. The enactment of such laws could have potentially conflicting requirements that would make
compliance challenging. In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws,
any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
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We are subject to data privacy and security laws in the EU as well as the EEA, including Regulation 2016/679, or the General Data Protection
Regulation (“GDPR”) with respect to our collection, control, processing, sharing, disclosure and other use of personal data located in the EEA. The GDPR
went into effect in May 2018, and companies that must comply with the GDPR face increased compliance obligations and risk, including more robust
regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of
the noncompliant company, whichever is greater. Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third
countries that have not been found to provide adequate protection to such personal data, including the United States; in July 2020, the Court of Justice of
the EU (“CJEU”) limited how organizations could lawfully transfer personal data from the EEA to the United States by invalidating the Privacy Shield for
purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (“SCCs”). In March 2022, the US and EU
announced a new regulatory regime intended to replace the invalidated regulations; however, this new EU-US Data Privacy Framework has not been
implemented beyond an executive order signed by President Biden on October 7, 2022 on Enhancing Safeguards for United States Signals Intelligence
Activities. The European Commission issued revised SCCs on June 4, 2021 to account for the decision of the CJEU and recommendations made by the
European Data Protection Board. The revised SCCs must be used for relevant new data transfers from September 27, 2021; existing standard contractual
clauses arrangements must be migrated to the revised clauses by December 27, 2022. The new SCCs apply only to the transfer of personal data outside of
the EEA and not the United Kingdom. The UK’s Information Commissioner’s Office has published new data transfer standard contracts for transfers from
the UK under the UK GDPR. This new documentation will be mandatory for relevant data transfers from September 21, 2022; existing standard
contractual clauses arrangements must be migrated to the new documentation by March 21, 2024; the United Kingdom’s Information Commissioner’s
Office launched a public consultation on its draft revised data transfers mechanisms in August 2021. There is some uncertainty around whether the revised
clauses can be used for all types of data transfers, particularly whether they can be relied on for data transfers to non-EEA entities subject to the GDPR. As
supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start
taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to
transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the
geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
Further, since January 2021, we may also be subject to the UK GDPR, which, together with the UK Data Protection Act 2018, retains the GDPR
in UK national law. The UK GDPR mirrors the fines under the GDPR, meaning the potential of parallel fines of up to the greater of £17.5 million or 4% of
global turnover. The European Commission has adopted an adequacy decision in favor of the UK, enabling data transfers from EU member states to the
UK without additional safeguards. However, the UK adequacy decision will automatically expire in June 2025 unless the European Commission re-
assesses and renews/extends that decision and remains under review by the Commission during this period. In September 2021, the UK government
launched a consultation on its proposals for wide-ranging reform of UK data protection laws following Brexit. There is a risk that any material changes
which are made to the UK data protection regime could result in the European Commission reviewing the UK adequacy decision, and the UK losing its
adequacy decision if the European Commission deems the UK to no longer provide adequate protection for personal data. The relationship between the UK
and the EU in relation to certain aspects of data protection law remains uncertain, and it is unclear how UK data protection laws and regulations will
develop in the medium to longer term.
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Our business and operations may suffer in the event of information technology system failures, cyberattacks or deficiencies in our cybersecurity.
We collect and maintain information in digital form that is necessary to conduct our business, and we are increasingly dependent on information
technology systems and infrastructure to operate our business. In the ordinary course of our business, we collect, store and transmit large amounts of
confidential information, including intellectual property, proprietary business information and personal information of customers and our employees and
contractors. It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We have
implemented physical and electronic security measures to protect our proprietary information, maintain standard operation procedures and conduct business
continuity and disaster recovery simulations, penetration testing and train our employees. However, we cannot provide assurance that our data protection
and security measures will not be breached or will provide adequate protection for our property.
Our information technology systems and those of our third-party service providers, strategic partners and other contractors or consultants are
vulnerable to attack and damage or interruption from computer viruses and malware (e.g. ransomware), malicious code, natural disasters, terrorism, war,
telecommunication and electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes, employee theft or misuse, human
error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons
inside our organization, or persons with access to systems inside our organization. We have also outsourced elements of our information technology
infrastructure, and as a result a number of third-party vendors may or could have access to our confidential information.
There is a risk that third parties may obtain and improperly utilize our proprietary information to our competitive disadvantage. Attacks upon
information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by
sophisticated and organized groups and individuals with a wide range of motives and expertise. We may also face increased cybersecurity risks due to our
reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals
to exploit vulnerabilities. Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often
are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may
also experience security breaches that may remain undetected for an extended period. Even if identified, we may be unable to adequately investigate or
remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to
remove or obfuscate forensic evidence. We may not be able to detect or prevent the unauthorized use of such information or take appropriate and timely
steps to enforce our intellectual property rights.
We and certain of our service providers are from time to time subject to cyberattacks and security incidents. While we do not believe that we have
experienced any significant system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it
could result in a material disruption of our development programs and our business operations, whether due to a loss, corruption or unauthorized disclosure
of our trade secrets, personal information or other proprietary or sensitive information or other similar disruptions. It could also expose us to risks,
including an inability to provide our services and fulfill contractual demands, and could cause management distraction and the obligation to devote
significant financial and other resources to mitigate such problems. If a security breach or other incident were to result in the unauthorized access to or
unauthorized use, disclosure, release or other processing of personal information, it may be necessary to notify individuals, governmental authorities,
supervisory bodies, the media and other parties pursuant to privacy and security laws. Any security compromise affecting us, our service providers,
strategic partners, other contractors, consultants, or our industry, whether real or perceived, could harm our reputation, erode confidence in the effectiveness
of our security measures and lead to regulatory scrutiny. To the extent that any disruption or security breach were to result in a loss of, or damage to, our
data or systems, or inappropriate disclosure of confidential or proprietary or personal information, we could incur liability, including litigation exposure,
penalties and fines, we could become the subject of regulatory action or investigation, our competitive position could be harmed and the further
development and commercialization of our products and services could be delayed.
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Laws and regulations affecting government contracts make it more costly and difficult for us to successfully conduct our business.
We must comply with numerous laws and regulations relating to the formation, administration and performance of government contracts, which
can make it more difficult for us to retain our rights under our BARDA contracts. These laws and regulations affect how we conduct business with
government agencies. Among the most significant government contracting regulations that affect our business are:
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the Federal Acquisition Regulations (“FAR”) and agency-specific regulations supplemental to the FAR, which comprehensively regulate the
procurement, formation, administration and performance of government contracts;
business ethics and public integrity obligations, which govern conflicts of interest and the hiring of former government employees, restrict the
granting of gratuities and funding of lobbying activities and include other requirements such as the Anti-Kickback Statute and Foreign
Corrupt Practices Act;
export and import control laws and regulations; and
laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the
exportation of certain products and technical data.
Any material changes in applicable laws and regulations could restrict our ability to maintain our BARDA contracts or obtain new contracts with
the U.S. federal government.
We could be subject to product liability lawsuits, which could result in costly and time-consuming litigation and significant liabilities.
The development of biopharmaceutical products involves an inherent risk of product liability claims and associated adverse publicity. Our
products may be found to be harmful or to contain harmful substances. This exposes us to substantial risk of litigation and liability or may force us to
discontinue production of certain products. Although we have product liability insurance covering up to $10 million for claims in countries where
NexoBrid is sold through our sales force or through our distributors, the coverage may not insure us against all claims that may be asserted against us.
Product liability insurance is costly and often limited in scope. There can be no assurance that we will be able to obtain or maintain insurance on reasonable
terms or to otherwise protect ourselves against potential product liability claims that could impede or prevent commercialization of NexoBrid, EscharEx or
our pipeline product candidates. Furthermore, a product liability claim could damage our reputation, whether or not such claims are covered by insurance
or are with or without merit. A product liability claim against us or the withdrawal of a product from the market could have a material adverse effect on our
business or financial condition. Furthermore, product liability lawsuits, regardless of their success, would likely be time-consuming and expensive to
resolve and would divert management’s time and attention, which could seriously harm our business.
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We are subject to extensive environmental, health and safety, and other laws and regulations.
Our business involves the controlled use of chemicals. The risk of accidental contamination or injury from these materials cannot be eliminated. If
an accident, spill or release of any such chemicals or substances occurs, we could be held liable for resulting damages, including for investigation,
remediation and monitoring of the contamination, including natural resource damages, the costs of which could be substantial. We are also subject to
numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures. Although we maintain
workers’ compensation insurance to cover the costs and expenses that may be incurred because of injuries to our employees resulting from the use of these
materials, this insurance may not provide adequate coverage against potential liabilities. Additional or more stringent laws and regulations affecting our
operations may be adopted in the future. We may incur substantial capital costs and operating expenses and may be required to obtain consents to comply
with any of these or certain other laws or regulations and the terms and conditions of any permits required pursuant to such laws and regulations, including
costs to install new or updated pollution control equipment, modify our operations or perform other corrective actions at our respective facilities. In
addition, fines and penalties may be imposed for noncompliance with environmental, health and safety and other laws and regulations or for the failure to
have, or comply with the terms and conditions of, required environmental or other permits or consents.
The enactment of legislation implementing changes in tax legislation or policies in different geographic jurisdictions could materially impact our
business, financial condition and results of operations.
We conduct business globally and file income tax returns in multiple jurisdictions. Our consolidated effective income tax rate could be materially
adversely affected by several factors, including: changing tax laws, regulations and treaties, or the interpretation thereof (such as the Inflation Reduction
Act of 2022 signed into law in the United States on August 16, 2022 which, among other changes, introduced a 15% corporate minimum tax on certain
corporations and a 1% excise tax on certain stock repurchases by United States corporations, which the U.S. Treasury indicated may also apply to certain
stock redemptions by a foreign corporation funded by certain United States affiliates); tax policy initiatives and reforms under consideration (such as those
related to the Organization for Economic Co-Operation and Development’s (“OECD”) Base Erosion and Profit Shifting, or BEPS, project, the European
Commission’s state aid investigations and other initiatives); the practices of tax authorities in jurisdictions in which we operate; the resolution of issues
arising from tax audits or examinations and any related interest or penalties. Such changes may include (but are not limited to) the taxation of operating
income, investment income, dividends received or (in the specific context of withholding tax) dividends, royalties and interest paid.
We are unable to predict what tax reforms may be proposed or enacted in the future or what effect such changes would have on our business, but
such changes, to the extent they are brought into tax legislation, regulations, policies or practices in jurisdictions in which we operate, could increase the
estimated tax liability that we have expensed to date and paid or accrued on our consolidated financial statements, and otherwise affect our future results of
operations, cash flows in a particular period and overall or effective tax rates in the future in countries where we have operations, reduce post-tax returns to
our shareholders and increase the complexity, burden and cost of tax compliance.
Risks Related to Our Intellectual Property Rights
Our success depends in part on our ability to obtain and maintain protection for the intellectual property relating to, or incorporated into, our
technology and products.
Our commercial success depends in part on our ability to obtain and maintain patent protection and trade secret protection for our intellectual
property and proprietary technologies, our products and their uses, as well as our ability to operate without infringing upon the proprietary rights of others.
We rely on a combination of patents, trademark and trade secret laws, non-disclosure and confidentiality agreements, licenses, assignments of invention
agreements and other restrictions on disclosure and use to protect our intellectual property rights.
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As of December 31, 2022, we had been granted a total of 85 patents and have 11 pending patent applications. The family of patents that covers
NexoBrid specifically includes 35 granted patents worldwide. EscharEx is covered in 13 patents and 6 national phase applications. However, there can be
no assurance that patent applications relating to our products, processes or technologies will result in patents being issued, that any patents that have been
issued will be adequate to protect our intellectual property or that we will enjoy patent protection for any significant period of time. Additionally, any issued
patents may be challenged by third parties, and patents that we hold may be found by a judicial authority to be invalid or unenforceable. Other parties may
independently develop similar or competing technology or design around any patents that may be issued to or held by us. Our current patents will expire or
they may otherwise cease to provide meaningful competitive advantage, and we may be unable to adequately develop new technologies and obtain future
patent protection to preserve our competitive advantage or avoid adverse effects on our business.
Our patent protection may be limited, subjecting us to challenges by competitors.
At present, we consider our patents relating to our enzymatic platform technology, which underlies NexoBrid, EscharEx and our current pipeline
product candidates, to be material to the operation of our business as a whole. Our patents which cover NexoBrid claim specific mixtures of proteolytic
enzymes, methods of producing such mixtures and methods of treatment using such mixtures. Although the protection achieved is significant for NexoBrid,
EscharEx and our pipeline product candidates, when looking at our patents’ ability to block competition, the protection offered by our patents may be, to
some extent, more limited than the protection provided by patents which claim chemical structures that were previously unknown. If our patents covering
NexoBrid in various jurisdictions were subject to a successful challenge or if a competitor were able to successfully design around them, our business and
competitive advantage could be significantly affected.
In addition, the patent landscape in the biotechnology field is highly uncertain and involves complex legal, factual and scientific questions, and
changes in either patent laws or in the interpretation of patent laws in the United States and other countries may diminish the value and strength of our
intellectual property or narrow the scope of our patent protection. In addition, we may fail to apply for or be unable to obtain patents necessary to protect
our technology or products or enforce our patents due to lack of information about the exact use of our process by third parties. Even if patents are issued to
us, they may be challenged, narrowed, invalidated, held to be unenforceable or circumvented, which could limit our ability to prevent competitors from
using similar technology or marketing similar products, or limit the length of time our technologies and products have patent protection. In addition, we are
a party to license agreement with Mark Klein, that imposes various obligations upon us as a licensee, including the obligation to make milestone and
royalty payments contingent on the sales of NexoBrid. If we fail to comply with these obligations, the licensor may terminate the license, in which event
we might not be able to market any product that is covered by the licensed intellectual property, including NexoBrid.
In order to preserve and enforce our patents and other intellectual property rights, we may need to assert claims or file lawsuits against third
parties. Such lawsuits could entail significant costs to us and divert our management’s attention from developing and commercializing our products.
Lawsuits may ultimately be unsuccessful and may also subject us to counterclaims and cause our intellectual property rights to be challenged, narrowed,
invalidated or held to be unenforceable.
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The timing of a patent application, grant, and expiration may put us at a disadvantage compared to our competitors.
Our material patents also may not afford us protection against competitors with similar technology. Because patent applications in the United
States and many other jurisdictions are typically not published until 18 months after their filing, if at all, and because publications of discoveries in
scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions
claimed in our or their issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in such
patent applications. As a result, the patents we own and license may be invalidated in the future, and the patent applications we own and license may not be
granted. For example, if a third party has also filed a patent application covering an invention similar to one covered in one of our patent applications, we
may be required to participate in an adversarial proceeding known as an “interference proceeding,” declared by the U.S. Patent and Trademark Office or its
foreign counterparts, to determine priority of invention. The costs of these proceedings could be substantial and our efforts in them could be unsuccessful,
resulting in a loss of our anticipated patent position. In addition, if a third party prevails in such a proceeding and obtains an issued patent, we may be
prevented from practicing technology or marketing products covered by that patent. Additionally, patents and patent applications owned by third parties
may prevent us from pursuing certain opportunities such as entering into specific markets or developing certain products. Finally, we may choose to enter
into markets where certain competitors have patents or patent protection over technology that may impede our ability to compete effectively.
We may not be able to protect our intellectual property rights in all jurisdictions.
Effective protection of our intellectual property rights may be unavailable or limited in some countries, and even if available, we may fail to
pursue or obtain necessary intellectual property protection in such countries, because filing, prosecuting, maintaining and defending patents on product
candidates in all countries throughout the world would be prohibitively expensive. In addition, the legal systems of certain countries do not favor the
aggressive enforcement of patents and other intellectual property rights, and the laws of certain foreign countries do not protect our rights to the same
extent as the laws of the United States. As a result, our intellectual property may not provide us with sufficient rights to exclude others from
commercializing products similar or identical to ours. Competitors may use our technologies in jurisdictions where we have not obtained patent protection
to develop their own products, and we may be unable to prevent such competitors from importing such infringing products into territories where we have
patent protection but where enforcement is not as strong as in the United States or into jurisdictions in which we do not have patent protection. These
products may compete with our product candidates and our patents and other intellectual property rights may not be effective or sufficient to prevent them
from competing in those jurisdictions.
Our currently issued NexoBrid patents are nominally due to expire at various dates between 2025 and 2029. However, because of the extensive
time required for development, testing and regulatory review of a potential product, and although such delays may entitle us to patent term extensions, it is
possible that, before NexoBrid can be commercialized in additional international jurisdictions and/or before any of our future products can be
commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantages of
the patent. The international PCT patent applications relating to EscharEx were filed on January 30, 2017. National phase applications corresponding to
these PCT applications were filed in several jurisdictions and the expiration date of the 13 patents that issued and those that will be issued is January 30,
2037, absent patent-term adjustment and/or extensions. Our pending and future patent applications may not lead to the issuance of patents or, if issued, the
patents may not provide us with any competitive advantage. We also cannot guarantee that:
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any of our present or future patents or patent claims or other intellectual property rights will not lapse or be invalidated, circumvented,
challenged or abandoned;
our intellectual property rights will provide competitive advantages or prevent competitors from making or selling competing products;
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our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by
our agreements with third parties;
any of our pending or future patent applications will be issued or have the coverage originally sought;
our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak; or
we will not lose the ability to assert our intellectual property rights against, or to license our technology to, others and collect royalties or
other payments.
We may be unable to identify all past or future unauthorized uses of our intellectual property.
Additionally, unauthorized use of our intellectual property may have occurred or may occur in the future. Any failure to identify unauthorized use
of, and otherwise adequately protect, our intellectual property could adversely affect our business, including by reducing the demand for our products. Any
reported adverse events involving counterfeit products that purport to be our products could harm our reputation and the sale of our products. Moreover, if
we are required to commence litigation related to unauthorized use, whether as a plaintiff or defendant, such litigation would be time-consuming, force us
to incur significant costs and divert our attention and the efforts of our management and other employees, which could, in turn, result in lower revenue and
higher expenses.
In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes and know-how.
We rely on proprietary information, such as trade secrets, know-how and confidential information, to protect intellectual property that may not be
patentable or that we believe is best protected by means that do not require public disclosure. We generally seek to protect this proprietary information by
entering into confidentiality agreements, or consulting, services or employment agreements that contain non-disclosure and non-use provisions with our
employees, consultants, contractors, scientific advisors and third parties. However, we may fail to enter into the necessary agreements, and even if entered
into, these agreements may be breached or otherwise fail to prevent disclosure, third-party infringement or misappropriation of our proprietary information,
may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure or use of proprietary information. We have
limited control over the protection of trade secrets used by our suppliers and service providers and could lose future trade secret protection if any
unauthorized disclosure of such information occurs. In addition, our proprietary information may otherwise become known or be independently developed
by our competitors or other third parties. To the extent that our employees, consultants, contractors, scientific advisors and other third parties use
intellectual property owned by others in their work for us, disputes may arise as to the related rights or resulting know-how and inventions. Costly and
time-consuming litigation could be necessary to enforce and determine the scope of our and relevant third parties’ proprietary rights and failure to obtain or
maintain protection for our proprietary information could adversely affect our competitive business position. In addition, if a third party is able to establish
that we are using their proprietary information without their permission, we may be required to obtain a license to such information or, if such a license is
not available, re-design our products to avoid any such unauthorized use or temporarily delay or permanently stop manufacturing or sales of the affected
products. Furthermore, laws regarding trade secret rights in certain markets where we operate may afford little or no protection to our trade secrets.
Some of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including potential
competitors. While we take steps to prevent our employees from using the proprietary information or know-how of others in their work for us, we may be
subject to claims that we or these employees have inadvertently or otherwise used or disclosed intellectual property, trade secrets or other proprietary
information of any such employee’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 fail to defend any such claims successfully, in
addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.
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If we are unable to protect our trademarks from infringement, our business prospects may be harmed.
We own trademarks that identify “MediWound,” “NexoBrid” and “EscharEx,” among others, and have registered these trademarks in certain key
markets. Although we take steps to monitor the possible infringement or misuse of our trademarks, it is possible that third parties may infringe, dilute or
otherwise violate our trademark rights. Any unauthorized use of our 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.
We may be subject to claims that we infringe, misappropriate or otherwise violate the intellectual property rights of third parties.
Our development, marketing or sale of NexoBrid, EscharEx or our pipeline product candidates may infringe or be accused of infringing one or
more claims of an issued patent to which we do not hold a license or other rights. We may also be subject to claims that we are infringing, misappropriating
or otherwise violating other intellectual property rights, such as trademarks, copyrights or trade secrets. Third parties could therefore bring claims against
us or our strategic partners that would cause us to incur substantial expenses, including litigation costs or costs associated with settlement, and, if successful
against us, could cause us to pay substantial damages. Further, if such a claim were brought against us, we could be forced to temporarily delay or
permanently stop manufacturing or sales of NexoBrid, EscharEx or our pipeline product candidates that are the subject of the suit.
If we are found to be infringing, misappropriating or otherwise violating the patent or other intellectual property rights of a third party, or in order
to avoid or settle claims, we may choose or be required to seek a license from a third party and be required to pay license fees or royalties or both, which
could be substantial. These licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be
nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from
commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened claims, we or our strategic
partners are unable to enter into licenses on acceptable terms.
There have been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and
biotechnology industries. In addition, to the extent that we gain greater visibility and market exposure as a public company in the United States, we face a
greater risk of being involved in such litigation. In addition to infringement claims against us, we may become a party to other patent litigation and other
proceedings, including interference, opposition, re-examination and similar proceedings before the U.S. Patent and Trademark Office and its foreign
counterparts, regarding intellectual property rights with respect to NexoBrid, EscharEx or our pipeline product candidates. The cost to us of any patent
litigation or other proceeding, even if resolved in our favor, could be substantial. A negative outcome could result in liability for monetary damages,
including treble damages and attorneys’ fees if, for example, we are found to have willfully infringed a patent. A finding of infringement could prevent us
from developing, marketing or selling a product or force us to cease some or all of our business operations. Some of our competitors may be able to sustain
the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting
from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the
marketplace, and patent litigation and other proceedings may also absorb significant management time.
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Under applicable employment laws, we may not be able to enforce covenants not to compete.
We generally enter into non-competition agreements with our employees. These agreements prohibit our employees, if they cease working for us,
from competing directly with us or working for our competitors or clients for a limited period. We may be unable to enforce these agreements under the
laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefitting from the expertise our
former employees or consultants developed while working for us. For example, Israeli labor 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 protection of a company’s trade secrets or other intellectual
property.
We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation
and adversely affect our business.
A significant portion of our intellectual property has been developed for us by our employees in the course of their employment. Under the Israeli
Patent Law, 5727-1967, or the Patent Law, inventions conceived by an employee in the course and as a result of or arising from his or her employment with
a company are regarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the
employee proprietary rights. The Patent Law also provides under Section 134 that if there is no agreement between an employer and an employee as to
whether the employee is entitled to consideration for service inventions, and to what extent and under which conditions, the Israeli Compensation and
Royalties Committee, or the Committee, a body constituted under the Patent Law, shall determine these issues. Section 135 of the Patent law provides
criteria for assisting the Committee in making its decisions. According to case law handed down by the Committee, an employee’s right to receive
consideration for service inventions is a personal right and is entirely separate from the proprietary rights in such invention. Therefore, this right must be
explicitly waived by the employee. A decision handed down in May 2014 by the Committee clarifies that the right to receive consideration under Section
134 can be waived and that such waiver can be made orally, in writing or by behavior like any other contract. The Committee will examine, on a case by
case basis, the general contractual framework between the parties, using interpretation rules of the general Israeli contract laws. Further, the Committee has
not yet determined one specific formula for calculating this remuneration, nor the criteria or circumstances under which an employee’s waiver of his right
to remuneration will be disregarded. Similarly, it remains unclear whether waivers by employees in their employment agreements of the alleged right to
receive consideration for service inventions should be declared as void being a depriving provision in a standard contract. We generally enter into
assignment-of-invention agreements with our employees pursuant to which such individuals assign to us all rights to any inventions created in the scope of
their employment or engagement with us. Although our employees have agreed to assign to us service invention rights and have specifically waived their
right to receive any special remuneration for such service inventions beyond their regular salary and benefits, we may face claims demanding remuneration
in consideration for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current
or former employees or be forced to litigate such claims, which could negatively affect our business.
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Risks Related to an Investment in Our Ordinary Shares
The market price of our ordinary shares may be subject to fluctuation and you could lose all or part of your investment.
Our ordinary shares were first offered publicly in our IPO in March 2014 at a price of $98.00 per share, and our ordinary shares have subsequently
traded as high as $127.12 per share and as low as $8.47 per share through December 31, 2022. The market price of our ordinary shares on the Nasdaq
Global Market 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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actual or anticipated variations in our and our competitors’ results of operations and financial condition;
market acceptance of our products;
general economic and market conditions and other factors, including factors unrelated to our operating performance;
the mix of products that we sell and related services that we provide;
changes in earnings estimates or recommendations by securities analysts, if our ordinary shares continue to be covered by analysts;
publication of the results of preclinical or clinical trials for NexoBrid, EscharEx or any of our pipeline product candidates;
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;
development of technological innovations or new competitive products by others;
announcements of technological innovations or new products by us;
regulatory developments and the decisions of regulatory authorities as to the marketing of our current products or the approval or rejection of
new or modified products;
developments concerning intellectual property rights, including our involvement in litigation;
changes in our expenditures to develop, acquire or license new products, technologies or businesses;
changes in our expenditures to promote our products;
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changes in the structure of healthcare payment systems;
our sale or proposed sale, or the sale by our significant shareholders, of our ordinary shares or other securities in the future;
changes in key personnel;
success or failure of our research and development projects or those of our competitors; and
the trading volume of our ordinary shares.
These factors and any corresponding price fluctuations may materially and adversely affect the market price of our ordinary shares and result in
substantial losses being incurred by our investors. In the past, following periods of market volatility, public company shareholders have often instituted
securities class action litigation. If we were involved in securities litigation, it could impose a substantial cost upon us and divert the resources and attention
of our management from our business.
Future sales of our ordinary shares could reduce the market price of our ordinary shares.
If we or our existing shareholders, our directors or their affiliates or certain of our executive officers, sell a substantial number of our ordinary
shares in the public market, the market price of our ordinary shares could decrease significantly. The perception in the public market that we or 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.
We have made significant offerings of our ordinary shares in the past and may do so again in the future. For example, on April 23, 2019, the SEC
declared effective our shelf registration statement on Form F-3, which registered the resale of 1,605,732 shares that are subject to registration rights. All
shares sold pursuant to an offering covered by that registration statement (or a subsequent shelf registration that we may file to replace it after it expires)
will be freely transferable. See “ITEM 7.B. Related Party Transactions—Registration Rights Agreement.” In February 2020, we entered into an Open
Market Sales Agreement with Jefferies LLC to issue and sell our ordinary shares with gross sales proceeds of up to $15 million, from time to time, through
an at the market offering under which Jefferies LLC will act as our sales agent. As of the date hereof, we have not issued or sold any ordinary shares
pursuant to the Open Market Sales Agreement. Sales by us or our shareholders of a substantial number of ordinary shares in the public market could cause
the market price of our ordinary shares to decline or could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our
equity securities.
In addition, as of March 15, 2023, 938,518 ordinary shares were subject to outstanding option and RSU awards granted to employees and office
holders under our share incentive plans, including 367,967 ordinary shares issuable under currently exercisable share options and RSUs. On April 28, 2014,
we filed a registration statement on Form S-8 registering the issuance of up to 433,249 ordinary shares issuable under our share incentive plans, which
amount included 137,296 ordinary shares issuable upon the exercise of option awards previously granted under our 2003 Israeli Share Option Plan and
211,721 ordinary shares issuable under our 2014 Equity Incentive Plan. On January 1, 2016, 2018, 2019, 2020, 2021 and 2022, the shares available for
issuance under our 2014 Equity Incentive Plan automatically increased by 61,573, 77,280, 77,654, 77,723, 77,820 and 357,143 shares, respectively. As of
March 15, 2023, 6,523 shares remained available for future issuance under our share incentive plans. Shares included in such registration statement may be
freely sold in the public market upon issuance, except for shares held by affiliates who have certain restrictions on their ability to sell.
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As a foreign private issuer, we are permitted to, and actually do, follow certain home country corporate governance practices instead of otherwise
applicable SEC and Nasdaq requirements.
As a foreign private issuer, we are permitted to, and do, follow certain home country corporate governance practices instead of those otherwise
required under the Nasdaq Stock Market listing rules for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to the
(i) quorum requirement for shareholder meetings (ii) independence requirement for the board of directors and (iii) shareholder approval for certain
transactions other than a public offering involving issuances of a 20% or more interest in the company. See “ITEM 16G. Corporate Governance.” We may
in the future elect to follow home country practices in Israel with regard to other matters as well, such as the formation and composition of the nominating
and corporate governance committee, separate executive sessions of independent directors and the requirement to obtain shareholder approval for certain
dilutive events (such as for the establishment or amendment of certain equity-based compensation plans, issuances that will result in a change of control of
the company, and certain acquisitions of the stock or assets of another company). Following our home country governance practices as opposed to the
requirements that would otherwise apply to a U.S. company listed on the Nasdaq Global Market may provide less protection to you than what is accorded
to investors under the Nasdaq Stock Market listing rules applicable to domestic U.S. issuers. See “ITEM 16G. Corporate Governance.”
As a foreign private issuer, we are not subject to the provisions of Regulation FD or U.S. proxy rules and are exempt from filing certain Exchange Act
reports.
As a foreign private issuer, we are exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy
statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in
Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual and current reports and financial statements with the
SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act, and we are generally exempt from
filing quarterly reports with the SEC under the Exchange Act. Moreover, we are not required to comply with Regulation FD, which prohibits the selective
disclosure of material nonpublic information to, among others, broker-dealers and holders of a company’s securities under circumstances in which it is
reasonably foreseeable that the holder will trade in the company’s securities on the basis of the information. Even though we intend to comply voluntarily
with Regulation FD, these exemptions and leniencies will reduce the frequency and scope of information and protections to which you are entitled as an
investor.
For so long as we qualify as a foreign private issuer, we are not required to comply with the proxy rules applicable to U.S. domestic companies,
including the requirement applicable to emerging growth companies to disclose the compensation of our Chief Executive Officer and other two most highly
compensated executive officers on an individual, rather than an aggregate, basis. Nevertheless, the regulations promulgated under the Israeli Companies
Law, 5759-1999 (the “Israeli Companies Law”) require us to disclose the annual compensation of our five most highly compensated officers on an
individual, rather than on an aggregate, basis. See “ITEM 6.B. Compensation.” Under the Companies Law regulations, this disclosure is required to be
included in the proxy statement for our annual meeting of shareholders each year, which we furnish to the SEC under cover of a Report of Foreign Private
Issuer on Form 6-K. Because of that disclosure requirement under Israeli law, we are also including such information in this annual report, pursuant to the
disclosure requirements of Form 20-F.
We would lose our foreign private issuer status if a majority of our outstanding ordinary shares are held of record by U.S. shareholders and we fail
to meet additional requirements necessary to avoid loss of foreign private issuer status. Although we have elected to comply with certain U.S. regulatory
provisions, our loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to us under U.S. securities
laws as a U.S. domestic issuer may be significantly higher. If we lose our foreign private issuer status, we will be required to file periodic reports and
registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private
issuer. We would also be required to follow U.S. proxy disclosure requirements, including the requirement to disclose more detailed information about the
compensation of our senior executive officers on an individual basis. We may also be required to modify certain of our policies to comply with accepted
governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, we would lose
our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.
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We have never paid cash dividends on our share capital, and we do not anticipate paying any cash dividends in the foreseeable future.
We have never declared or paid cash dividends on our share capital, nor do we anticipate paying any cash dividends on our share capital in the
foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. As a
result, capital appreciation, if any, of our ordinary shares will be an investor’s sole source of gain for the foreseeable future. In addition, Israeli law limits
our ability to declare and pay dividends, and may subject our dividends to Israeli withholding taxes. See “ITEM 8.A. Consolidated Statements and Other
Financial Information—Dividend Policy,” “ITEM 10.B. Articles of Association—Dividend and liquidation rights” and “ITEM 10.E. Taxation—Israeli Tax
Considerations and Government Programs.”
If we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, or if our internal control over financial reporting or our
disclosure controls and procedures are not effective, investors may lose confidence in the accuracy and the completeness of the reports we furnish or
file with the SEC, the reliability of our financial statements may be questioned and our share price may suffer.
We are required to comply with the internal control, evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act of 2002
(the “Sarbanes-Oxley Act”). Pursuant to Section 404(a) of the Sarbanes-Oxley Act, we are required to furnish a report by management on the effectiveness
of our internal control over financial reporting. If we become an accelerated filer or a large accelerated filer, we will be required to comply with the auditor
attestation requirements of Section 404(b) of the Sarbanes Oxley Act.
To maintain the effectiveness of our disclosure controls and procedures and our internal control over financial reporting, we expect that we will
need to continue to enhance existing, and implement new, financial reporting and management systems, procedures and controls to manage our business
effectively and support our growth in the future. The process of evaluating our internal control over financial reporting requires an investment of substantial
time and resources, including by our Chief Financial Officer and other members of our senior management. The determination and any remedial actions
required could divert internal resources and take a significant amount of time and effort to complete and could result in us incurring additional costs that we
did not anticipate, including the hiring of outside consultants.
Irrespective of compliance with Section 404, any failure of our internal controls could have a material adverse effect on our stated results of
operations and harm our reputation. As a result, we may experience higher than anticipated operating expenses, as well as higher independent auditor fees
during and after the implementation of these changes. If we are unable to implement any of the required changes to our internal control over financial
reporting effectively or efficiently, it could adversely affect our operations, financial reporting or results of operations. Further, if our internal controls over
financial reporting are not effective, the reliability of our financial statements may be questioned and our share price may suffer.
35
Our U.S. shareholders may suffer adverse tax consequences if we are characterized as a passive foreign investment company.
Generally, if for any taxable year 75% or more of our gross income is passive income, or at least 50% of the average quarterly value of our assets
(which may be determined in part by the market value of our ordinary shares, which is subject to change) are held for the production of, or produce, passive
income, we would be characterized as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. Based on our current
estimates of our gross income and gross assets and the nature of our business, we do not believe we were classified as a PFIC for the taxable year ended
December 31, 2022. There can be no assurance that we will not be considered a PFIC for the current or any future taxable year. PFIC status is determined
as of the end of the taxable year and depends on a number of factors, including the value of a corporation’s assets and the amount and type of its gross
income. Furthermore, the value of our gross assets is likely to be determined in large part by reference to our market capitalization. As such, a decline in
the value of our ordinary shares or an increase in the value of our passive assets (including cash and short term investments), for example, may result in our
becoming a PFIC. If we are characterized as a PFIC, our U.S. shareholders may suffer adverse tax consequences, including having gains realized on the
sale of our ordinary shares treated as ordinary income, rather than as capital gain, the loss of the preferential rate that may be applicable to dividends
received on our ordinary shares by individuals who are U.S. Holders (as defined in “ITEM 10.E. Taxation—United States Federal Income Taxation”), and
having interest charges apply to distributions by us and the proceeds of share sales. Certain elections exist that may alleviate some of the adverse
consequences of PFIC status and would result in an alternative treatment (such as mark-to-market treatment) of our ordinary shares. However, we do not
intend to provide the information necessary for U.S. holders to make qualified electing fund elections if we are classified as a PFIC. See “ITEM 10.E.
Taxation—United States Federal Income Taxation—Passive Foreign Investment Company Considerations.”
If a U.S. person is treated as owning at least 10% of our ordinary shares, such holder may be subject to adverse U.S. federal income tax
consequences.
If a U.S. person is treated as owning (directly, indirectly, or constructively) at least 10% of the value or voting power of our ordinary shares, such
person may be treated as a “U.S. shareholder” with respect to each “controlled foreign corporation” in our group (if any). Since our group includes one or
more U.S. subsidiaries, certain of our non-U.S. subsidiaries will be treated as controlled foreign corporations (regardless of whether or not we are treated as
a controlled foreign corporation). A U.S. shareholder of a controlled foreign corporation may be required to report annually and include in its U.S. taxable
income its pro rata share of “Subpart F income,” “global intangible low-taxed income,” and investments in U.S. property by controlled foreign
corporations, regardless of whether the Company makes any distributions. An individual that is a U.S. shareholder with respect to a controlled foreign
corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a U.S. shareholder that is a U.S.
corporation. Failure to comply with these reporting obligations may subject a U.S. shareholder to significant monetary penalties and may prevent the
statute of limitations with respect to such U.S. shareholder’s U.S. federal income tax return for the year for which reporting was due from starting. We
cannot provide any assurances that we will assist holders of ordinary shares in determining whether any of our non-U.S. subsidiaries is treated as a
controlled foreign corporation or whether any holder of ordinary shares is treated as a U.S. shareholder with respect to any such controlled foreign
corporation or furnish to any U.S. shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations.
The United States Internal Revenue Service has provided limited guidance on situations in which investors may rely on publicly available information to
comply with their reporting and taxpaying obligations with respect to foreign-controlled controlled foreign corporations. A U.S. holder should consult its
tax advisors regarding the potential application of these rules to an investment in the ordinary shares.
36
Risks Primarily Related to our Operations in Israel
Our headquarters, manufacturing and other significant operations are located in Israel and, therefore, our results may be adversely affected by
political, economic or military instability in Israel and by conflicts between Israel and neighboring terrorist groups or countries.
Our headquarters, manufacturing and research and development facilities are located in Yavne, Israel. In addition, the majority of our key
employees, officers and directors are residents of Israel. In recent years, there has been political instability in Israel, including four national elections within
the last two-plus years. Over the past decade, there have been multiple hostilities between Israel and Hamas (an Islamist militia and political group in the
Gaza strip) and in the summer of 2006, there was an armed conflict between Israel and Hezbollah (an Islamist militia and political group in Lebanon). Even
during times without formal conflict, Hamas and other terrorist groups in the Gaza strip have shot rockets into southern Israel, which have sometimes
damaged civilian and commercial property.
In recent years, Iran, which has threatened to attack Israel and is widely believed to be developing nuclear weapons, has been expanding its
influence in Syria and in Lebanon through Hezbollah and other proxy terrorist groups. Although Iran’s activities have not directly affected the political and
economic conditions in Israel, Iran’s purpose is widely believed to take control of the Middle East, including Israel. Israel has responded with attacks on
Iranian military operations in Syria. These events and any future political, economic and military instability have the potential to interrupt our operations by
damaging our facilities (to the extent rocket attacks against Israel reach the region of our headquarters) or preventing our employees, officers and directors
from working. Such interruptions or stoppages may result in a material adverse effect on our business, operations and results of operations.
The Israeli government is currently pursuing extensive changes to Israel’s judicial system. In response to the foregoing developments, individuals,
organizations and institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business
environment in Israel including due to reluctance of foreign investors to invest or transact business in Israel as well as to increased currency fluctuations,
downgrades in credit rating, increased interest rates, increased volatility in security markets, and other changes in macroeconomic conditions. To the extent
that any of these negative developments do occur, they may have an adverse effect on our business, our results of operations and our ability to raise
additional funds, if deemed necessary by our management and board of directors.
Our commercial insurance may leave us subject to a risk of a loss if a terrorist attack or act of war occurs.
Our commercial insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East.
The reinstatement value of direct damages that are caused by terrorist attacks or acts of war that the Israeli government is currently committed to covering
might not be maintained or, if maintained, might not be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could
have a material adverse effect on our business. Any armed conflict involving Israel could adversely affect our operations and results of operations.
Our operations may be disrupted by the obligation of our employees to perform military service.
As of December 31, 2022, we had 73 employees based in Israel, certain of whom may be called upon to perform up to 54 days (and in the case of
non-officer commanders or officers, up to 70 or 84 days, respectively) of military reserve duty in each three-year period until they reach the age of 40 (and
in some cases, depending on their specific military profession, up to 45 or even 49 years of age). In certain emergency circumstances, these employees may
be called to immediate and unlimited active duty. Our operations could be disrupted by the absence of a significant number of employees related to military
service, which could materially adversely affect our business and results of operations.
37
Boycotts and various Middle Eastern business restrictions in the region may adversely impact our ability to operate sell our products.
Several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose
restrictions on doing business with Israel and Israeli companies whether as a result of hostilities in the region or otherwise. In addition, there have been
increased efforts by activists to cause companies and consumers to boycott Israeli goods based on Israeli government policies. Recently, Israel has signed
bilateral peace agreements with several Middle Eastern (including Arab) countries, forging new economic ties with them. Nevertheless, if the actions by
boycott activists become more widespread and successful, that may adversely impact our ability to sell our products.
Provisions of Israeli law and our articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, us, even when the
terms of such a transaction are favorable to us and our shareholders.
Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for
transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For
example, a tender offer for all of a company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the
holders of at least 95% of the issued share capital. Completion of the tender offer also requires approval of a majority of the offerees that do not have a
personal interest in the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least 98% of the company’s outstanding
shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six months following the
completion of the tender offer, petition an Israeli court to alter the consideration for the acquisition, unless the acquirer stipulated in its tender offer that a
shareholder that accepts the offer may not seek such appraisal rights. See “ITEM 10.B. Articles of Association—Acquisitions Under Israeli law” for
additional information.
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 but makes the deferral contingent
on the fulfillment of a number of conditions, including, in some cases, 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 restrictions. Moreover, with respect to certain share swap transactions, the tax
deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred.
We have received Israeli government grants for certain research and development activities. The terms of those grants require us to satisfy specified
conditions and to pay penalties in addition to repayment of the grants upon certain events.
Our research and development efforts have been financed in part through grants from the Israeli Innovation Authority (“IIA”), formerly operating
as the Israeli Office of the Chief Scientist (the “OCS”). The total gross amount of grants actually received by us from the IIA, including accrued LIBOR
interest (or such other interest rate that the IIA may set in the future) and net of royalties actually paid as of December 31, 2022, totaled approximately
$13.6 million and the amortized cost (using the interest method) of the liability as of that date totaled approximately $7.6 million. As of December 31,
2022, we had accrued and paid net royalties to the IIA in an amount of $1.6 million. As of December 31, 2018 we determined that we will no longer be
supported by the IIA. As a result, we did not submit applications for IIA grants in 2020, 2021 or 2022 and we do not plan to submit in 2023.
The IIA grants that we have received are repayable by payment of royalties from the sale of products developed as part of the programs for which
grants were received. Our obligation to pay these royalties is contingent on our actual sale of such products and services. In the absence of such sales, no
payment of such royalties is required.
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Even following full repayment of any IIA grants, we must nevertheless continue to comply with the requirements of the Encouragement of
Research, Development and Technological Innovation in the Industry Law, 5744-1984 (formerly known as the Law for the Encouragement of Industrial
Research and Development, 5744-1984), and related regulations (collectively, the “Innovation Law”). When a company develops know-how, technology or
products using IIA grants, the terms of these grants and the Innovation Law restrict the transfer outside of Israel of such know-how, and the manufacturing
or manufacturing rights of such products, technologies or know-how, without the prior approval of the IIA. Therefore, if aspects of our technologies are
deemed to have been developed with IIA funding, the discretionary approval of an IIA committee would be required for any transfer to third parties outside
of Israel of know-how or manufacturing or manufacturing rights related to those aspects of such technologies. We may not receive those approvals.
Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer technology or development out of Israel.
The transfer of IIA-supported technology or know-how or manufacturing or manufacturing rights related to aspects of such technologies outside
of Israel may involve the payment of significant penalties and other amounts, depending upon the value of the transferred technology or know-how, the
amount of IIA support, the time of completion of the IIA-supported research project and other factors. If our products are manufactured outside of Israel,
assuming we receive prior approval from the IIA for the foreign manufacturing, we may be required to pay increased royalties. The increase in royalties
depends on the manufacturing volume that is performed outside of Israel. These restrictions and requirements for payment may impair our ability to sell
our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology
outside of Israel. Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel of technology or
know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.
It may be difficult to enforce a judgment of a U.S. court against us, our officers and directors or the Israeli experts named in this annual report in
Israel or the United States, to assert U.S. securities laws claims in Israel or to serve process on our officers and directors and these experts.
We are incorporated in Israel. All of our executive officers and three of our directors listed in this annual report reside outside of the United States,
and most of our assets and most of the assets of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of
these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and
may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the United States or to assert U.S.
securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws
reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may
determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be
proven as a fact by expert witnesses, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law.
There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment
against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court.
Your rights and responsibilities as a shareholder will be governed by Israeli law, which differs in some material respects from the rights and
responsibilities of shareholders of U.S. companies.
Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and
Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in 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 certain matters, such as an amendment to the company’s articles of association, an increase of the company’s
authorized share capital, a merger of the company and approval of related party transactions that require shareholder approval. A shareholder also has a
general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or a shareholder who knows that it possesses
the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment of an office holder in the company or has another
power with respect to the company, has a duty to act in fairness towards the company. However, Israeli law does not define the substance of this duty of
fairness. See “ITEM 6.C. Board Practices.” Some of the parameters and implications of the provisions that govern shareholder behavior have not been
clearly determined. These provisions may be interpreted to impose additional obligations and liabilities on our shareholders that are not typically imposed
on shareholders of U.S. corporations.
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Additionally, the quorum requirements for meetings of our shareholders are lower than is customary for domestic issuers. As permitted under the
Companies Law, pursuant to our articles of association, the quorum required for an ordinary meeting of shareholders will consist of at least two
shareholders present in person, by proxy or by other voting instrument in accordance with the Companies Law, who hold at least 25% of our outstanding
ordinary shares. For an adjourned meeting at which a quorum is not present, the meeting may generally proceed irrespective of the number of shareholders
present at the end of half an hour following the time fixed for the meeting.
General Risk Factors
If equity research analysts do not continue to publish research or reports about our business or if they issue unfavorable commentary or
downgrade our ordinary shares, the price of our ordinary shares could decline.
The trading market for our ordinary shares relies in part on the research and reports that equity research analysts publish about us and our
business. We do not have control over these analysts and we do not have commitments from them to write research reports about us. The price of our
ordinary shares could decline if no research reports are published about us or our business, or if one or more equity research analysts downgrades our
ordinary shares or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.
Item 4. INFORMATION ON THE COMPANY
A.
History and Development of the Company
Our History
MediWound Ltd. ("MediWound") is a company limited by shares organized under the laws of the State of Israel in January 2000. We are
registered with the Israeli Registrar of Companies. Our registration number is 51-289494-0. Our principal executive offices are located at 42 Hayarkon
Street, Yavne 8122745, Israel, and our telephone number is +972 (77)-971-4100. Our website address is www.MediWound.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. We have included
our website address in this annual report solely for informational purposes. Our agent for service of process in the United States is Puglisi & Associates,
located at 850 Library Avenue, Suite 204, Newark, Delaware 19711, and its telephone number is +1 (302) 738-6680. The SEC maintains an internet site
that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at: http://www.sec.gov.
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Principal Capital Expenditures
See “ITEM 5.B. Liquidity and Capital Resources.”
B.
Business Overview
We are a biopharmaceutical company that develops, manufactures, and commercializes novel, cost effective, bio‑therapeutic, non-surgical
solutions for tissue repair and regeneration. Our strategy leverages our breakthrough enzymatic technology platform into a diversified portfolio of
biotherapeutics across multiple indications to pioneer solutions for unmet medical needs. Our current portfolio is focused on next-generation enzymatic
therapies for burn care, wound care and tissue repair.
NexoBrid® is our commercial orphan biological product for early non-surgical eschar removal of deep-partial and full-thickness thermal burns. It
is a bromelain-based biological product containing a sterile mixture of proteolytic enzymes that selectively removes burn eschar within four hours without
harming surrounding viable tissue. NexoBrid is currently marketed in the EU, Japan, India, as well as in other international markets, and recently received
FDA authorization for marketing in the U.S.
EscharEx®, our next-generation enzymatic therapy under development for the debridement of chronic and hard-to-heal wounds, is based on the
same active pharmaceutical ingredient (“API”) as NexoBrid. Results from Phase II studies showed that EscharEx is significantly more effective and faster
than standard of care (“SOC”) or placebo control in debridement of Venous Leg Ulcers (“VLUs”) and Diabetic Foot Ulcers (“DFUs”), with a good safety
and tolerability profile. EscharEx’s mechanism of action is believed to be mediated by the proteolytic enzymes that cleave and remove the necrotic tissue
and prepare the wound bed for healing.
Our third innovative product candidate, MW005, is a topical biological drug under development for the treatment of low-risk Basal Cell
Carcinoma (“BCC”). In a Phase I/II open-label, multicenter, randomized clinical trial conducted in the U.S., MW005 was shown to be safe, well-tolerated,
and an effective treatment for BCC with patients demonstrating complete clinical and histological clearance of target lesions.
We manufacture NexoBrid and our product candidates in our cGMP certified sterile manufacturing facility at our headquarters in Yavne, Israel.
Key Recent Developments
NexoBrid
Our FDA authorization of NexoBrid for treatment of severe burns was received in December 2022. Our Biologics License Application (“BLA”)
submission leading to FDA authorization, which we originally submitted in September 2020 and re-submitted in August 2022 following its initial review,
was covered by a comprehensive battery of pre-clinical studies and 8 clinical studies, including the pivotal Phase III U.S. clinical study (DETECT), which
evaluated the efficacy and safety of NexoBrid in adult patients with deep-partial and full-thickness thermal burns of 3%-30% of total body surface area
(TBSA). The BLA approval triggered a $7.5 million milestone payment from our commercial partner in the U.S., Vericel Corporation.
In December 2022, NexoBrid received marketing authorization in Japan and India. Kaken Pharmaceutical, a leading pharmaceutical company in
Japan, has the exclusive rights to market and distribute NexoBrid in Japan. Bharat Serums and Vaccines Limited (BSV), a leading biopharmaceutical
company in India, has the exclusive rights to market and distribute NexoBrid in India.
In September, 2022, we announced that EMA has validated for review our Type II Variation submitted by us to expand the currently approved
indication for NexoBrid (removal of eschar in adults with deep partial-and full-thickness thermal burn wounds) into the pediatric population. We expect a
decision from the European Commission by mid-year 2023.
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EscharEx
In July 2022, we announced positive results from our U.S. Phase II Pharmacology Study of EscharEx for Debridement of lower leg ulcers (VLUs
and DFUs). The study was designed to evaluate the clinical performance, safety, and pharmacology effect of EscharEx in the debridement of lower leg
ulcers in up to fifteen patients. The study evaluated the safety and efficacy of debridement as measured by incidence of, and time to complete debridement.
In addition, the study evaluated the pharmacological effects of EscharEx as measured by the changes from baseline to end of the treatment period in (1)
wound biofilm presence in wound biopsies, (2) bacterial burden measured by MolecuLight® fluorescence images, and (3) biomarkers of wound healing
and inflammation in wound fluid. 70% of patients achieved complete debridement during the course of treatment within up to 8 applications. On average,
complete debridement was achieved after 3.9 applications of EscharEx. Additionally, an average reduction of 35% in wound size was achieved by the end
of the 2-week follow-up period. In all patients that were positive for biofilm at baseline, the biofilm was reduced substantially to single individual
microorganisms or completely removed by the end of treatment. Seven patients had positive red fluorescence (indicative of bacteria) at baseline and
average red fluorescence was reduced from 1.69 cm2 pre-treatment to 0.60 cm2 post treatment. Biomarker analysis from wound fluid is on-going and
safety data showed that EscharEx is safe and well-tolerated.
In May 2022, we announced positive results from our U.S. Phase II clinical study of EscharEx for the debridement of VLUs. The study met its
primary endpoint with a high degree of statistical significance and demonstrated that patients treated with EscharEx had a statistically significant higher
incidence of complete debridement during the 14-day measurement period within up to 8 applications, compared to gel vehicle (EscharEx: 63% (29/46) vs.
gel vehicle: 30% (13/43), p-value=0.004). EscharEx efficacy superiority remained statistically significant after adjusting for pre-specified covariates
ascribed to patient baseline characteristics, wound size, wound age and regions. The study also met key secondary and exploratory endpoints. In addition,
the study showed that EscharEx was safe and well tolerated, and the overall safety was comparable between the arms as assessed by the data safety
monitoring board. Importantly, there were no observed deleterious effects on wound closure and no material differences in reported adverse events. We are
having discussions with the FDA regarding the EscharEx pivotal Phase III study design, which is expected to be initiated in the second half of 2023.
In July 2022 we presented a market research conducted by Oliver Wyman, describing the market potential of EscharEx, Based on this market
research, EscharEx Targeted Addressable Market (“TAM”) for VLUs and DFUs is estimated at approximately $2 billion in the U.S. In addition, this market
research and physician feedback suggests potential market share for EscharEx at approximately 30%.
MW005
In December 2022, we announced positive results in U.S. Phase I/II study of MW005 for the treatment of basal cell carcinoma. The data showed
MW005 to be safe and well-tolerated, with patients achieving complete clinical and histological clearance of their target lesions. Based on these positive
results, we plan to continue enrolling patients in our Phase I/II study, thereby optimizing its dosing regimen and application technique. We anticipate
announcing the final results in the third quarter of 2023.
Our Focus:
Burn Care
NexoBrid, a concentrate of proteolytic enzymes enriched in bromelain, is an easy to use, topically-applied product that removes eschar in four
hours without harming the surrounding healthy tissues. Eschar removal is a critical first step in the successful healing of severe burns. Under existing SOC,
burn eschar may be removed either by employing certain existing topical agents that have been found to be minimally effective or that take a significantly
longer period of time to work, or by resorting to non-selective surgery, which is traumatic and may result in loss of blood and viable tissue. NexoBrid’s
rapid and selective debridement alleviates the known risks associated with eschar, such as infection, eventual sepsis, wound deterioration and consequential
scarring, and it allows physicians to reach an informed decision on further treatment at an earlier stage by direct visual assessment of the actual burn depth.
Furthermore, NexoBrid minimizes the burden associated with invasive surgical procedures, reduces the need for skin grafting and sacrifice of healthy tissue
from donor sites on a patient’s body and generally results in a more favorable overall long-term patient outcome. NexoBrid has been investigated in
hundreds of patients across more than 22 countries and four continents in nine completed Phase II, Phase III and post-marketing clinical studies. Over
12,000 burn patients have been treated with NexoBrid in the market since 2013 and the safety and efficacy data reported from post marketing data sources
are consistent with the data available from clinical trials and no new safety signals have been observed.
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There have been hundreds of presentations and several award winning abstracts of NexoBrid in international and national scientific conferences, as well as
about 120 peer-reviewed papers, resulting in support of burn specialists and key opinion leaders. Awareness of NexoBrid continues to grow through our
marketing efforts in countries where NexoBrid is approved.
Burn Wounds
Burns are life threatening and debilitating traumatic injuries causing considerable morbidity and mortality. A burn may result from thermal,
electrical or chemical means that destroy the skin to varying depths. According to Critical Care, an international clinical medical journal, burns are also
among the most expensive traumatic injuries because of long and costly hospitalization, rehabilitation and wound and scar treatment.
Most burn injuries involve part of or the entire thickness of the skin and in some cases, the deeper subcutaneous fat tissue or underlying structures.
The severity of the burn depends on three main factors:
•
•
The extent of the surface that the burn occupies is usually referred to as percent of total body surface area (“TBSA”). A burn on an adult’s
entire palm would generally amount to 1% TBSA, and the average hospitalized patient has a burn covering approximately 9% TBSA. Burns
covering more than 15-20% TBSA usually require hospitalization and may result in dehydration, shock and increased risk of mortality.
The depth of the burn, referred to in terms of “degree” is generally classified into four categories:
○
○
○
Superficial or first-degree burns. Such burns do not penetrate the basal membrane and usually heal naturally.
Dermal/partial thickness or second-degree burns. Such burns are characterized by varying amounts of damaged dermis and can be
further subdivided into superficial and deep partial-thickness burns. Superficial partial-thickness burns may heal spontaneously after
removal of the covering thin eschar. Conversely, deep partial-thickness burns are often difficult for physicians to accurately diagnose
before eschar removal and may progress and transform into full-thickness burns if not debrided in a timely manner, depending on the
magnitude of latent tissue death of the surrounding skin.
Full thickness or third-degree burns. Such burns are characterized by death of the entire dermal tissue down to the subcutaneous fat and
must be debrided and treated by autografting, which is the process of harvesting skin from healthy donor sites on a patient’s body and
transplanting it on the post-debridement, clean wound bed.
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○
Fourth-degree burns. Such burns, which are rare, extend beyond the subcutaneous fat tissue into the underlying structures, such as
muscle or bone, and also require debridement and further substantial treatment.
•
Other factors include the age of the victim, the body part where the burn occurred and any co-morbidities of the patient. For example, some
patients may require hospitalization regardless of the TBSA or degree of the burn, such as children, the elderly or victims with burns to the
extremities, joints or head/neck area or with co-morbidities such as smoke inhalation, diabetes or obesity.
When patients are hospitalized for a severe burn, the first step in the treatment after patient stabilization and resuscitation is usually eschar
removal. The eschar is the burned tissue in the wound, which is deprived of blood and isolated from all natural systemic defense mechanisms. Eschar
removal is an essential first step in the treatment of patients with severe burns, allowing for:
•
•
the prevention of local infection, sepsis (a systemic inflammatory response caused by severe infection) and additional damage to surrounding
viable tissue; and
the initiation of the body’s healing process and scar prevention.
In addition to minimizing the possibility of additional complications, once the eschar is removed, a physician may properly diagnose the true
extent of the trauma by a direct visual assessment of the clean wound bed. An informed treatment strategy can be decided upon only if the depth of the burn
and extent of the tissue damage is known. Diagnosis of burn depth is difficult, especially because the burn commonly changes its appearance during the
first days after injury due to burn progression. Burns that are initially difficult to classify due to the presence of eschar are referred to as “indeterminate”
burns. This ambiguity can delay the assessment of the burn depth and formulation of proper treatment. Unless the burns are life-threatening, definitive
treatment is postponed for several days post-injury until diagnosis is clearer, when burn progression by death of the surrounding and underlying tissue has
already occurred and ended. During this delay, local and systemic effects of post-burn inflammation and bacterial contamination can occur. Therefore,
earlier, selective eschar removal is essential to prevent eschar-related complications and to allow the physician to reach an informed decision on further
treatment.
Currently, there are two main treatment modalities for debridement:
•
Surgical debridement
○
○
Surgical debridement predominantly includes tangential excision, a procedure in which a surgeon amputates the entire dead tissue
mass, layer after layer, down to healthy, viable tissue. The excision is extended into healthy intact tissue to make sure that no trace of
the eschar remains, resulting in up to an estimated 30-50% of healthy tissue being excised during this procedure. Other methods include
dermabrasion, in which a mechanically powered, hand-held rotating abrading cylinder is used to slowly scrape off tissue, and hydro
surgery, in which a high-pressure flow of water abrades the tissue. These alternative methods have attempted to limit the trauma
associated with tangential excision, but entail spray of contaminated eschar or take a significantly longer time to complete than
tangential excision.
The benefits of surgical eschar removal are that it is usually fast and effective. Disadvantages include the significant trauma of the
procedure, associated blood loss, risk of surgery in delicate areas of the body such as hands, added costs, and, most importantly, the loss
of viable tissue that necessitates additional surgical procedures for harvesting skin from healthy donor sites and autografting.
44
○
Due to the disadvantages of surgery in extensive burns some surgeons limit their debriding surgery to only a part of the affected area in
a single session (15-30% TBSA in most centers), thus delaying full debridement by days. After several days, complications related to
eschar contamination may begin and some of the benefits of the earlier debridement may not be realized. On the other hand, when
excising burns immediately, all suspected necrotic tissue will be excised, inevitably resulting in over-excision, especially in
“indeterminate” burns, as after surgical excision, the remaining skin often no longer has any spontaneous healing potential and will heal
only by autografting.
•
Non-surgical debridement
○
○
Non-surgical debridement includes many different treatment options that do not require direct surgical removal of the skin to remove
eschar. With non-surgical debridement, the eschar is naturally, but slowly, removed by contaminant microorganisms, tissue autolysis, or
self-decomposition, and the inflammatory process that may lead to serious local and systemic complications. In seeking to facilitate
such natural processes, topical medication, anti-microbial agents, enzymes and biological/chemical applications are often applied onto
the eschar.
The benefits of this approach are that it is non-surgical, reduces trauma to the patient and is easier to apply. Disadvantages include
numerous dressing changes and mechanical scraping with limited debridement efficacy. This prolongs the eschar removal process,
which may lead to death of the tissue surrounding the initial burn wound, causing partial-thickness wounds to transform into full-
thickness wounds and forming granulation tissue that may develop into heavy scars.
As demonstrated in our clinical trials, NexoBrid combines the advantages of surgical and non-surgical debridement modalities by providing rapid
and effective eschar removal while not harming viable tissue. This allows for earlier direct visual assessment of the burn wound in order to formulate
proper treatment.
Market Opportunity
Severe burns require specialized care in hospitals or burn centers. Approximately 100,000 patients with severe burns are hospitalized every year in
the United States and Europe. The prevalence of patients with severe burns is even higher in emerging economies. For example, approximately 400,000
patients are hospitalized every year with burns in India according to a study conducted by IMS Health. The severe burn patients are predominantly treated
by specialists in approximately 250 burn centers in Europe and the United States, as well as at burn units of large hospitals in Europe. We believe these
patients can benefit from NexoBrid’s effective and selective, non-surgical eschar removal.
In addition to our current marketing of NexoBrid in Europe and the United States, we have signed local distribution agreements for distribution of
NexoBrid in Europe, Latin America, Asia-Pacific countries, members of the Commonwealth of Independent States (“CIS”) and the Middle East and we
plan to target additional markets in these territories by leveraging our approved registration file for additional regional marketing authorizations.
In addition to the market opportunities for NexoBrid discussed above, we believe that NexoBrid has the potential to play a critical role in the event
of a burn mass casualty incident (“BMCI”), which is generally defined as any incident in which emergency medical services resources, such as personnel
and equipment, are overwhelmed by the number and severity of casualties. A variety of public emergencies may give rise to a BMCI, such as terrorist
attacks, natural disasters, fires and explosions. One example of a BMCI is a mass burn casualty disaster, which is defined by the American Burn
Association as a catastrophic event in which the number of burn victims exceeds the capacity of the local burn center to provide optimal care. If a
significant number of burn victims arrive at a burn center following an event, some victims may go untreated until the bottleneck is resolved. The use of
non-surgical means that are capable of providing rapid eschar removal without harming healthy tissue, particularly during public health emergencies, could
potentially reduce the time, labor and resource burdens associated with the current standard-of-care, thereby enabling the treatment of more patients. In the
event of a mass burn casualty disaster, healthcare professionals can use NexoBrid to begin treatment at the patient’s bedside without the need for a surgical
team and facilities. NexoBrid has demonstrated in clinical studies, with statistical significance, its ability to non-surgically and rapidly remove eschar in a
single four-hour application. Once the acute treatment has been completed, the wound can be covered with available means and further managed once the
BMCI is under control and the bottlenecks resolved. NexoBrid has been recognized by BARDA as a medical countermeasure for treatment of burns in the
event of a BMCI.
45
BARDA Contracts
In September 2015, we were awarded the first BARDA Contract for treatment of thermal burn injuries, representing a total value of up to $112
million. Between 2017 and 2020, BARDA expanded its commitment by an aggregate supplemental amount of $47 million. In February 2022 BARDA
expanded its awarded contract by providing supplemental funding of $9 million to support the NexoBrid BLA resubmission to the FDA and the continuous
expanded access program (collectively the "First BARDA Contract").
The First BARDA Contract is our primary contract with BARDA and relates to the advancement of the development and manufacturing, as well
as the procurement of NexoBrid as a medical countermeasure as part of U.S. preparedness for mass casualty events.
Under the First BARDA Contract, BARDA provided technical assistance and a total of up to $91 million in funding for NexoBrid development
activities required to achieve U.S. marketing authorization from the FDA. These activities include the NexoBrid Phase III (DETECT) study and subsequent
requirements for BLA submission, the ongoing Phase III pediatric (CIDS) study and the NexoBrid expanded access treatment protocol (NEXT). In January
2020, BARDA committed an additional $16.5 million to procure NexoBrid as part of the HHS mission to build national preparedness for public health
medical emergencies. The contract further includes a $10 million option to fund the development of other potential NexoBrid indications and an option to
procure additional NexoBrid valued at up to $50 million.
In September 2018, we were awarded an additional, separated BARDA contract (the “Second BARDA Contract”), which is an additional, separate
contract to develop NexoBrid for the treatment of Sulfur Mustard injuries as part of BARDA’s preparedness for mass casualty events. The Second BARDA
Contract provides approximately $12 million of funding to support research and development activities up to pivotal studies in animals under the U.S. FDA
Animal Rule, and contains options for BARDA to provide additional funding of up to $29 million for additional development activities, animal pivotal
studies, and the BLA submission for licensure of NexoBrid for the treatment of sulfur mustard injuries.
As of December 31, 2022, the Company has received approximately $82 million in aggregate of funding, from BARDA under the two contracts,
and an additional $16.5 million for procurement of NexoBrid for U.S. emergency preparedness.
Each BARDA contract may be terminated by BARDA at any time at BARDA’s discretion.
NexoBrid Clinical History
NexoBrid, our innovative biopharmaceutical product, has received marketing authorizations from the U.S., European Commission and the Israeli,
Argentinean, South Korean, Russian, Peruvian, Chilean, Taiwanese, Ukrainian, other Eurasian states, United Arab Emirates, Japanese and Indian
Ministries of Health for the removal of eschar in adults with deep partial- and full-thickness thermal burns. The active ingredient of NexoBrid is a
concentrate of proteolytic enzymes enriched in bromelain extracted from pineapple stems. Proteolysis is a breakdown of proteins into smaller building
blocks, polypeptides or amino acids. Our research and development strategy is centered around our validated proteolytic enzyme platform technology,
focused on next-generation bio-active therapies for burn and wound care and biological medicinal products for tissue repair. For each indication, our
research and development team further develops and optimizes our enzymatic platform technology, creating unique and differentiated products meeting
separate needs based on the specific indication, which is the basis for NexoBrid, EscharEx and all other pipeline product candidates. One vial of NexoBrid
containing 2 grams of concentrate of proteolytic enzymes enriched in bromelain is sufficient for treating a burn wound area of 1% total body surface area
(“TBSA”).
46
We developed NexoBrid to fulfill the previously unmet need for a non-surgical effective and selective debriding agent that combines the efficacy
and speed of surgery with the non-invasiveness of non-surgical methods. NexoBrid enhances the ability of physicians to conduct an earlier direct visual
assessment of the burn depth to reach an informed decision on further treatment as well as to reduce the surgical burden and achieve a favorable long-term
patient outcome.
NexoBrid has been investigated in hundreds of patients across 22 countries and four continents in nine completed Phase II and Phase III and post-
marketing clinical studies. While we are marketing our product for the removal of eschar in burn wounds under the name “NexoBrid,” in clinical trials the
product has been referred to as “Debridase” and “Debrase.”
The following table sets forth information regarding the completed clinical trials of NexoBrid:
Study
Type
Design
Trial 1
Trial 2
Trial 3
Trial 4
Trial 5
Trial 6
Trial 7
Trial 8
Trial 9
Retrospective
Phase II
Investigator
initiated
Dose range
Phase II
Prospective
Phase II
IND/FDA
Phase II
IND/FDA
Phase III
EMA
Phase IIIb
EMA
Phase II
EMA
Post approval
safety study
EMA
Phase III
IND/FDA
Data collected
from files of
patients
treated with
NexoBrid
Parallel,
controlled,
observer-
blind,
randomized,
single-center
Parallel,
controlled,
observer-
blind, three-
arm,
randomized,
multi-center
Parallel,
controlled,
open label,
three-arm,
randomized,
single-center
Parallel,
controlled,
open label,
two-arm,
randomized,
multi-center
Parallel,
controlled,
blinded, two-
arm, multi-
center
Open label,
single-arm,
multi-center
Observational
retrospective
data collection
Parallel,
controlled,
open label,
three-arm,
randomized,
multi-center
Main
Objectives
Safety and
efficacy
Comparison
of efficacy
and safety
Safety and
efficacy
Safety
Safety
Efficacy
Wound
Types
Deep
partial/full
thickness
thermal burns
Deep partial
/full
thickness
thermal
burns
Deep partial
/full
thickness
thermal
burns
Deep partial
/full
thickness
thermal
burns
Deep partial/
full thickness
thermal
burns
Long-term
scar
assessment
Quality of
life
Scar
formation
Safety and
pharmacokinetics
Efficacy
Effectiveness
of the risk
minimization
activities
Safety
Efficacy
Deep partial/full
thickness thermal
burns
Burns which
were treated
with NexoBrid
in the market
Deep partial/
full thickness
thermal
burns
Number of
Patients
154
20
140
30
182
89
36
160
175
Study
Length
1985-2000
2002-2005
2003-2004
2006-2007
2006-2009
2011
2009-2015
2017-2019
2015-2020
Location
Israel
Israel
International
United
International
International
International
Europe
International
States
47
Ongoing clinical trials
Pediatric investigational plan – CIDS study
The CIDS study is a Phase III, multicenter, multinational, randomized, controlled, open-label study in children with thermal burns. The study
objectives are to evaluate the efficacy and safety of treatment with NexoBrid compared with SOC in hospitalized children with severe thermal burns of 1%
to 30% TBSA. We expanded this study also to United States burn centers, following approval of the study protocol by the FDA. The study is underway in
accordance with a study design endorsed by the FDA and the EMA as part of the agreed Pediatric Investigational Plan (“PIP”) to support extension of the
indication to pediatric patients. The CIDS study includes pediatric patients of all ages, from newborn to eighteen years of age, offering NexoBrid to this
important and sensitive group of patients. The primary endpoints evaluate early eschar removal, surgical burden, and cosmesis and function with a 12-
month follow-up. Secondary endpoints included reduction in the need for surgical excision for eschar removal (surgical need), blood loss, reduction of the
need for autograft in DPT wounds and non-inferiority in cosmesis and function at twenty-four months follow-up from wound closure. Additional extended
long term cosmesis and function assessment at more than 30 months from wound closure was added to the protocol. Non-inferiority of the time to complete
wound closure and other standard safety measurements were also compared with the SOC control arm.
The study was expanded to include burn centers in the United States following agreement with the FDA, under the same protocol with alignment
to the U.S. Phase III study (DETECT) protocol for the adult population. The non-inferiority of cosmesis and function at twelve months and twenty-four
months from wound closure were defined as safety measurements. In addition, reduction in surgical need was measured only by reduction in incidence of
surgical excision for eschar removal.
In July 2021, we announced positive top-line results, which include acute phase and 12-month follow-up data analysis. The study enrolled 145
pediatric patients, from newborn to eighteen years of age, randomized to either NexoBrid or SOC at a ratio of 1:1, across 36 burn centers worldwide. The
study met all three primary endpoints with a high degree of statistical significance, as well as certain secondary endpoints. NexoBrid demonstrated a
significant reduction in time to achieve complete eschar removal and significant reduction in wound area requiring surgical excision while demonstrating
non-inferiority to standard-of-care in quality of scars. In addition, the study showed that NexoBrid was safe and well-tolerated. The long-term follow-up for
cosmesis and function, quality of life and safety measurements is ongoing, and data is expected in the first half of 2023. This study is funded by BARDA.
See “—BARDA Contracts” above.
48
Expanded access treatment protocol (“NEXT”)
The NEXT protocol, which we initiated in October 2019, is an open-label, single-arm treatment protocol which allows for the treatment of up to
250 burn patients with deep partial- and full-thickness thermal burns up to 30% TBSA. In September 2020, the FDA agreed to allow the NEXT protocol to
be expanded to include pediatric as well as adult burn patients. The NEXT protocol is being funded by BARDA. See “—BARDA Contracts” above. NEXT
has been designed to be consistent with current real-life burn treatment practices in the U.S. and up to 30 U.S. burn centers are anticipated to
participate. We received FDA concurrence that patients can be treated under the NEXT protocol in a burn MCI that is not a declared national emergency.
We have provided documents for consideration by the FDA supporting the use of NexoBrid in a declared national medical emergency contingent upon the
FDA issuance of an Emergency Use Authorization (“EUA”). The EUA is a mechanism by which the FDA can allow an unapproved medical product that
qualifies as a mass casualty medical countermeasure to be used in a public health emergency.
Wound Care
Our second innovative product candidate, EscharEx, is a bio-active therapeutic product under development for debridement of chronic and other
hard-to-heal wounds. EscharEx is complementary to the large number of existing advanced wound healing therapies, which require a clean wound bed in
order to heal the wound. EscharEx API is a concentrate of proteolytic enzymes enriched in bromelain and as such, benefits from the wealth of existing
development data on NexoBrid. The mechanism of action of EscharEx is mediated by the proteolytic enzymes that cleaves and removes the necrotic tissue
and prepares the wound bed for healing. Results from several Phase II studies showed that EscharEx is significantly more effective and faster than SOC or
placebo control in debridement of VLUs and DFUs, with a good safety and tolerability profile.
Chronic and Other Hard-to-Heal Wounds
The chronic and other hard-to-heal wound market consists of a broader addressable population of more than 14 million patients in Europe and the
United States alone suffering from chronic wounds such as VLUs, DFUs, pressure ulcers and additional patients suffering from surgical/traumatic hard-to-
heal wounds. Chronic and other hard-to-heal wounds represent a $25 billion burden to the U.S. healthcare system. Chronic and hard-to-heal wounds are
caused by impairment in the biochemical and cellular healing processes due to local or systemic conditions and generally can take several weeks to heal, if
not longer. Such wounds can lead to significant morbidity, including pain, infection, impaired mobility, hospitalization, reduced productivity, amputation
and mortality. In each of the various wound types, the presence of the eschar is a frequent cause for “chronification” of wounds and the removal of eschar is
the key step to commence healing. Eschar needs to be removed to prevent further deterioration of the wound that may result in additional adverse patient
outcomes. If not effectively treated, these wounds can lead to potentially severe complications including further infection, osteomyelitis, fasciitis,
amputation and mortality. Most advanced wound care therapies, including negative pressure wound therapy, such as V.A.C. Therapy, and skin substitutes
such as Apligraf and Dermagraft and human amniotic tissue products, are complementary to our lead product candidate, EscharEx, as these products
require a clean wound bed to effectively heal a wound. Four common chronic and other hard-to-heal wounds are:
•
Venous leg ulcers. VLUs develop as a result of vascular insufficiency, or the inability for the vasculature of the leg to return blood back
toward the heart properly. Based on our comprehensive market research study on EscharEx that involved more than 200 healthcare
professionals in the U.S. and Europe, which was last updated in 2022, the VLU overall prevalence is approximately 3.3 million (1% of total
U.S. population). Furthermore, the annual incidence of VLUs in the U.S. alone, is approximately 960,000 (accounting for 45% recurrence), of
which approximately 690,000 undergo debridement in a given year. These ulcers usually form on the sides of the lower leg, above the ankle
and below the calf, and are slow to heal and often recur if preventative steps are not taken. The risk of VLUs can increase as a result of a
blood clot forming in the deep veins of the legs, obesity, smoking, lack of physical activity or work that requires many hours of standing.
49
•
•
•
Diabetic foot ulcers. Diabetes can lead to a reduction in blood flow, which can cause patients to lose sensation in their feet and may prevent
them from noticing injuries, sometimes leading to the development of DFUs, which are open sores or ulcers on the feet that may take several
weeks to heal, if ever. Based on our comprehensive market research study conducted in 2015 on EscharEx that involved more than 200
healthcare professionals in the U.S. and Europe and, which was updated in 2019, there are estimated 31 million diabetics in 2019 (9.4% of the
U.S. population). The annual incidence of DFUs in the United States alone, is approximately 990,000 (accounting for 45% recurrence), of
which approximately 820,000 undergo debridement in a given year.
Pressure ulcers. Pressure ulcers form as a result of pressure sores, or bed sores, which are injuries to the skin or the tissue beneath the skin.
Constant pressure on an area of skin reduces blood supply to the area and over time can cause the skin to break down and form an open ulcer.
These often occur in patients who are hospitalized or confined to a chair or bed, and usually form over bony areas, where there is little
cushion between the bone and the skin, such as lower parts of the body. Annually, 2.5 million pressure ulcers are treated in the United States
in acute care facilities alone.
Surgical/traumatic wounds. Surgical wounds form as a result of various types of surgical procedures such as investigative or corrective, minor
or major, open (traditional) or minimal access surgery, elective or emergency, and incisions (simple cuts) or excision (removal of tissue),
among others. Traumatic wounds form as a result of cuts, lacerations or puncture wounds, which have caused damage to the skin and
underlying tissue. Severe traumatic wounds may require surgical intervention to close the wound and stabilize the patient. Surgical/traumatic
hard-to-heal wounds develop for various reasons, such as local surgical complications, suboptimal closure techniques, presence of foreign
materials, exposed bones or tendons and infection. In the United States, millions receive post-surgical wound care annually.
Market Opportunity
Currently, surgery (sharp debridement) is generally considered a first-line option. Sharp debridement is an effective method to debride a wound.
However, this method requires surgically skilled physicians performing surgery with patients under, anesthesia, which in elderly patients with various co-
morbidities is accompanied with a higher risk of local and systemic complications. Surgery may also involve hemorrhage which could be more difficult to
control due to a high incidence of use of anticoagulants in this population. Surgery on wounds may very easily become infected with the infection
propagating to surrounding soft and boney tissues ending in life threatening major complication or amputation. Very often even minor, limited sharp
debridement exposes other sensitive tissue, such as tendons, deep vessels/nerves and bones that may become infected or may be severely damaged,
necessitating additional, more extensive debridement or even amputation. Due to these limitations, chronic wounds are treated by conservative methods,
with autolytic and enzymatic debridement being the most commonly-used non-sharp methods. This includes collagenase-based enzymatic debriding
ointment, hydrogels and other topical dressings, which require numerous application sessions and a long time (6-8 weeks) to achieve a clean wound bed, if
they achieve this at all. Thus, there is an unmet medical need for a non-surgical rapid and effective debridement agent for the outpatient setting, nursing
home facilities and patients’ homes. Given the high demand for an effective non-surgical debridement technique and the clinical data generated to date,
EscharEx has the potential to expand the current use of enzymatic debridement across all sites of care and achieve substantial market share. As documented
in the Phase II study described below, EscharEx significantly improved the rate of complete debridement after few once-daily applications, thus potentially
facilitating wound debridement without the need for surgery. Based on our comprehensive market research study on EscharEx that involved more than 200
healthcare professionals in the U.S. and Europe, which was last updated in 2022, EscharEx TAM for VLUs and DFUs is estimated at approximately $2
billion in the U.S. This market research and physician feedback suggests potential market share for EscharEx at approximately 30%.
50
EscharEx Clinical History
EscharEx is a topical agent being developed for debridement of chronic and other hard-to-heal wounds, in order to fulfill an unmet need for a non-
surgical rapid and effective debridement option. EscharEx is based on the same active substance as NexoBrid but differs in other aspects, such as in
formulation and presentation. Based on our current pre-clinical studies, the second generation EscharEx demonstrated even higher potency in lower doses,
which could further contribute to EscharEx’s efficacy and tolerability. This advanced generation of EscharEx has been designed in accordance with the
current treatment workflow and reimbursement programs, providing a non-surgical easy-to-use, potent product for daily application, which we believe will
enhance patient compliance and improve quality of care. Based on the feedback received from different stakeholders, we believe that our second generation
EscharEx can better address the unmet medical need for a non-surgical rapid and effective product, particularly in the outpatient setting, where the majority
of patients are treated, and has a greater potential to achieve substantial market share.
Second generation EscharEx is more differentiated from NexoBrid, which further limits the chances for competition between the two products.
Non-clinical safety studies performed with NexoBrid support EscharEx development, and we have already completed successfully bridging
toxicology studies. In a pre-IND meeting the FDA stated that existing toxicology data for EscharEx, including cross-referenced NexoBrid data, could be
sufficient to support initiation of clinical studies in the product.
Following the successful completion of the EscharEx U.S. Phase II study in VLU patients, we have entered into discussions with the FDA
regarding the EscharEx pivotal Phase III study design, which expected to be initiated in the second half of 2023.
Completed clinical trials
We completed a first Phase II feasibility study in Israel for chronic and other hard-to-heal wounds. In January 2017 we completed and announced
the final results of a second Phase II prospective study in Israel and Europe. In November 2017, we announced the final results of a second cohort of the
second Phase II study. Based on the completed studies, we believe that our product candidate may be effective for debridement of chronic and other hard-
to-heal wounds.
First Phase II feasibility study—Israel
This first Phase II feasibility study was conducted in Israel to study the efficacy of our technology on chronic and other hard-to-heal wounds. The
study assessed 24 patients at two sites. The results showed that our technology was effective in debriding various chronic and other hard-to-heal wound
etiologies, such as VLUs, DFUs, pressure sores and trauma on diseased skin.
51
Second Phase II study—Israel/E.U. – First Cohort
This second Phase II study was a prospective, controlled, assessor-blinded, randomized, multi-center Phase II study in Israel and Europe. The
study objectives were to evaluate the efficacy and safety of EscharEx in comparison to the Gel Vehicle at a ratio of 2:1 for the treatment of a variety of
chronic and other hard-to-heal wounds in three etiologies: DFUs, VLUs and post-surgical or traumatic hard-to-heal wounds.
The primary endpoint assessed incidence of complete non-viable tissue removal (debridement) at the end of the debridement period (within up to
10 daily applications) and the secondary endpoints assessed various efficacy and safety endpoints, including wound bed preparation and wound healing.
In January 2017 we reported final results of the first cohort of 73 patients. The average wound age in the EscharEx arm was more than double
(72.8 weeks) that of the gel vehicle group (30.8 weeks). The average wound size was 33.6 cm2 in the EscharEx arm vs. 25.8 cm2 in the gel vehicle group.
Despite the larger wounds and that wounds treated with EscharEx were older than wounds treated with gel vehicle (72.8 vs. 30.8 weeks), the study met its
primary endpoint. EscharEx demonstrated a statistically significant higher incidence of complete debridement at the end of the debridement period. Patients
treated with EscharEx demonstrated a higher incidence of complete debridement (55% or 27/49) compared with patients treated with the hydrogel6 vehicle
(29% or 7/24) with p=0.047.
*w/i 10 daily applications
Predefined sub-group analyses showed that 50% of patients with DFUs treated with EscharEx (8/16) achieved complete debridement at the end of
the debridement period compared with 14.3% of patients with DFUs treated with hydrogel vehicle (1/7). In addition, 62.5% of patients with VLUs treated
with EscharEx (10/16) achieved complete debridement at the end of the debridement period compared with 25% of patients with VLUs treated with
hydrogel vehicle (2/8). Post hoc analysis showed that 56.3% of patients with VLU or DFU in the EscharEx group had complete debridement at the end of
the debridement period compared with 20.0% in hydrogel vehicle group (p=0.028).
The study included secondary endpoints that provide further insight into number of efficacy and safety parameters. The secondary endpoint of
time to complete debridement demonstrated a clear trend (p=0.075) that strongly suggests that not only is there a difference in the incidence of
debridement, as confirmed by the primary endpoint, but that debridement occurred earlier in the group treated by EscharEx. The advantage in time to
complete debridement was corroborated by the statistically significant post hoc result in the subgroup of patients with VLUs or DFUs that were treated
with EscharEx (p=0.024).
52
Post hoc analysis showed that of patients who achieved complete debridement in the EscharEx group, 93% (25/27) completed the debridement
within 7 days (4-5 applications on average).
The overall patient demographics were comparable across both arms. No deleterious effect on wound healing was observed and no material
differences were found in reported adverse events. The overall safety was comparable between the arms.
Second Phase II study—Israel/E.U. – Second Cohort
After successfully completing the first cohort of the study which included 73 patients recruited in 15 clinical sites, we initiated a second cohort of
patients to demonstrate safety and tolerability over extended periods of application to further support the product’s convenient application. In this second
cohort, we recruited 38 patients from two etiologies, either VLUs or DFUs, over extended periods of application (24-72 hours) with up to eight
applications, randomizing the patients to two study arms EscharEx or gel vehicle at a ratio of 2:1. The primary objective was to assess safety.
EscharEx met its primary safety endpoint in this cohort, and the overall patient demographics and wound baseline characteristics were comparable
across the arms in the second cohort. No related systemic adverse events were reported and adverse events related to local application were mild to
moderate, reversible and resolved during the trial. Vital signs, pain scores, infection rates, laboratory parameters and blood loss were comparable between
the two arms of the trial. Overall, no material safety concerns were identified.
53
EscharEx U.S. Phase II Study in Venous Leg Ulcer (VLU) Patients
In December 2019, we initiated a U.S. Phase II adaptive design clinical study of EscharEx for the treatment of VLUs. The study was a multicenter,
prospective, randomized, placebo-controlled, adaptive design study, evaluating the safety and efficacy of EscharEx in debridement of VLUs compared to
gel vehicle (placebo control) and non-surgical standard-of-care of either enzymatic or autolytic debridement (NSSOC). The study enrolled 120 patients,
with 119 treatet at approximately 20 clinical sites, primarily in the U.S. Study participants were treated with either EscharEx (n=46), gel vehicle control
(n=43), or non-surgical standard-of-care (n=30), with a three-month follow-up. The single primary endpoint was incidence of complete debridement (non-
viable tissue removal), clinically assessed, within up to 8 treatment applications during the assessment period (within 14 days), compared to gel vehicle
placebo control. Secondary and exploratory endpoints assessed time to achieve complete debridement, reduction of pain, reduction of wound area,
granulation tissue and wound quality of life, enabling evaluation of clinical benefits compared to both gel vehicle and NSSOC. Incidence and time to
achieve wound closure were assessed as safety measurements.
In May 2022 we announced our results from this study. The study met its primary endpoint with a high degree of statistical significance,
demonstrating that patients treated with EscharEx had a statistically significant higher incidence of complete debridement during the 14-day measurement
period within up to 8 applications compared to gel vehicle (EscharEx: 63% (29/46) vs. gel vehicle: 30% (13/43), p-value=0.004). EscharEx efficacy
superiority remained statistically significant compared to gel vehicle after adjusting for pre-specified covariates ascribed to patient baseline characteristics,
wound size, wound age and region.
The study met key secondary and exploratory endpoints. Patients treated with EscharEx had a statistically significant higher incidence of complete
debridement, during the same 14-day measurement period, compared to patients treated by non-surgical standard-of-care ("NSSOC") (EscharEx: 63%
(29/46) vs. NSSOC: 13% (4/30)) and the time to achieve complete debridement was significantly shorter. Estimated median time to complete debridement
was 9 days for patients treated with EscharEx and 59 days for patients treated with NSSOC (p-value=0.016). On average, complete debridement was
achieved after 3.6 applications of EscharEx compared to 12.8 applications with NSSOC. Patients treated with EscharEx demonstrated significantly higher
incidence of greater than 75% granulation tissue at the end of the treatment period compared to gel vehicle (p-value <0.0001). Favorable trends were
observed in wound area reduction and reduction of pain compared to gel vehicle.
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In addition, the study showed that EscharEx was safe and well tolerated, and the overall safety was comparable between the arms as assessed by
the data safety monitoring board. Importantly, there were no observed deleterious effects on wound closure and no material differences in reported adverse
events. Estimated time to complete wound closure was 64 days for patients treated with EscharEx compared to 78 days for patients treated with NSSOC.
EscharEx Pharmacology Study
In May 2022, we announced positive results from our U.S. Phase II pharmacology study of EscharEx for debridement of lower leg ulcers. The
study was a prospective, open label, single-arm study, conducted at three U.S. clinical sites. The study evaluated the clinical performance, safety, and
pharmacology effect of EscharEx in the debridement of lower leg ulcers (VLUs and DFUs). The study evaluated the safety and efficacy of debridement as
measured by incidence of, and time to complete debridement. In addition, the study evaluated the pharmacological effects of EscharEx as measured by the
changes from baseline to end of treatment period in (1) wound biofilm presence in wound biopsies, (2) bacterial burden measured by MolecuLight®
fluorescence images, and (3) biomarkers of wound healing and inflammation in wound fluid. Twelve patients with either VLUs or DFUs were enrolled in
the study. Patients were treated with up to eight daily applications of EscharEx and then continued follow-up for 2 weeks. Punch biopsies and wound fluids
were collected prior to the first, and after the last treatment. Biofilm presence was analyzed from wound biopsies. Wound fluids were analyzed to evaluate
biomarkers of wound healing and inflammation, i.e., MMPs, cytokines, chemokines, growth factors and HNE. Fluorescent imaging was used during
treatment to measure wound size and bacterial load. Fluorescent imaging was also utilized to identify the highest fluorescence area to obtain the biopsy.
EscharEx demonstrated safe and effective debridement with a few daily applications. In addition, evaluation of wounds’ tissue samples (biopsies) and
fluorescence images, indicated reduction of wound area, biofilm and bacterial bioburden following the treatment with EscharEx.
Seventy percent of patients achieved complete debridement during the course of treatment within up to 8 applications. On average, complete
debridement was achieved after 3.9 applications of EscharEx. Additionally, an average reduction of 35% in wound size was achieved by the end of the 2-
week follow-up period. In all patients that were positive for biofilm at baseline, the biofilm was reduced substantially to single individual microorganisms
or completely removed by the end of treatment. Seven patients had positive red fluorescence (indicative of bacteria) at baseline and average red
fluorescence was reduced from 1.69 cm2 pre-treatment to 0.60 cm2 post treatment. Biomarker analysis from wound fluid is on-going and safety data shows
that EscharEx is safe and well-tolerated.
The development of EscharEx for the debridement of chronic and other hard-to-heal wound indications is in Phase 2 studies, and there is no
certainty that EscharEx will achieve all of the objectives of the trials as required or that the FDA will allow at this stage to initiate further studies or that we
will successfully complete the development to obtain a marketing authorization for EscharEx. See “ITEM 3.D. Risk Factors—Development and
commercialization of EscharEx in the United States and our pipeline product candidates worldwide requires successful completion of the regulatory
approval process, and may suffer delays or fail.”
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Non-Melanoma Skin Cancer
MW005, is a topically applied biological product candidate for the treatment of non-melanoma skin cancers, based on the same active substance
of NexoBrid and EscharEx, a concentrate of proteolytic enzymes enriched in bromelain. The clinical development plan of MW005 is supported by the
results from several toxicological and other preclinical studies, as well as vast clinical experience from NexoBrid and EscharEx, which share the same API.
We launched a new clinical program to evaluate our drug product candidate MW005 in patients with non-melanoma skin cancer.
Non-melanoma Skin Cancers
Cancers of the skin are by far the most common of all types of cancer with about approximately 5.4 million basal and squamous cell skin cancers
are diagnosed each year in the US. The number of these cancers has been increasing for many years due to combination of better skin cancer detection,
people getting more sun exposure, and people living longer.
•
•
•
•
Basal cell carcinomas - BCC starts in the basal cell layer, which is the lower part of the epidermis. If not removed completely, basal cell
carcinoma can come back (recur) in the same place on the skin. People who have had basal cell skin cancers are also more likely to get new
ones in other places. BCCs are uncontrolled and abnormal growths that arise in the basal cells of the skin and the tumors primarily affect
photo exposed areas, most commonly in the head, and infrequently appear on unexposed areas such as the genital and genitalia regions. The
main cause of BCC is chronic ultraviolet (UV) exposure. BCC is the most common form of skin cancer, accounting for 75-80% of all skin
cancers
Squamous cell carcinomas - Squamous cell carcinomas (“SCC”) start in the flat cells in the upper (outer) part of the epidermis
Actinic keratosis - Actinic keratosis (“AK”), also known as solar keratosis, is a pre-cancerous skin condition caused by too much exposure to
the sun. People who have them usually develop more than one. A small percentage of AKs may turn into squamous cell skin cancer.
Bowen disease - Bowen disease (squamous cell carcinoma in situ), is the earliest form of squamous cell skin cancer
Market opportunity
Basal cell carcinoma is a non-melanoma skin cancer that arises from the basal layer of epidermis and its appendages and is the most diagnosed
skin cancer in the US (~4.3 million cases annually).
Under existing standard of care, low-risk patients are treated with tumor resection via either standard surgical excision or Mohs micrographic
surgery. Recurrence rates for these sharp methods of tumor removal are low (~5% at 5 years), and the procedure is considered straightforward with limited
patient downtime or side effects. Topical products (5-FU and Imiquimod) are used primarily in superficial lesions, but have limited use and are reserved for
surgery ineligible patients. Drawbacks include longer treatment duration (>6 weeks), low efficacy (~14% at 5 years), and side effects such as scarring, skin-
site reactions, and fatigue/flu-like illness. High-risk patients are also primarily treated with surgery; surgery-ineligible patients are treated with oral
hedgehog pathway inhibitors, which are effective in the short-term, but have high recurrence rates / safety concerns. There is a need for more effective,
safer topical products in low-risk superficial basal cell carcinoma for surgery-ineligible patients (e.g., site of tumor is challenging for excision or may result
in cosmetic issues) or for patients for whom surgery is not appropriate (e.g., older / frail patients, or those with challenges in seeking pre and post-surgical
appointments) and current topical agents may be avoided due to long treatment durations and because they result in an unpleasant treatment process for
patients.
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MW005 Clinical History
Ongoing clinical trials
U.S. Phase I/II Study in basal cell carcinoma Patients
In July 2021, we initiated a U.S. Phase I/II study of MW005 for the treatment of low-risk basal cell carcinoma (BCC). The Phase I/II open-label,
randomized clinical study in BCC is designed to evaluate safety and tolerability of MW005 using different schedules of administration, as well as provide a
preliminary evaluation of efficacy as measured by the percentage of target lesion with complete histological clearance.
The Phase I/II study was an open-label, multicenter, randomized clinical trial designed to evaluate the safety and efficacy of MW005 in patients
with BCC, using different regimens. All patients enrolled in the study had histologically confirmed superficial or nodular BCC. Those patients received
seven topical applications of MW005 once every other day for 14 days. Eight weeks after the last treatment, all patients underwent a complete excisional
biopsy, and the specimen was subject to an independent histological clearance examination. The study’s endpoints included safety and tolerability
measurements, as well as efficacy assessment, as measured by the proportion of patients who reached clinically and histologically confirmed complete
clearance.
In December 2022, we announced positive results from this study. The data showed MW005 to be safe and well-tolerated, with patients achieving
complete clinical and histological clearance of their target lesions. Based on these positive results, we plan to continue enrolling patients in its Phase I/II
study, optimizing its dosing regimen and application technique. The final results are expected in the third quarter of 2023.
Although we have conducted preclinical trials, the development of MW005 for non-melanoma skin cancer indications is still in its preliminary
phase and there is no certainty that it will achieve all the aims of the trials as required and/or successfully complete the approval process for such
indication. See “ITEM 3.D. Risk Factors—Development and commercialization of EscharEx in the United States and our pipeline product candidates
worldwide requires successful completion of the regulatory approval process, and may suffer delays or fail.”
Research and Development
Our research and development strategy is centered around our validated proteolytic enzyme platform technology, focused on next-generation
protein-based therapies for burn and wound care, and for tissue repair, which underlies NexoBrid and EscharEx, into additional product candidates for
high-value indications. For more information regarding our research and development expenses, see “ITEM 5.C. Research and Development, Patents and
Licenses, etc.”
Pre-Clinical Clinical Studies
We conduct clinical studies and preclinical studies to support the efficacy and safety of our products and their ingredients and to extend and
validate their benefits for human health. Preclinical studies allow us to substantiate the safety of our products and obtain preliminarily indications of their
pharmacological and safety profile. As of the date hereof, we have conducted more than 50 non-GLP and GLP preclinical studies. All pre-clinical safety
and toxicology studies were conducted according to the principles of Good Laboratory Practices (“GLP”), and thirteen clinical studies, according to the
principles of Good Clinical Practices (“GCP”), for NexoBrid, EscharEx and our pipeline product candidates. As a result, we have developed significant
experience in planning, designing, executing, analyzing and publishing clinical studies.
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Our research and development team manages our clinical studies and coordinates the project planning, trial design, execution, outcome analyses
and clinical study report submission. During the design, execution and analyses of our studies, our research and development team consults with key
opinion leaders and top-tier consultants in the relevant field of research to optimize both design and execution, as well as to strengthen the scientific,
medical and regulatory compliance level of the investigational plan. Our clinical studies have been conducted in collaboration with leading medical and
research centers throughout the world.
Manufacturing, Supply and Production
We operate a manufacturing facility in Yavne, Israel, in a building that we sub-lease from Clal Life Sciences L.P., with 39 employees as of
December 31, 2022. This facility allows us to manufacture sterile biopharmaceutical products, such as NexoBrid. The facility is designed to meet current
cGMP requirements and similar foreign requirements, as certified by the U.S., EU member states competent authorities, the Israeli Ministry of Health,
South Korean ministry of health and Japanese ministry of health. Our facility is subject to audits for reassessment of cGMP compliance and similar foreign
requirements, which are performed periodically by regulatory authorities and was re-approved as cGMP-compliant for an additional three years term as of
the audit date, until 2025. Additionally, as part of the regulatory approval process for NexoBrid our plant was inspected in 2022 by the FDA and the
Pharmaceuticals and Medical Devices Agency (“PMDA”) of Japan to confirm it meets all regulatory requirements. In addition, other regional applicable
authorities may also need to inspect our plant to confirm it meets all regulatory requirements in order to obtain marketing authorization in these
jurisdictions. Applicable changes in our production processes for NexoBrid must be approved by the EMA and similar authorities in other jurisdictions.
While we believe that our current manufacturing capacity at the facility is sufficient to meet the expected near-term commercial demand for
NexoBrid, we initiated a facility scale-up in 2022 to meet the growing global demand for NexoBrid. We expect the cost will be approximately $10-
12 million.
The starting material used by us in the manufacturing of NexoBrid and our other product candidates is bromelain SP, which is derived from
pineapple plant stems. We have entered into an agreement with CBC, dated January 11, 2001, as amended on February 28, 2010, pursuant to which CBC
uses proprietary methods to manufacture bromelain SP and supplies us with this intermediate drug substance in bulk quantities. According to the terms of
the agreement, CBC shall not, and shall not permit related companies or a third party to, manufacture, use, supply or sell the raw materials for the use or
production of a product directly or indirectly competing with any of our products. Our supply agreement with CBC has no fixed expiration date and can be
voluntarily terminated by us, with at least six months’ advance written notice, or by CBC, with at least 24 months’ advance written notice.
Upon obtaining bromelain SP from CBC, we further process it into the drug substance and then into the drug product to finally create the powder
form of NexoBrid. The necessary inactive ingredients contained in NexoBrid, or the excipients, are readily available and generally sold to us by multiple
suppliers. In addition to this powder, we manufacture a sterile gel substance by combining water for injections produced by us at our facility and additional
excipients.
Marketing, Sales and Distribution
We commercialize globally NexoBrid via multiple sales channels:
Europe
In Europe and Israel, we sell NexoBrid, primarily through our own sales force consisting of a marketing team of specialized and knowledgeable
sales representatives in Europe, focusing on leading burn centers and Key Opinion Leaders (KOL) management. We have obtained national reimbursement
for NexoBrid in Belgium, Italy, and Greece and we continue to locally execute our market access strategy for most of Europe to obtain procurement by
burn centers and hospitals as part of their budget, or under local, regional or national reimbursement, depending on the specific process required in each
country. We believe that additional burn units in large hospitals as well as smaller hospitals will follow the treatment trends once established by the burn
centers. See “—Government Legislation and Regulation—Pharmaceutical Coverage, Pricing and Reimbursement.” Furthermore, we are establishing
additional distribution channels through local partners to extend outreach in EU (Sweden, Finland, Denmark, France, Switzerland, Greece, Malta, Bulgaria,
Cyprus, Portugal, the Netherlands and Luxemburg), where NexoBrid is already approved for marketing as part of the European marketing authorization. In
addition to receiving marketing authorization for NexoBrid in the European Union, key opinion leaders in the burn care field worldwide are already aware
of NexoBrid’s efficiency in removing eschar due to hundreds of scientific presentations and several award-winning abstracts at international and national
conferences and about 120 peer-reviewed papers.
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North America
Vericel License and Supply Agreements
On May 6, 2019, we entered into exclusive license and supply agreements with Vericel to commercialize NexoBrid in all countries of North
America (which we refer to as the “Territory”).
License Agreement.
We entered into the Vericel License Agreement pursuant to which we granted Vericel an exclusive license, with the right to grant sublicenses, to
develop and commercialize NexoBrid and any improvements of NexoBrid (the “Licensed Product”) in the Territory.
Pursuant to the terms of the Vericel License Agreement, Vericel will have exclusive control regarding the commercialization of Licensed Products
in the Territory and must use commercially reasonable efforts to commercialize Licensed Products within the Territory. We and Vericel have made
customary representations and warranties and have agreed to certain customary covenants, including confidentiality and indemnification.
Within 10 days of signing the Vericel License Agreement, Vericel paid us an upfront fee of $17.5 million (the “Upfront Payment”) and upon the
U.S. regulatory approval of the BLA for NexoBrid Vericel paid us $7.5 million. Vericel is obligated to pay us up to $125 million, in the aggregate, upon
attainment of certain sales milestones. The first sales milestone of $7.5 million is triggered when annual net sales of the Licensed Products in the Territory
exceed $75 million. Vericel is also obligated to pay us tiered royalties on net sales of Licensed Products at rates ranging from mid-high single-digit to mid-
teen percentages, subject to certain customary reductions, as well as a percentage of gross profits on committed purchases by BARDA and a royalty on
additional sales to BARDA. The royalties will expire on a product-by-product and country-by-country basis upon the latest to occur of (i) twelve years
following the first commercial sale of such Licensed Product in such country, (ii) the earliest date on which there are no valid claims of MediWound patent
rights covering such Licensed Product in such country, and (iii) the expiration of the regulatory exclusivity period for such Licensed Product in such
country (the “Royalty Term”). Such royalties are subject to reduction in the event that (a) Vericel must license additional third-party intellectual property in
order to develop, manufacture or commercialize a Licensed Product, or (b) biosimilar competition occurs with respect to the Licensed Product in any
country within the Territory. After the expiration of the applicable royalties for the Licensed Product in any country within the Territory, the license for
such Licensed Product in such country would become a fully paid-up, royalty-free, perpetual and irrevocable license.
The Vericel License Agreement expires on the date of expiration of all royalty obligations due under the agreement unless earlier terminated in
accordance with its terms. Either party may terminate the agreement upon the failure of the other party to comply with its material obligations under the
agreement if that failure is not remedied within certain specified cure periods or in the event of a party’s insolvency. In addition, Vericel may terminate the
agreement upon a 150-day written notice to us.
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Supply Agreement.
On May 6, 2019, concurrently with our entry into the License Agreement, we entered into a supply agreement with Vericel (the “Supply
Agreement”) pursuant to which we are obligated to supply Vericel with NexoBrid for sale in the Territory on an exclusive basis for the first five years of the
term of the Supply Agreement. The Supply Agreement requires us to take steps to ensure that our manufacturing capacity meets Vericel’s demand for
NexoBrid. In addition, after the exclusivity period or upon supply failure, Vericel will be permitted to establish an additional or alternate source of supply.
Pursuant to the Supply Agreement, we will supply NexoBrid to Vericel based on Vericel’s fixed orders on a unit price basis. After a specified
period, the unit price, on an annual basis, may be increased based on the United States Producer Price Index for Chemical Manufacturing published by the
Bureau of Labor Statistics.
The Supply Agreement’s initial term is five years (the “Initial Term”), with Vericel required to provide us with notice regarding whether it plans to
extend the Initial Term for an additional two years by the third anniversary of the Supply Agreement. On May 2022, Vericel notified us on its election to
extend the Initial Term for an additional 2 years until 2026. After the Initial Term and optional two-year extension, Vericel, at its sole discretion, may
choose to extend the Supply Agreement’s term for additional one-year periods for a potential total term of fifteen years.
The Supply Agreement will automatically terminate upon the expiration or termination of the License Agreement. Either party may terminate the
Supply Agreement upon the failure of the other party to comply with its material obligations under the Supply Agreement if such failure is not remedied
within certain specified cure periods. After the Initial Term, Vericel may terminate the Supply Agreement upon 12 months’ prior written notice to us, and
we may terminate the Supply Agreement upon 36 months prior written notice to Vericel.
BARDA
Pursuant to the First BARDA Contract, BARDA has initiated the procurement of NexoBrid valued at $16.5 million, for emergency stockpile as
part of the HHS mission to build national preparedness for public health medical emergencies. BARDA purchased inventory is being managed by
MediWound under vendor managed inventory. As of December 31, 2022, the Company has received $16.5 million for procurement of NexoBrid for U.S.
emergency preparedness.
Under our exclusive license and supply agreements with Vericel, we will equally split the gross profits on the initial procurement and receive a
double-digit royalty on any additional future BARDA purchases of NexoBrid. Please see “Vericel License and Supply Agreements” above.
Other International Markets
In other international markets, we sell NexoBrid through local distributors with which we have distribution agreements, focusing on Asia Pacific,
EMEA, CEE and LATAM. We have signed local distribution agreements for distribution in Argentina, Russia, Colombia, Mexico, Peru, Chile, Ecuador,
Panama, India, Bangladesh, Sri Lanka, Japan, Australia, New-Zealand, Singapore, Ukraine, Taiwan and United Arab Emirates.
Our distributors in Argentina, Russia, South Korea, Peru, Chile, Taiwan, Japan, India, United Arab Emirates and Eurasian countries have obtained
marketing authorization. Our additional distributors have filed or are in the process of filing for market authorization in their respective territories and are
expected to launch NexoBrid after receipt of local regulatory approval, which may take a year or more to be granted, and, consequently, may occur in
certain markets during 2023. We have launched NexoBrid in Argentina, South Korea, Russia, Taiwan and Chile and expect additional launches following
receipt of local marketing authorizations. We plan to enter other international markets through collaboration with local distributors and leverage our
approved registration file in Europe to obtain regional marketing authorizations.
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For a breakdown of our consolidated revenues by geographic markets and by categories of operations for the years ended December 31, 2021 and
2022, please see “Item 5.A Operating and Financial Review and Prospects—Operating Results.”
Intellectual Property
Our intellectual property and proprietary technology are important to the development, manufacture and sale of NexoBrid, EscharEx and our
future pipeline product candidates. We seek to protect our intellectual property, core technologies and other know-how through a combination of patents,
trademarks, trade secrets, non-disclosure and confidentiality agreements, licenses, assignments of invention and other contractual arrangements with our
employees, consultants, partners, suppliers, customers and others. Additionally, we rely on our research and development program, clinical trials, know-
how and marketing and distribution programs to advance our products and product candidates. As of December 31, 2022, we had been granted a total of 85
patents and have 11 pending patent applications. The family of patents that covers NexoBrid specifically includes 35 granted patents worldwide. EscharEx
is covered by 13 patents and 6 national phase applications.
The main patents for our proteolytic enzyme technology which underlies NexoBrid, EscharEx and our current pipeline product candidates have
been issued in Europe, the United States and other international markets. Our patents which cover NexoBrid claim specific mixtures of proteolytic
enzymes, methods of producing such mixtures and methods of treatment using such mixtures. Although the protection achieved is significant for NexoBrid,
EscharEx and our pipeline product candidates, when looking at our patents’ ability to block competition, the protection offered by our patents may be, to
some extent, more limited than the protection provided by patents which claim chemical structures which were previously unknown. Absent patent-term
extensions, the NexoBrid patents are nominally set to expire in 2025 and in 2029 in the United States. The NexoBrid patents issued in Europe and in other
foreign jurisdictions are nominally set to expire in 2025. The patents and the national phase applications relating to EscharEx, if the national phase
applications are granted, will expire on January 30, 2037, absent any patent-term adjustment and/or extensions.
While our policy is to obtain patents by application, license or otherwise, to maintain trade secrets and to seek to operate without infringing on the
intellectual property rights of third parties, technologies related to our business have been rapidly developing in recent years. Additionally, patent
applications that we may file or license from third parties may not result in the issuance of patents, and our issued patents and any issued patents that we
may receive in the future may be challenged, invalidated or circumvented. For example, we cannot predict the extent of claims that may be granted or
enforceable in our patents nor can we be certain of the priority of inventions covered by pending third‑party patent applications filed in the U.S. If third
parties prepare and file patent applications that also claim technology or therapeutics to which we have rights, we may have to participate in proceedings to
determine priority of invention, which could result in substantial costs to us, even if the eventual outcome is favorable to us. Moreover, because of the
extensive time required for clinical development and regulatory review of a product we may develop, it is possible that, before NexoBrid can be
commercialized in additional jurisdictions and/or before any of our future products can be commercialized, related patents will expire a short period
following commercialization, thereby reducing the advantage of such patent. Loss or invalidation of certain of our patents, or a finding of unenforceability
or limited scope of certain of our intellectual property rights, could have a material adverse effect on us. See “ITEM 3.D. Risk Factors — Our success
depends in part on our ability to obtain and maintain protection for the intellectual property relating to, or incorporated into, our technology and products.”
In addition to patent protection, we also rely on trade secrets, including unpatented know‑how, technology innovation, drawings, technical
specifications and other proprietary information in attempting to develop and maintain our competitive position. We also rely on protection available under
trademark laws, and we currently hold various registered trademarks, including “MediWound,” “NexoBrid” and “EscharEx” in various jurisdictions,
including the United States, the European Union and Israel.
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Klein License Agreement
In September 2000, we signed an exclusive license agreement, as amended in June 2007, with Mark Klein, a third party, for use of certain patents
and intellectual property (the “Klein License Agreement”). Under the Klein License Agreement, we received an exclusive license to use the third party’s
patents and intellectual property to develop, manufacture, market and commercialize NexoBrid and its pipeline product candidates for the treatment of
burns and other wounds. The claims of such patents are directed to a process of preparing a mixture of escharase and proteolytic enzymes and cover the
underlying proteolytic mixture of escharase and proteolytic enzymes prepared by that specific process. Pursuant to the Klein License Agreement, we are
obligated to keep accounting records related to the sales of NexoBrid and its pipeline product candidates and pay royalties as discussed below. The Klein
License Agreement may be terminated by Mark Klein, subject to notice and dispute resolution provisions of the Klein License Agreement, in the event of
our breach, bankruptcy petition, insolvency or failure to achieve a development milestone within six months of a target date. We have already achieved all
development milestones under the Klein License Agreement.
In consideration for the Klein License Agreement, we paid an aggregate amount of $1.0 million following the achievement of certain development
milestones. In addition, we undertook to pay royalties of 1.5‑2.5% from revenues, 10% of royalties received from sublicensing and 2% of lump‑sum
payments received from sublicensing up to $1 million and 4% above $1 million, in each case relating to products based on the licensed patents and
intellectual property, for a term of 10‑15 years, as applicable, from the date of the first commercial delivery in a major country. In addition, under the Klein
License Agreement, we agreed to pay a one‑time lump‑sum amount of $1.5 million upon reaching aggregate revenues of $100 million from the sale of
such products.
Competition
NexoBrid received orphan drug status in the European Union on July 31, 2002 and in the United States on August 20, 2003 for debridement of
deep partial‑ and full‑thickness burns in hospitalized patients. In the United States and the European Union, a sponsor that develops an orphan drug has
marketing exclusivity for seven years post‑approval by the FDA and for ten years post‑approval by the EMA, respectively. The exclusive marketing rights
in both regions are subject to certain exceptions, including the development of a clinically significant benefit over the prevalent SOC. Once the market
exclusivity for our orphan indication expires in a given jurisdiction, subject to other protections such as patents, we could face competition from other
companies that may attempt to develop other products for the same indication.
The medical, biotechnology and pharmaceutical industries are intensely competitive and subject to significant technological change and changes
in practice. While we believe that our innovative technology, knowledge, experience and scientific resources provide us with competitive advantages, we
may face competition from many different sources with respect to NexoBrid, EscharEx, MW005 and our existing pipeline product candidates or any
product candidates that we may seek to develop or commercialize in the future. Possible competitors may include medical practitioners, pharmaceutical and
wound care companies, academic and medical institutions, governmental agencies and public and private research institutions, among others. Any product
that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.
In addition, we face competition from the current SOC. The current SOC for eschar removal in severe burns is surgery, where eschar removal can
be performed by tangential excision, dermabrasion or hydro jet, or non‑surgical alternatives, such as applying topical medications to the eschar to facilitate
the natural healing process. Consequently, we face competition from traditional surgical procedures and topical agents. However, based on our clinical
trials, we believe that NexoBrid has a sustainable competitive advantage over the current non‑surgical alternatives and is less invasive than surgery in
removing eschar in patients with burn wounds. See “—NexoBrid and Our Clinical History” for the results of our clinical trials.
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Although we are in the clinical and preclinical phases for our pipeline product candidates for debridement of chronic and other hard‑to‑heal
wounds and treatment of low-risk basal cell carcinoma and connective tissue disorders and other indications, respectively, if one of our pipeline product
candidates receives approval in the future, we would compete with traditional surgery and existing non‑surgical and other treatments. In chronic and other
hard‑to‑heal wounds, we expect to face competition from current standard of care for debridement by sharp debridement or from the current non-surgical
standard of care, either enzymatic debridement, primarily Smith & Nephew Plc’s Santyl, a collagenase-based product indicated for debriding chronic
dermal ulcers and severely burned areas or autolytic debridement.
The current standard of care for treatment of low-risk basal cell carcinoma is surgical excision. In superficial basal cell carcinoma and inoperable
nodular basal cell carcinoma, we expect to face competition from current topical applications such as imiquimod and 5FU.
In addition to the currently available products, other products may be introduced to debride chronic and other hard‑to‑heal wounds or treat
superficial and nodular basal cell carcinoma and connective tissue disorders during the time that we engage in necessary development. Accordingly, if one
of our pipeline product candidates is approved, our main challenge in the market would be to educate physicians seeking alternatives to surgery to use our
product instead of already existing treatments. While we are still in the development stages, based on our studies, we believe that our pipeline product
candidates will be more effective than the current non‑surgical alternatives and less invasive than surgery in removing eschar in chronic and other
hard‑to‑heal wounds or tumor resection and may be comparable or perhaps better than currently available treatments for connective tissue disorders.
Government Legislation and Regulation
Our business is subject to extensive government regulation. Regulation by governmental authorities in the United States, the European Union and
other jurisdictions is a significant factor in the development, manufacture and marketing of NexoBrid and in ongoing research and development activities.
European Union
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The approval process of medicinal products in the European Union generally involves satisfactorily completing each of the following:
laboratory tests, animal studies and formulation studies all performed in accordance with the applicable EU GLP or GMP regulations;
submission to the relevant authorities of a CTA, 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 competent authorities of a marketing authorization application (“MAA”), which includes the data supporting
preclinical and clinical safety and efficacy as well as detailed information on the manufacture and composition and control of the product
development and proposed labeling as well as other information;
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•
•
•
inspection by the relevant national authorities of the manufacturing facility or facilities and quality systems (including those of third parties)
at which the product is produced, to assess compliance with strictly enforced GMP;
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 competent authority of the MAA before any commercial marketing, sale or shipment of the product.
Quality/preclinical studies
In order to assess the potential safety and efficacy of a product, tests include laboratory evaluations of product characterization, analytical tests and
controls, as well as studies to evaluate toxicity and pharmacological effects in animal studies. The conduct of the preclinical tests and formulation of the
compounds for testing must comply with the relevant E.U. regulations and requirements. The results of such tests, together with relevant manufacturing
control information and analytical data, are submitted as part of the CTA. Non-clinical studies are performed to demonstrate the health or environmental
safety of new biological substances. Non-clinical studies must be conducted in compliance with the principles of GLP as set forth in EU Directive
2004/10/EC. In particular, non-clinical studies, both in vitro and in vivo, must be planned, performed, monitored, recorded, reported and archived in
accordance with the GLP principles, which define a set of rules and criteria for a quality system for the organizational process and the conditions for non-
clinical studies. These GLP standards reflect the Organization for Economic Co-operation and Development requirements.
Clinical trial approval
Clinical drug development is often described as consisting of four temporal phases (Phase I‑IV). See, for example, the EMA’s note for guidance
on general considerations for clinical trials (CPMP/ICH/291/95).
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Phase I (Most typical kind of study: Human Pharmacology);
Phase II (Most typical kind of study: Therapeutic Exploratory);
Phase III (Most typical kind of study: Therapeutic Confirmatory); and
Phase IV (Variety of Studies: Therapeutic Use).
Studies in Phase IV are all studies other than routine surveillance performed after drug approval and are related to the approved indication.
The phase of development provides an inadequate basis for classification of clinical trials because one type of trial may occur in several phases.
The phase concept is a description, not a set of requirements. The temporal phases do not imply a fixed order of studies since for some drugs in a
development plan the typical sequence will not be appropriate or necessary.
Clinical trials of medicinal products in the EU must be conducted in accordance with EU and national regulations and the International
Conference on Harmonization (“ICH”) guidelines on GCP as well as the applicable regulatory requirements and the ethical principles that have their origin
in the Declaration of Helsinki. If the sponsor of the clinical trial is not established within the EU, it must appoint an EU entity to act as its legal
representative. The sponsor must take out a clinical trial insurance policy, and in most EU member states, the sponsor is liable to provide ‘no fault’
compensation to any study subject injured in the clinical trial.
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The regulatory landscape related to clinical trials in the EU has been subject to recent changes. The EU Clinical Trials Regulation (“CTR”) which
was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. Unlike directives, the CTR is directly
applicable in all EU member states without the need for member states to further implement it into national law. The CTR notably harmonizes the
assessment and supervision processes for clinical trials throughout the EU via a Clinical Trials Information System, which contains a centralized EU portal
and database.
While the Clinical Trials Directive required a separate CTA to be submitted in each member state, to both the competent national health authority
and an independent ethics committee, much like the FDA and IRB respectively, the CTR introduces a centralized process and only requires the submission
of a single application to all member states concerned. The CTR allows sponsors to make a single submission to both the competent authority and an ethics
committee in each member state, leading to a single decision per member state. The CTA must include, among other things, a copy of the trial protocol and
an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under investigation. The
assessment procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by
each member state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s decision is communicated
to the sponsor via the centralized EU portal. Once the CTA is approved, clinical study development may proceed.
The CTR foresees a three-year transition period. The extent to which ongoing and new clinical trials will be governed by the CTR varies. Clinical
trials for which an application was submitted (i) prior to January 31, 2022 under the Clinical Trials Directive, or (ii) between January 31, 2022 and January
31, 2023 and for which the sponsor has opted for the application of the Clinical Trials Directive remain governed by said Directive until January 31, 2025.
After this date, all clinical trials (including those which are ongoing) will become subject to the provisions of the CTR.
Medicines used in clinical trials must be manufactured in accordance with GMP. Other national and EU-wide regulatory requirements may also
apply.
Pediatric investigation plan (“PIP”)
We initiated a PIP study in November 2014.
On January 26, 2007, Regulation (EC) 1901/2006 came into force with its primary purpose being the improvement of the health of children
without subjecting children to unnecessary trials, or delaying the authorization of medicinal products for use in adults. The regulation established the
Pediatric Committee (“PDCO”), which is responsible for coordinating the EMA’s activities regarding medicinal products for children. The PDCO’s main
role is to determine which studies the applicant needs to perform in the pediatric population as part of the PIP.
All applications for marketing authorization for new medicinal products that were not authorized in the EU prior to January 26, 2007 must include
the results of studies carried out in children of different ages. The PDCO determines the requirements and procedures of such studies, describing them in a
PIP. This requirement also applies when a company wants to add a new indication, pharmaceutical form or route of administration for a medicine that is
already authorized. The PDCO can grant deferrals for some medicines, allowing a company to delay development of the medicine in children until there is
enough information to demonstrate its effectiveness and safety in adults. The PDCO can also grant waivers when development of a medicine in children is
not needed or is not appropriate, because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is
intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric
patients.
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Before an MAA can be filed, or an existing marketing authorization can be amended, the EMA confirms that the applicant complied with the
studies’ requirements and measures listed in the PIP. Since the regulation became effective, several incentives for the development of medicines for
children become available in the European Union, including:
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medicines that have been authorized for marketing in the EU with the results of PIP studies included in the product information are eligible
for an extension of their supplementary protection certificate extension (if any is in effect at the time of approval) by six months. This is the
case even when the studies’ results are negative;
for orphan medicines, such as NexoBrid, the incentive is an additional two years of market exclusivity instead of one;
scientific advice and protocol assistance at the EMA are free of charge for questions relating to the development of medicines for children;
and
medicines developed specifically for children that are already authorized, but are not protected by a patent or supplementary protection
certificate, can apply for a pediatric use marketing authorization (“PUMA”). If a PUMA is granted, the product will benefit from 10 years of
market protection as an incentive.
In September 2022, we announced that EMA validated for review our Type II Variation to expand the currently approved indication for NexoBrid
(removal of eschar in adults with deep partial-and full-thickness thermal burn into the pediatric population. We expect decision from EMA by mid-year
2023.
Marketing authorization
Authorization to market a product in the EU member states proceeds under one of four procedures: a centralized authorization procedure, a mutual
recognition procedure, a decentralized procedure or a national procedure. Marketing authorization may be granted only to an applicant established in the
European Union. Through our wholly‑owned German subsidiary, we received approval for NexoBrid pursuant to the centralized authorization procedure.
The centralized procedure provides for the grant of a single marketing authorization, issued by the European Commission based on the opinion of
the EMA’s Committee for Medicinal Products for Human Use (“CHMP”), that is valid throughout the EU and the EEA countries, and including Norway,
Iceland and Lichtenstein. The centralized procedure is compulsory for medicines produced by certain biotechnological processes, products designated as
orphan medicinal products, advanced therapy medicinal products (“ATMPs”) and products with a new active substance indicated for the treatment of
certain diseases, and is optional for products which constitute a significant therapeutic, scientific, or technical innovation or for which a centralized process
is in the interest of patients. Products that have received orphan designation in the EU, such as NexoBrid, will qualify for this centralized procedure, under
which each product’s MAA is submitted to the EMA. Under the centralized procedure in the European Union, the maximum time frame for the evaluation
of an MAA by the EMA is 210 days (excluding clock stops, when additional written or oral information is to be provided by the applicant in response to
questions asked by the Committee of Medicinal Products for Human Use).
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In general, if the centralized procedure is not followed, there are three alternative procedures where applications are filed with one or more
members state medicines regulators, each of which will grant a national marketing authorization:
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Mutual recognition procedure. If an authorization has been granted by one-member state, or the Reference Member State, an application may
be made for mutual recognition in one or more other member states, or the Concerned Member State(s).
Decentralized procedure. The decentralized procedure may be used to obtain a marketing authorization in several European member states
when the applicant does not yet have a marketing authorization in any country.
National procedure. Applicants following the national procedure will be granted a marketing authorization that is valid only in a single
member state. Furthermore, this marketing authorization is not based on recognition of another marketing authorization for the same product
awarded by an assessment authority of another member state. If marketing authorization in only one-member state is preferred, an application
can be filed with the national competent authority of a member state. The national procedure can also serve as the first phase of a mutual
recognition procedure.
It is not always possible for applicants to follow the national procedure. In the case of medicinal products in the category for which the centralized
authorization procedure is compulsory, that procedure must be followed. In addition, the national procedure is not available in the case of medicinal
product dossiers where the same applicant has already obtained marketing authorization in one of the other European Union member state or has already
submitted an application for marketing authorization in another member state and the application is under consideration. In the latter case, applicants must
follow a mutual recognition procedure.
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. Sanctions may be imposed for failure to adhere to the conditions of the marketing authorization. In extreme
cases, the authorization may be revoked, resulting in withdrawal of the product from sale.
Period of authorization and renewals
Under the above-described procedures, in order to grant the marketing authorization, the EMA or the competent authorities of the EU member
states make an assessment of the risk benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy. Marketing
authorization is valid for an initial five‑year period and may be renewed thereafter on the basis of a re‑evaluation of the risk‑benefit balance by the EMA or
by the competent authority of the authorizing member state. To this end, the marketing authorization holder shall provide the EMA or other applicable
competent authority 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 six months before the end of the initial five‑year period. Once renewed, the marketing authorization is valid for an
unlimited period, unless the EMA or other applicable competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one
additional five‑year renewal. Any authorization which is not followed by the actual placing of the drug on the E.U. market (in case of centralized
procedure) or on the market of the authorizing member state within three years after authorization shall cease to be valid.
Orphan designation
In the EU, the Committee for Orphan Medicinal Products assesses orphan drug designation. The criteria for designating an “orphan medicinal
product” in the EU are similar in principle to those in the United States. A medicinal product can be designated as an orphan if its sponsor can establish
that (1) the product is intended for the diagnosis, prevention or treatment of a life threatening or chronically debilitating condition; (2) either (a) such
condition affects not more than five in 10,000 persons in the EU when the application is made, or (b) the product, without the benefits derived from the
orphan status, would not generate sufficient return in the EU to justify the necessary investment; and (3) there exists no satisfactory method of diagnosis,
prevention or treatment of the condition in question that has been authorized for marketing in the EU or, if such method exists, the product will be of
significant benefit to those affected by that condition.
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In the EU, orphan drug designation also entitles a party to financial incentives such as reduction of fees or fee waivers, protocol assistance, access
to the centralized procedure, and ten years of market exclusivity upon grant of a marketing authorization for the approved indication, which means that the
competent authorities cannot accept another MAA, or grant a marketing authorization, or accept an application to extend a marketing authorization for a
similar medicinal product for the same indication for a period of ten years. The period of market exclusivity is extended by two years for orphan medicinal
products that have also complied with an agreed PIP. No extension to any supplementary protection certificate can be granted on the basis of pediatric
studies for orphan indications. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval
process. This period may be reduced to six years if, at the end of the fifth year, 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, where the prevalence of the condition has increased above
the threshold, or a safer, more effective or otherwise clinically superior product is available. Orphan drug designation must be requested before submitting
an MAA. Additionally, granting of an authorization for another similar orphan medicinal product where another product has market exclusivity can happen
at any time if: (i) the second applicant can establish that its product, although similar to the authorized product, is safer, more effective or otherwise
clinically superior, (ii) inability of the applicant to supply sufficient quantities of the orphan medicinal product or (iii) where the applicant consents to a
second orphan medicinal product application. A company may voluntarily remove a product from the orphan register.
Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
Regulatory data protection
Without prejudice to the law on the protection of industrial and commercial property, some marketing authorizations benefit from an “8+2(+1)”
year period of regulatory protection. During the first eight years from the grant of the innovator company’s marketing authorization, data exclusivity
applies. If granted, the data exclusivity period prevents generic or biosimilar applicants from relying on the pre-clinical and clinical trial data contained in
the dossier of the reference product when applying for a generic or biosimilar MA in the EU during a period of eight years from the date on which the
reference product was first authorized in the EU. After the eight years have expired, a generic company can make use of the preclinical and clinical trial
data of the originator in their regulatory applications but still cannot market their product until the end of the 10 year market exclusivity period. An
additional one year of market exclusivity can be obtained if, during the first eight years of those 10 years, the marketing authorization holder obtains an
approval for one or more new therapeutic indications which, during the scientific evaluation prior to their approval, are determined to bring a significant
clinical benefit in comparison with existing therapies. However, there is no guarantee that a product will be considered by the EU’s regulatory authorities to
be a new chemical or biological entity, and products may not qualify for data exclusivity. Under the current rules, a third party may reference the preclinical
and clinical data of the reference product beginning eight years after first approval, but the third party may market a generic version only after 10 (or 11)
years have lapsed.
There is a special regime for biosimilars, or biological medicinal products that are similar to a reference medicinal product but that do not meet the
definition of a generic medicinal product, for example, because of differences in raw materials or manufacturing processes. For such products, the results of
appropriate preclinical or clinical trials must be provided, and guidelines from the EMA detail the type of quantity of supplementary data to be provided for
different types of biological product. There are no such guidelines for complex biological products, such as gene or cell therapy medicinal products, and so
it is unlikely that biosimilars of those products will currently be approved in the EU. However, guidance from the EMA states that they will be considered
in the future in light of the scientific knowledge and regulatory experience gained at the time.
Additional data protection can be applied for when an applicant has complied with all requirements as set forth in an approved PIP.
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Post-Approval Requirements
Similar to the United States, both marketing authorization holders and manufacturers of medicinal products are subject to comprehensive
regulatory oversight by the EMA, the European Commission and/or the competent regulatory authorities of the member states. The holder of a marketing
authorization must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance who is responsible
for oversight of that system. Key obligations include expedited reporting of suspected serious adverse reactions and submission of periodic safety update
reports (“PSURs”).
All new MAA must include a risk management plan (“RMP”) describing the risk management system that the company will put in place and
documenting measures to prevent or minimize the risks associated with the product. The regulatory authorities may also impose specific obligations as a
condition of the marketing authorization. Such risk-minimization measures or post-authorization obligations may include additional safety monitoring,
more frequent submission of PSURs, or the conduct of additional clinical trials or post-authorization safety studies.
Failure to comply with the aforementioned EU and member state laws may result in administrative, civil or criminal penalties. These penalties
could include delays or refusal to authorize the conduct of clinical trials, or to grant marketing authorization, product withdrawals and recalls, product
seizures, suspension, withdrawal or variation of the marketing authorization, total or partial suspension of production, distribution, manufacturing or
clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal penalties. These penalties could include delays or refusal to
authorize the conduct of clinical trials, or to grant the marketing authorization, product withdrawals and recalls, product seizures, suspension, withdrawal or
variation of the marketing authorization, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions,
injunctions, suspension of licenses, fines and criminal penalties.
The aforementioned EU rules are generally applicable in the EEA.
Brexit
The UK left the EU on January 31, 2020, following which existing EU medicinal product legislation continued to apply in the United Kingdom
during the transition period under the terms of the EU-UK Withdrawal Agreement. The transition period, which ended on December 31, 2020, maintained
access to the EU single market and to the global trade deals negotiated by the EU on behalf of its members. The transition period provided time for the UK
and EU to negotiate a framework for partnership for the future, which was then crystallized in the Trade and Cooperation Agreement (“TCA”) and became
effective on January 1, 2021. The TCA includes specific provisions concerning pharmaceuticals, which include the mutual recognition of GMP inspections
of manufacturing facilities for medicinal products and GMP documents issued but does not foresee wholesale mutual recognition of UK and EU
pharmaceutical regulations.
EU laws which have been transposed into UK law through secondary legislation continue to be applicable as “retained EU law”. However, under
the Retained EU Law (Revocation and Reform) Bill 2022, which is currently before the UK parliament, any retained EU law not expressly preserved and
“assimilated” into domestic law or extended by ministerial regulations (to no later than 23 June 2026) will automatically expire and be revoked by
December 31, 2023. In addition, new legislation such as the EU CTR or in relation to orphan medicines will not be applicable. The UK government has
passed a new Medicines and Medical Devices Act 2021, which introduces delegated powers in favor of the Secretary of State or an ‘appropriate authority’
to amend or supplement existing regulations in the area of medicinal products and medical devices. This allows new rules to be introduced in the future by
way of secondary legislation, which aims to allow flexibility in addressing regulatory gaps and future changes in the fields of human medicines, clinical
trials and medical devices.
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As of January 1, 2021, the Medicines and Healthcare Products Regulatory Agency (“MHRA”) is the UK’s standalone medicines and medical
devices regulator. As a result of the Northern Ireland protocol, different rules will apply in Northern Ireland than in England, Wales, and Scotland, together,
Great Britain (“GB”); broadly, Northern Ireland will continue to follow the EU regulatory regime, but its national competent authority will remain the
MHRA. The MHRA has published a guidance on how various aspects of the UK regulatory regime for medicines will operate in GB and in Northern
Ireland following the expiry of the Brexit transition period on December 31, 2020. The guidance includes clinical trials, importing, exporting, and
pharmacovigilance and is relevant to any business involved in the research, development, or commercialization of medicines in the UK. The new guidance
was given effect via the Human Medicines Regulations (Amendment etc.) (EU Exit) Regulations 2019 (the “Exit Regulations”).
The MHRA has introduced changes to national licensing procedures, including procedures to prioritize access to new medicines that will benefit
patients, including a 150-day assessment and a rolling review procedure. All existing EU MAs for centrally authorized products were automatically
converted or grandfathered into UK MAs, effective in GB (only), free of charge on January 1, 2021, unless the MA holder chose to opt-out. After Brexit,
companies established in the UK cannot use the centralized procedure and instead must follow one of the UK national authorization procedures or one of
the remaining post-Brexit international cooperation procedures to obtain an MA to commercialize products in the UK. For a period of three years from
January 1, 2021, the MHRA may rely on a decision taken by the an Commission on the approval of a new (centralized procedure) MA when determining
an application for a GB authorization; or use the MHRA’s decentralized or mutual recognition procedures which enable MAs approved in EU member
states (or Iceland, Liechtenstein, Norway) to be granted in GB.
There will be no pre-MA orphan designation. Instead, the MHRA will review applications for orphan designation in parallel to the corresponding
MA application. The criteria are essentially the same, but have been tailored for the market, i.e., the prevalence of the condition in GB, rather than the EU,
must not be more than five in 10,000. Should an orphan designation be granted, the period or market exclusivity will be set from the date of first approval
of the product in GB.
Data Privacy and Security Laws
Numerous state, federal and foreign laws, regulations, and standards govern the collection, use, access to, confidentiality and security of health-
related and other personal information, and could apply now or in the future to our operations or the operations of our partners. In the United States,
numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws and consumer
protection laws and regulations govern the collection, use, disclosure, and protection of health-related and other personal information. In addition, certain
laws govern the privacy and security of personal data, including health-related data in the EU/EEA and in other foreign jurisdictions. Privacy and security
laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in
investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.
Cybersecurity
In the normal course of business, we may collect and store personal information and certain sensitive company information, including proprietary
and confidential business information, trade secrets, intellectual property, information regarding trial participants in connection with clinical trials, sensitive
third-party information and employee information. To protect this information, our existing cybersecurity policies require continuous monitoring and
detection programs, network security precautions, encryption of critical data, and in depth security assessment of vendors. We maintain various protections
designed to safeguard against cyberattacks, including firewalls and virus detection software. We have established and regularly test our disaster recovery
plan and we protect against business interruption by backing up our major systems. In addition, we periodically scan our environment for any
vulnerabilities, perform penetration testing and engage third parties to assess effectiveness of our data security practices. A third party security consultant
conducts regular network security reviews, scans and audits. In addition, we maintain insurance that includes cybersecurity coverage.
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Our cybersecurity program is led by a team of highly skilled cybersecurity professionals. The program incorporates industry-standard frameworks,
policies and practices designed to protect the privacy and security of our sensitive information (“SOPs”). In addition, we maintain business continuity and
disaster recovery plans, conducted penetration testing, maintain regular cyber security training to employees and conducted an internal audit on our cyber
security preparedness in 2022.
Despite the implementation of our cybersecurity program, our security measures cannot guarantee that a significant cyberattack will not occur. A
successful attack on our information technology systems could have significant consequences to the business. While we devote resources to our security
measures to protect our systems and information, these measures cannot provide absolute security. See “Risk Factors – Risk Related to Healthcare Laws
and Other Legal Compliance Matters” for additional information about the risks to our business associated with a breach or compromise to our information
technology systems.
Manufacturing
The manufacturing of authorized drugs, for which a separate manufacturer’s license is mandatory, must be conducted in strict compliance with the
EMA’s cGMP requirements and comparable requirements of other regulatory bodies, which mandate the methods, facilities and controls used in
manufacturing, processing and packing of drugs to assure their safety and proper identification. The EMA monitors compliance with its GMP 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 competent authority of the member state 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. In January 2013, the EU and Israel signed the Protocol on Conformity Assessment and Acceptance of Industrial
Products (the “ACAA”), which covers medicinal products. The ACAA provides for mutual recognition of the conclusions of inspections of compliance of
manufacturers and importers with the principles and guidelines of EU GMP and equivalent Israeli cGMP. Certification of the conformity of each batch to
its specifications by either the importer or the manufacturer established in Israel or in the EU shall be recognized by the other party without re‑control at
import from one party to the other.
Marketing and promotion
The marketing and promotion of authorized medicinal products, including industry‑sponsored continuing medical education and advertising
directed toward the prescribers of drugs and/or the general public, are strictly regulated in the European Union, notably under Directive 2001/83 and
subject to laws concerning promotion of medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial
practices. The applicable legislation aims 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 applicable national authority of the authorizing member
state. All advertising and promotional activities for the product must be consistent with the approved summary of product characteristics, and therefore all
off-label promotion is prohibited. Direct-to-consumer advertising of prescription medicines is also prohibited in the EU. Although general requirements for
advertising and promotion of medicinal products are established under EU directives, the details are governed by regulations in each member state and can
differ from one country to another. Failure to comply with these requirements can result in adverse publicity, warning letters, mandated corrective
advertising and potential civil and criminal penalties.
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United States
Review and approval of biologics
In addition to E.U. regulations, NexoBrid is marketed as a biologic product in the United States for eschar removal in adults with deep partial
thickness and/or full thickness thermal burns and is therefore subject to various U.S. regulations. In the United States, the FDA regulates biologics under
the Federal, Food, Drug and Cosmetic Act (“FDCA”), the Public Health Service Act, and their respective implementation regulations. Biologics require the
submission of a BLA and licensure by the FDA prior to being marketed in the United States. The process of obtaining regulatory approvals and the
subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial
resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval
may subject an applicant to a variety of administrative or judicial sanctions as well as enforcement actions brought by the FDA, the U.S. Department of
Justice or other governmental entities. Possible sanctions may include the FDA’s refusal to approve pending BLAs or supplements, withdrawal of an
approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or
distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties.
The process required by the FDA prior to marketing and distributing a biologic in the United States generally involves the following:
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completion of laboratory tests, animal studies and formulation studies in compliance with the FDA’s GLP and GMP regulations, as
applicable;
submission to the FDA of an investigational new drug application (“IND”), which must become effective before clinical trials may begin;
approval by an independent institutional review board (“IRB”) at each clinical site before each trial may be initiated;
performance of adequate and well‑controlled clinical trials in accordance with GCP to establish the safety and efficacy of the product for each
indication;
preparation and submission to the FDA of a BLA;
satisfactory completion of an FDA advisory committee review, if applicable;
satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components
thereof, are produced to assess compliance with cGMP requirements, and to assure that the facilities, methods and controls are adequate to
preserve the product’s safety, purity and potency, and of selected clinical investigation sites to assess compliance with GCP; and
payment of user fees and FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for
use in the United States.
Preclinical studies
Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess the potential
safety and efficacy of the product candidate. Preclinical safety tests must be conducted in compliance with FDA regulations regarding good laboratory
practices. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND
which must become effective before clinical trials may commence. Some preclinical testing may continue even after the IND is submitted.
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Clinical trials in support of a BLA
Clinical trials involve the administration of an investigational product to human subjects under the supervision of qualified investigators in
accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing
before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the
study, 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. An IND automatically becomes effective 30 days after receipt by the FDA, unless
before that time the FDA raises concerns or questions related to a proposed clinical trial and places the trial on clinical hold. In such a case, the IND
sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin.
In addition, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it
commences at that institution, and the IRB must conduct continuing review and reapprove the study at least annually. The IRB must review and approve,
among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA
regulations. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public
dissemination on their website, ClinicalTrials.gov.
For purposes of BLA approval, clinical trials are typically conducted in three sequential phases, which may overlap or be combined. In the United
States, the three phases are generally described as follows:
Phase I: The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition and tested
for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness
and to determine optimal dosage.
Phase II: The investigational product is administered to a limited patient population to identify possible adverse effects and safety risks, to
preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.
Phase III:The investigational product is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in
well‑controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to
establish the overall risk‑benefit profile of the product, and to provide adequate information for the labeling of the product.
In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more
information about the product. These so-called Phase IV studies may be made a condition to approval of the BLA.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse
events occur. Phase I, Phase II and Phase III clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA
or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to
an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted
in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.
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Submission of a BLA to the FDA
The results of the preclinical studies and clinical trials, together with other detailed information, including information on the manufacture, control
and composition of the product, are submitted to the FDA as part of a BLA requesting approval to market the product candidate for a proposed indication.
Under the Prescription Drug User Fee Act (PDUFA), as amended, applicants are required to pay user fees to the FDA for reviewing a BLA. These user
fees, as well as the annual program fees required for approved products, can be substantial. Each BLA submitted to the FDA for approval is typically
reviewed for administrative completeness and reviewability within 60 days following submission of the application. If found complete, the FDA will “file”
the BLA, which triggers a full review of the application. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the
time of submission. The FDA’s established goals are to review and act on standard applications within ten months after it accepts the application for filing,
or, if the application qualifies for priority review, six months after the FDA accepts the application for filing. In both standard and priority reviews, the
review process is often significantly extended by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among
other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed, or held meets standards designed to
assure the product’s continued safety, purity and potency. The FDA may convene an advisory committee to provide clinical insight on application review
questions.
Before approving a BLA, the FDA generally inspects the facilities at which the product is manufactured or facilities that are significantly involved
in the product development and distribution process, and will not approve the product unless cGMP compliance is satisfactory. Additionally, before
approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. If the FDA determines that the application,
manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional
testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does
not satisfy the regulatory criteria for approval. After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the
investigational product will be produced, 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. A Complete Response letter will describe all of the deficiencies that
the FDA has identified in the BLA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the
FDA may issue the Complete Response letter without first conducting required inspections, testing submitted product lots, and/or reviewing proposed
labeling. In issuing the Complete Response letter, the FDA may recommend actions that the applicant might take to place the BLA in condition for
approval, including requests for additional information or clarification.
The FDA may deny approval of a BLA if applicable statutory or regulatory criteria are not satisfied, or may require additional testing or
information, which can delay the approval process. FDA approval of any application may include many delays or may never be granted. If a product is
approved, the approval will impose limitations on the indicated uses for which the product may be marketed, will require that warning statements be
included in the product labeling, may impose additional warnings to be specifically highlighted in the labeling (e.g., a Black Box Warning), which can
significantly affect promotion and sales of the product, may require that additional studies be conducted following approval as a condition of the approval
and may impose restrictions and conditions on product distribution, prescribing or dispensing. For example, the FDA may approve the BLA with a Risk
Evaluation and Mitigation Strategy, or REMS, to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or
potential serious risk associated with a product and to enable patients to have continued access to such medicines by managing their safe use. A REMS
program may be required to include various elements, such as a medication guide or patient package insert, a communication plan to educate healthcare
providers of the drug’s risks, or other elements to assure safe use, such as limitations on who may prescribe or dispense the drug, dispensing only under
certain circumstances, special monitoring and the use of patient registries.
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Once a product is approved, marketing the product for other indicated uses or making certain manufacturing or other changes requires FDA
review and approval of a supplemental BLA or a new BLA, which may require additional clinical data. In addition, further post‑marketing testing and
surveillance to monitor the safety or efficacy of a product may be required. Also, product approvals may be withdrawn if compliance with regulatory
standards is not maintained or if safety or manufacturing problems occur following initial marketing. In addition, new government requirements may be
established that could delay or prevent regulatory approval of our product candidates under development.
Post‑approval requirements
Any biologic products for which we receive FDA approvals are subject to pervasive continuing regulation by the FDA. Certain requirements
include, among other things, record‑keeping requirements, reporting adverse experiences with the product, providing the FDA with updated safety and
efficacy information annually or more frequently for specific events, product sampling and distribution requirements, complying with certain electronic
records and signature requirements and complying with FDA promotion and advertising requirements. These promotion and advertising requirements
include, among others, standards for direct‑to‑consumer advertising, prohibitions against promoting drugs for uses or in patient populations that are not
described in the drug’s approved labeling, known as “off‑label use,” and other promotional activities, such as those considered to be false or misleading.
Failure to comply with FDA requirements can have negative consequences, including the immediate discontinuation of noncomplying materials, adverse
publicity, enforcement letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties. Such
enforcement may also lead to scrutiny and enforcement by other government and regulatory bodies. Although physicians may prescribe legally available
drugs for off‑label uses, manufacturers may not encourage, market or promote such off‑label uses. As a result, “off‑label promotion” has formed the basis
for litigation under the Federal False Claims Act, violations of which are subject to significant civil fines and penalties.
The manufacturing of NexoBrid, EscharEx and our pipeline product candidates are and will be required to comply with applicable FDA
manufacturing requirements contained in the FDA’s cGMP regulations. NexoBrid is manufactured at our production plant in Yavne, Israel, which is cGMP
certified. The FDA’s cGMP regulations require, among other things, quality control and quality assurance, as well as the corresponding maintenance of
comprehensive records and documentation. Biologic manufacturers and other entities involved in the manufacture and distribution of approved drugs and
biologics are also required to register their establishments and list any products they make with the FDA and to comply with related requirements in certain
states. These entities are further subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other
laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP
compliance. In addition, a BLA holder must comply with post‑marketing requirements, such as reporting of certain adverse events. Such reports can
present liability exposure, as well as increase regulatory scrutiny that could lead to additional inspections, labeling restrictions or other corrective action to
minimize further patient risk. Discovery of problems with a product after approval may result in serious and extensive restrictions on the product,
manufacturer or holder of an approved BLA, as well as lead to potential market disruptions. These restrictions may include recalls, fines, warning letters, or
untitled letters, clinical holds on clinical studies, refusal of the FDA to approve pending applicants or supplements to approved applications, product
seizure or detention, or refusal to permit the import or export of products, suspension or revocation of a product license approval until the FDA is assured
that quality standards can be met, and continuing oversight of manufacturing by the FDA under a “consent decree,” which frequently includes the
imposition of costs and continuing inspections over a period of many years, as well as possible withdrawal of the product from the market. In addition,
changes to the manufacturing process generally require prior FDA approval before being implemented. Other types of changes to the approved product,
such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.
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The FDA also may impose a number of post‑approval requirements as a condition of approval of a BLA. For example, the FDA may require
post‑marketing testing, or Phase IV testing, as well as REMS and/or surveillance to monitor the effects of an approved product or place other conditions on
an approval that could otherwise restrict the distribution or use of NexoBrid.
Orphan designation and exclusivity
On August 20, 2003, NexoBrid received orphan drug designation in the United States. Under the Orphan Drug Act, the FDA may designate a drug
product as an “orphan drug” if it is intended to treat a rare disease or condition, meaning that it affects fewer than 200,000 individuals in the United States,
or more in cases in which there is no reasonable expectation that the cost of developing and making a drug product available in the United States for
treatment of the disease or condition will be recovered from sales of the product. A company must request orphan product designation before submitting a
BLA. If the request is granted, the FDA will disclose the identity of the therapeutic agent and its potential use. Orphan drug designation does not convey
any advantage in or shorten the duration of the regulatory review and approval process.
If a product with orphan status receives the first FDA approval for the disease or condition for which it has such designation, the product will be
entitled to orphan product exclusivity. Orphan product exclusivity means that FDA may not approve any other applications for the same product for the
same disease or condition for seven years, except in certain limited circumstances, such as a showing of clinical superiority to the product with orphan drug
exclusivity. Competitors may receive approval of different products for the indication for which the orphan product has exclusivity and may obtain
approval for the same product but for a different indication. If a drug or drug product designated as an orphan product ultimately receives marketing
authorization for an indication broader than that designated in its orphan product application, it may not be entitled to exclusivity. In addition, exclusive
marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the
manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.
Expedited Development and Review Programs
The FDA offers a number of expedited development and review programs for qualifying product candidates. The fast track program is intended to
expedite or facilitate the process for reviewing new products that meet certain criteria. Specifically, new products are eligible for fast track designation if
they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or
condition. Fast track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a fast
track product has opportunities for frequent interactions with the review team during product development and, once a BLA is submitted, the product may
be eligible for priority review. A fast track product may also be eligible for rolling review, where the FDA may consider for review sections of the BLA on
a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA
agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the
first section of the BLA.
A product intended to treat a serious or life-threatening disease or condition may also be eligible for breakthrough therapy designation to expedite
its development and review. A product can receive breakthrough therapy designation if preliminary clinical evidence indicates that the product may
demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed
early in clinical development. The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance
beginning as early as Phase I and an organizational commitment to expedite the development and review of the product, including involvement of senior
managers.
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Any marketing application for a biologic submitted to the FDA for approval, including a product with a fast track designation and/or breakthrough
therapy designation, may be eligible for other types of FDA programs intended to expedite the FDA review and approval process, such as priority review
and accelerated approval. A product is eligible for priority review if it has the potential to provide a significant improvement in the treatment, diagnosis or
prevention of a serious disease or condition compared to marketed products. For products containing new molecular entities, priority review designation
means the FDA’s goal is to take action on the marketing application within six months of the 60-day filing date, compared with ten months under standard
review.
Additionally, products studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive
accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a
clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity
or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative
treatments. As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled post-marketing
clinical studies to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. In addition, the FDA currently
requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch
of the product.
In 2017, FDA established a new regenerative medicine advanced therapy, or RMAT, designation as part of its implementation of the 21st Century
Cures Act, which was signed into law in December 2016. To qualify for RMAT designation, the product candidate must meet the following criteria: (1) it
qualifies as a RMAT, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product
using such therapies or products, with limited exceptions; (2) it is intended to treat, modify, reverse, or cure a serious or life-threatening disease or
condition; and (3) preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such a disease or condition.
Like fast track and breakthrough therapy designation, RMAT designation provides potential benefits that include more frequent meetings with FDA to
discuss the development plan for the product candidate and eligibility for rolling review and priority review. Products granted RMAT designation may also
be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or reliance
upon data obtained from a meaningful number of sites, including through expansion to additional sites. Once approved, when appropriate, the FDA can
permit fulfillment of post-approval requirements under accelerated approval through the submission of clinical evidence, clinical studies, patient registries,
or other sources of real world evidence such as electronic health records; through the collection of larger confirmatory datasets; or through post-approval
monitoring of all patients treated with the therapy prior to approval.
Fast track designation, breakthrough therapy designation, priority review, accelerated approval, and RMAT designation do not change the
standards for approval but may expedite the development or approval process.
Pediatric studies and exclusivity
Under the Pediatric Research Equity Act of 2003, a BLA or supplement thereto must contain data that are adequate to assess the safety and
effectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each
pediatric subpopulation for which the product is safe and effective. Sponsors must also submit pediatric study plans prior to the assessment data. Those
plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral
or waiver requests, and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then review the
information submitted, consult with each other and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.
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The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after
approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to
deferral requests and requests for extension of deferrals are contained in the FDASIA. Unless otherwise required by regulation, the pediatric data
requirements do not apply to products with orphan designation.
Separately, in the event the FDA issues a Written Request for pediatric data relating to a product, a BLA sponsor who submits such data may be
entitled to pediatric exclusivity. Pediatric exclusivity is another type of non‑patent marketing exclusivity in the United States which, if granted, provides for
the attachment of an additional six months of marketing protection to the term of any existing exclusivity, including other non‑patent and orphan
exclusivity. This six‑month exclusivity may be granted if a BLA sponsor submits pediatric data that fairly respond to the Written Request from the FDA for
such data. The data do not need to show that the product is effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly
respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within
the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is
not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot accept or approve another application.
The Animal Rule
In the case of product candidates that are intended to treat certain rare life-threatening diseases, conducting controlled clinical trials to determine
efficacy may be unethical or unfeasible. Under regulations issued by the FDA in 2002, often referred to as the “Animal Rule”, the approval of such
products can be based on clinical data from trials in healthy human subjects that demonstrate adequate safety and efficacy data from adequate and well-
controlled animal studies. Among other requirements, the animal studies must establish that the drug or biological product is reasonably likely to produce
clinical benefits in humans. Because the FDA must agree that data derived from animal studies may be extrapolated to establish safety and effectiveness in
humans, seeking approval under the Animal Rule may add significant time, complexity and uncertainty to the testing and approval process. In addition,
products approved under the Animal Rule are subject to additional requirements including post-marketing study requirements, restrictions imposed on
marketing or distribution or requirements to provide information to patients.
Patent term restoration and extension
A patent claiming a new drug product may be eligible for a limited patent term extension under the Drug Price Competition and Patent Term
Restoration Act of 1984 (the “Hatch‑Waxman Act”), which permits a patent restoration of up to five years for the patent term lost during product
development and the FDA regulatory review. The restoration period granted is typically one‑half the time between the effective date of an IND and the
submission date of a BLA, plus the time between the submission date of a BLA and the ultimate approval date. Patent term restoration cannot be used to
extend the remaining term of a patent past a total of fourteen years from the product’s approval date. Only one patent applicable to an approved drug
product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent in question. A patent that
covers multiple drugs for which approval is sought can only be extended in connection with one of the approvals. The U.S. Patent and Trademark Office
reviews and approves the application for any patent term extension or restoration in consultation with the FDA.
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Biosimilars and reference product exclusivity
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “ACA”),
which was signed into law in 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), which created an
abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-approved reference biological product.
Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms
of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a
product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference
product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be
alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of
the reference biologic. However, complexities associated with the larger, and often more complex, structures of biological products, as well as the
processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being
worked out by the FDA.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference
product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date
on which the reference product was first licensed. During this 12‑year period of exclusivity, another company may still market a competing version of the
reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and
well‑controlled clinical trials to demonstrate the safety, purity and potency of their product.
The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether
products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law. The BPCIA
is complex and continues to be interpreted and implemented by the FDA. In addition, recent government proposals have sought to reduce the 12‑year
reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject
of recent litigation. As a result, the ultimate impact, implementation, and meaning of the BPCIA remains subject to significant uncertainty.
Review and Approval of Drug Products Outside the European Union and the United States
In addition to the above regulations, we must obtain approval of a product by the comparable regulatory authorities of foreign countries outside of
the European Union and the United States before we can commence clinical trials or marketing of NexoBrid in those countries. The approval process varies
from country to country and the time may be longer or shorter than that required for FDA or EU approval. In addition, the requirements governing the
conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country. In all cases, clinical trials are conducted in
accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
If we fail to comply with applicable regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of
regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
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Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. In the United
States, EU and other markets, sales of any products for which we receive regulatory approval for commercial sale will depend to a large extent on the
availability of reimbursement from third‑party payors. Third‑party payors include governments, government health administrative authorities, managed
care providers, private health insurers and other organizations. The process for determining whether a payor will provide coverage for a drug product may
be separate from the process for setting the price or reimbursement rate that the payor will pay for the drug product. Third‑party payors may limit coverage
to specific drug products on an approved list, or formulary, which might not include all of the drug products approved for a particular indication by the
FDA, European Commission or National Ministries of Health. Third‑party payors are increasingly challenging the price and examining the medical
necessity and cost‑effectiveness of medical products and services, in addition to their safety and efficacy. We may need to conduct expensive
pharmacoeconomic studies in order to demonstrate the medical necessity and cost‑effectiveness of NexoBrid, in addition to the costs required to obtain the
FDA or other Ministry of Health approvals. Additionally, NexoBrid may not be considered medically necessary or cost‑effective. A payor’s decision to
provide coverage for a drug product does not guarantee that an adequate reimbursement rate will be approved. Adequate third‑party reimbursement may
not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.
In the United States, the ACA substantially changed the way healthcare is financed by both governmental and private insurers and significantly
impacted the pharmaceutical industry. The ACA contains a number of provisions, including those governing enrollment in federal healthcare programs,
reimbursement changes and fraud and abuse provisions, which will impact existing government healthcare programs and will result in the development of
new programs, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback
program. Additionally, the ACA:
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increases the minimum level of Medicaid rebates payable by manufacturers of brand‑name drugs from 15.1% to 23.1%;
requires collection of rebates for drugs paid by Medicaid managed care organizations; and
imposes a non‑deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs” to specified
federal government programs.
Since its enactment, there have been judicial, executive and congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S.
Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the
ACA. Thus, the ACA will remain in effect in its current form. Further, prior to the U.S. Supreme Court ruling, President Biden issued an executive order
that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace from February 15, 2021
through August 15, 2021. The executive order instructed certain governmental agencies to review and reconsider their existing policies and rules that limit
access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and
policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.
There has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products,
which have resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing,
review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug
products. . In March 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminates the statutory Medicaid drug rebate cap, currently
set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. In August 2022, the
Inflation Reduction Act of 2022, or IRA, was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price
negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare
Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting
program (beginning in 2025). The IRA permits the Secretary of the Department of Health and Human Services to implement many of these provisions
through guidance, as opposed to regulation, for the initial years. For that and other reasons, it is currently unclear how the IRA will be effectuated, or the
impact of the IRA on our business. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could
limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our products or
additional pricing pressures. 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.
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In the EU, pricing and reimbursement schemes vary widely from country to country and often within regions or provinces of countries. Some
countries may limit the annual budget of coverage or request that the company participate in the cost above certain use levels or for treatments perceived as
unsuccessful and impose monitoring processes on the use of the product. Some countries and hospitals may require inclusion into the hospital formulary for
payment from the hospital budget. Some countries and hospitals may require the completion of additional studies that compare the cost‑effectiveness of a
particular drug candidate to currently available therapies. For example, the EU provides options for its member states to restrict the range of medicinal
products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. This
Health Technology Assessment (“HTA process”) which is currently governed by the national laws of the individual EU member states, is the procedure
according to which the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given medicinal product
in the national healthcare systems of the individual country is conducted. The outcome of HTA regarding specific medicinal products will often influence
the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU Member States. On December 15,
2021, the Health Technology Regulation (“HTA Regulation”) was adopted. The HTA Regulation is intended to boost cooperation among EU member states
in assessing health technologies, including new medicinal products, and providing the basis for cooperation at EU level for joint clinical assessments in
these areas. When it enters into application in 2025, the HTA Regulation will be intended to harmonize the clinical benefit assessment of HTA across the
EU.
Further, 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 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. Any country that has price controls or reimbursement limitations for drug
products may not allow favorable reimbursement and pricing arrangements. Historically, products launched in the EU do not follow price structures of the
United States and generally prices tend to be significantly lower.
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Healthcare Law and Regulation
Healthcare providers, physicians and third‑party payors play a primary role in the recommendation and prescription of drug products that are
granted marketing authorization. Arrangements with healthcare providers, third‑party payors and other customers are subject to broadly applicable fraud
and abuse and other healthcare laws and regulations. Such restrictions under applicable federal, state and foreign healthcare laws and regulations, include
the following:
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the federal healthcare Anti‑Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering,
receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the
purchase, order or recommendation of, any good or service for which payment may be made, in whole or in part, under a federal healthcare
program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of this statute or specific intent to violate
it in order to have committed a violation;
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. 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;
HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements
relating to healthcare matters;
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 healthcare benefits, items or services;
the federal physician payment transparency requirements under the Affordable Care Act require certain manufacturers of drugs, devices and
medical supplies to report to Centers for Medicare & Medicaid Services information related to payments and other transfers of value to
physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other non-physician practitioners such as
physician assistants and nurse practitioners, and teaching hospitals and physician ownership and investment interests;
analogous state and foreign laws and regulations, such as state anti‑kickback and false claims laws, may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by non‑governmental third‑party payors, including private
insurers.
Violations of any of these laws or any other governmental laws and regulations that may apply include, without limitation, significant civil,
criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as
Medicare and Medicaid, disgorgement, contractual damages, reputational harm, diminished profits and the curtailment or restructuring of our operations.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant
compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to
physicians and other health care providers or marketing expenditures. Additionally, certain state and local laws require the registration of pharmaceutical
sales representatives.
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Environmental, Health and Safety Matters
We are subject to extensive environmental, health and safety laws and regulations in a number of jurisdictions, primarily Israel, governing, among
other things: the use, storage, registration, handling, emission and disposal of chemicals, waste materials and sewage; chemicals, 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 Yavne manufacturing 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 conduct periodic inspections in order to review and ensure our compliance with the various regulations.
These laws, regulations and permits could potentially require the expenditure by us of significant amounts for compliance or remediation. If we
fail to comply with such laws, regulations or permits, we may be subject to fines and other civil, administrative or criminal sanctions, including the
revocation of permits and licenses necessary to continue our business activities. In addition, we may be required to pay damages or civil judgments in
respect of third‑party claims, including those relating to personal injury (including exposure to hazardous substances we use, store, handle, transport,
manufacture or dispose of), property damage or contribution claims. Some environmental, health and safety laws allow for strict, joint and several liability
for remediation costs, regardless of comparative fault. We may be identified as a responsible party under such laws. Such developments could have a
material adverse effect on our business, financial condition and results of operations.
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, new
Israeli regulations were promulgated in 2012 relating to the discharge of industrial sewage into the sewer system. These regulations establish new and
potentially significant fines for discharging forbidden or irregular sewage into the sewage system.
Properties
Our principal executive offices are located at 42 Hayarkon Street, Yavne 8122745, Israel. We lease these facilities from our largest shareholder,
Clal Life Sciences, L.P. (“CLS”), pursuant to a sub‑lease agreement, as amended, that expires on October 30, 2025. The facilities consist of approximately
32,300 square feet of space, and the yearly lease fee is approximately $578,000. These facilities house our administrative headquarters, our research and
development laboratories and our manufacturing plant.
C. Organizational Structure
The legal name of our company is MediWound Ltd. and we are organized under the laws of the State of Israel. Our corporate structure consists of
MediWound Ltd., our Israeli parent company, (i) MediWound Germany GmbH, our active wholly‑owned subsidiary, which was incorporated on April 16,
2013 under the laws of the Federal Republic of Germany (ii) MediWound US, Inc., which was incorporated on December 8, 2020 under the laws of the
State of Delaware and (iii) MediWound UK Limited, our inactive wholly‑owned subsidiary, which was incorporated on July 26, 2004 under the laws of
England.
D. Property, Plants and Equipment
See “ITEM 4.B. Business Overview—Properties”, “ITEM 4.B. Business Overview—Manufacturing, Supply and Production” and “ITEM 4.B.
Business Overview—Environmental, Health and Safety Matters”.
83
Item 4A. UNRESOLVED STAFF COMMENTS
None.
Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. Operating Results
The information contained in this section should be read in conjunction with our consolidated financial statements for the year ended December
31, 2022 and related notes, and the information contained elsewhere in this annual report. Our financial statements have been prepared in accordance with
IFRS, as issued by the IASB.
Company Overview
We are a biopharmaceutical company that develops, manufactures, and commercializes novel, cost effective, bio‑therapeutic, non-surgical
solutions for tissue repair and regeneration. Our strategy leverages our breakthrough enzymatic technology platform into diversified portfolio of
biotherapeutics across multiple indications to pioneer solutions for unmet medical needs. Our current portfolio is focused on next-generation protein-based
therapies for burn care, wound care and tissue repair.
Our first innovative biopharmaceutical product, NexoBrid®, has received marketing authorization from the FDA and marketing authorization
from the European Medicines Agency (the “EMA”) and other international markets for removal of dead or damaged tissue, known as eschar, in adults with
deep partial-thickness and full-thickness thermal burns, also referred to as severe burns. NexoBrid, a concentrate of proteolytic enzymes enriched in
bromelain, represents a new paradigm in burn care management, and our clinical trials have demonstrated, with statistical significance, its ability to
non‑surgically and rapidly remove the eschar, without harming viable tissues, earlier relative to existing standard of care.
We commercialize NexoBrid globally through multiple sales channels. We sell NexoBrid to burn centers in the European Union, United Kingdom
and Israel, primarily through our direct sales force, focusing on key burn centers and KOLs. In the United States, we entered into exclusive license and
supply agreements with Vericel Corporation (Nasdaq: VCEL) to commercialize NexoBrid in North America. We have established local distribution
channels in multiple international markets, focusing on Asia Pacific, EMEA, CEE and LATAM, which local distributors are also responsible for obtaining
local marketing authorization within the relevant territories.
We have been awarded two contracts with the U.S. Biomedical Advanced Research and Development Authority ("BARDA"), for the advancement
of the development and manufacturing, as well as the procurement of NexoBrid which has initiated on January 2020, as a medical countermeasure as part
of BARDA preparedness for mass casualty events.
In September 20, 2022, we announced that that the EMA has validated for review the Type II Variation submitted by MediWound to expand the
current approved indication for NexoBrid (removal of eschar in adults with deep partial-thickness and full-thickness thermal burn wounds) into the
pediatric population. MediWound expects a decision from the European Commission in the first quarter of 2023.
EscharEx, our next-generation enzymatic therapy under development, is a topical biological drug candidate for the debridement of chronic and
other hard-to-heal wounds. Designed for the outpatient setting, EscharEx is an easy-to-use concentrate of proteolytic enzymes enriched in bromelain;
having the same API as NexoBrid. In several Phase II trials, EscharEx was shown to be well-tolerated and demonstrated safety and efficacy in the
debridement of various chronic and other hard-to-heal wounds with only few daily applications. EscharEx’s mechanism of action is mediated by the
proteolytic enzymes that cleave and remove the necrotic tissue and prepare the wound bed for healing.
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On May 12, 2022, we announced positive results from our U.S. Phase II clinical study of EscharEx for the debridement of VLUs. The study met
its primary endpoint with a high degree of statistical significance, demonstrating that patients treated with EscharEx had a statistically significant higher
incidence of complete debridement during the 14-day measurement period within up to 8 applications, compared to gel vehicle (EscharEx: 63% (29/46) vs.
gel vehicle: 30% (13/43), p-value=0.004). EscharEx efficacy superiority remained statistically significant after adjusting for pre-specified covariates
ascribed to patient baseline characteristics, wound size, wound age and regions.
The study met key secondary and exploratory endpoints. Patients treated with EscharEx had a statistically significant higher incidence of complete
debridement, during the same 14-day measurement period, compared to patients treated by non-surgical standard-of-care ("NSSOC") (EscharEx: 63%
(29/46) vs. NSSOC: 13% (4/30)) and the time to achieve complete debridement was significantly shorter. Estimated median time to complete debridement
was 9 days for patients treated with EscharEx and 59 days for patients treated with NSSOC (p-value=0.016). On average, complete debridement was
achieved after 3.6 applications of EscharEx compared to 12.8 applications with NSSOC. Patients treated with EscharEx demonstrated significantly higher
incidence of at least 75% granulation tissue at the end of the treatment period compared to gel vehicle (p-value <0.0001). Favorable trends were observed
in wound area reduction and reduction of pain compared to gel vehicle.
In addition, the study showed that EscharEx was safe and well tolerated, and the overall safety was comparable between the arms as assessed by
the data safety monitoring board. Importantly, there were no observed deleterious effects on wound closure and no material differences in reported adverse
events. Estimated time to complete wound closure was 64 days for patients treated with EscharEx compared to 78 days for patients treated with NSSOC.
EscharEx was also evaluated in a U.S. Phase II pharmacology study. The study was prospective, open label, single-arm and conducted at three
U.S. clinical sites. On July 7, 2022, we announced positive results from this study. 70% of patients achieved complete debridement during the course of
treatment within up to 8 applications. On average, complete debridement was achieved after 3.9 applications of EscharEx. Additionally, an average
reduction of 35% in wound size was achieved by the end of the 2-week follow-up period. In all patients that were positive for biofilm at baseline, the
biofilm was reduced substantially to single individual microorganisms or completely removed by the end of treatment. Seven patients had positive red
fluorescence (indicative of bacteria) at baseline and average red fluorescence was reduced from 1.69 cm2 pre-treatment to 0.60 cm2 post treatment.
Biomarker analysis from wound fluid is on-going and safety data shows that EscharEx is safe and well-tolerated.
Our third innovative product candidate, MW005, is a topically applied biological drug candidate for the treatment of non-melanoma skin cancers,
based on the same API as NexoBrid and EscharEx (a concentrate of proteolytic enzymes enriched in bromelain). In July 2021, we initiated a phase I/II
study of MW005 for the treatment of low-risk BCC. On July 11, 2022, we announced positive initial data from this study. In the first cohort, eleven patients
with either superficial or nodular BCC were treated. Patients enrolled into the study received seven topical applications of MW005, once every other day.
At the end of eight weeks post treatment period, all patients undergo complete excision, and the specimen is subject to an independent histological
clearance examination. Based on the data generated to date, MW005 is safe, well-tolerated and an effective treatment for BCC with a majority of patients
who completed the study demonstrating a complete histological clearance of target lesions. We anticipate announcing the final results in the third quarter of
2023.
We manufacture NexoBrid and our product candidates in our cGMP certified sterile manufacturing facility at our headquarters in Yavne, Israel.
85
As of December 31, 2022, we had cash and cash equivalents of $33.9 million. Our revenues were $26.5 million and $23.8 in 2022 and 2021,
respectively. Our net operating loss was $8.3 million and $11.2 in 2022 and 2021, respectively. We had an accumulated deficit of $168.1 million as of
December 31, 2022. We expect to incur significant expenses and operating losses for the foreseeable future, as research and development activities are
central to our operations, which will offset by cash inflows from NexoBrid.
We expect to continue to invest in our research and development efforts, including in respect of our NexoBrid ongoing clinical trials which are
fully funded by BARDA, as well as the clinical development and trials of EscharEx, MW005 and our other pipeline product candidates. In addition, we
expect to continue to advance NexoBrid as a standard of care, and expand its commercial reach in international markets, including for potential use as a
medical countermeasure during mass casualty events.
Key Components of Statements of Operations
Revenues
Sources of revenues. We derive revenues from sales of NexoBrid to burn centers and hospitals burn units in Europe and Israel as well as to local
distributors in other countries in accordance with distribution agreements we have in place, which also include revenues from licenses. We generate
revenues from BARDA procurement of NexoBrid for emergency stockpile pursuant to BARDA contract.
We generate revenues from development services provided to BARDA.
Our ability to generate additional, more significant revenues will depend on the successful commercialization of NexoBrid.
Cost of Revenues
Our total cost of revenues includes expenses for the manufacturing of NexoBrid, including: the cost of raw materials; employee‑related expenses,
including salaries, equity based‑compensation and other benefits and related expenses, lease payments, utility payments, depreciation, changes in inventory
of finished products, royalties and other manufacturing expenses. These expenses are partially reduced by an allotment of manufacturing costs associated
with research and development activities to research and development expenses.
Cost of revenues includes costs associated with the research and development services provided to BARDA and MTEC, including salaries and
related expenses, clinical trials, sub‑contractors and external advisors.
We expect that our cost of revenues from sale of products will continue to increase as we expand the sale of NexoBrid throughout the European
Union, the United States and other international markets.
Operating Expenses
Research and Development Expenses
Research and development activities are central to our business model. 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 research and development costs to increase significantly for the foreseeable future as EscharEx progresses in its clinical program in the U.S. and
our other pipeline product candidates' progress in clinical trials. However, we do not believe that it is possible at this time to accurately project total
program‑specific expenses to reach commercialization. There are numerous factors associated with the successful development of any of our product
candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our
stage of development. Additionally, future commercial and regulatory factors beyond our control will affect our clinical development programs and
plans. Our actual spending could differ as our plans change and we invest in other drugs or potentially reduce our anticipated funding on research for
existing products.
86
Research and development expenses consist primarily of compensation for employees engaged in research and development activities, including
salaries, equity‑based compensation, benefits and related expenses, clinical trials, contract research organization sub‑contractors, development materials,
external advisors and the allotted cost of our manufacturing facility for research and development purposes.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of compensation expenses for personnel engaged in sales and marketing, including salaries,
equity based‑compensation and benefits and related expenses, as well as promotion, marketing, market access, medical, and sales and distribution
activities. These expenses are primarily comprised of costs related to our subsidiary in Germany, which is focused on marketing NexoBrid in E.U., and
costs related to maintain marketing authorization.
General and Administrative Expenses
General and administrative expenses consist principally of compensation for employees in executive and administrative functions, including
salaries, equity‑based compensation, benefits and other related expenses, professional consulting services, including legal and audit fees, as well as costs of
office and overhead. We expect general and administrative expenses to remain stable.
Financial Income/Financial Expense
Financial income includes interest income, revaluation of financial instruments and exchange rate differences. Financial expense consists
primarily of revaluation of financial instruments, financial expenses in respect of deferred revenue, revaluation of lease liabilities and exchange rate
differences. The market interest due on government grants received from the IIA is also considered a financial expense, and is recognized beginning on the
date we receive the grant until the date on which the grant is expected to be repaid as part of the revaluation to fair value of liabilities in respect of
government grants.
Taxes on Income
The standard corporate tax rate in Israel is 23%.
We do not generate taxable income in Israel, as we have historically incurred operating losses resulting in carry forward tax losses totaling
approximately $157 million as of December 31, 2022. 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 carry forward tax losses.
Under the Law for the Encouragement of Capital Investments, 5719‑1959 (the “Investment Law”), we have been granted “Beneficiary Enterprise”
status, which provides certain benefits, including tax exemptions and reduced corporate tax rates. Income not eligible for Beneficiary Enterprise benefits is
taxed at the regular corporate tax rate. The benefit entitlement period starts from the first year that the Beneficiary Enterprise first earns taxable income, and
is limited to 12 years from the year in which the company requested to have tax benefits apply.
87
Comparison of Period to Period Results of Operations
We are providing within this section a supplemental discussion that compares our historical statement of operations data in accordance with IFRS,
as issued by the IASB. The below table and the below discussion provides data for each of the years ended December 31, 2022 and 2021. The below
discussion of our results of operations omits a comparison of our results for the years ended December 31, 2020 and 2021. In order to view that discussion,
please see “Item 5. Operating and Financial Review and Prospects—A. Operating Results— Comparison of Period to Period Results of Operations— Year
Ended December 31, 2020 Compared to Year Ended December 31, 2021” in our Annual Report on Form 20-F for the year ended December 31, 2021,
which we filed with the SEC on March 25, 2022.
Condensed statements of operations data:
Revenues
Cost of revenues
Gross profit
Operating expenses:
Research and development
Selling and marketing
General and administrative
Other expenses
Operating loss
Financial expenses, net
Loss before taxes on income
Tax expenses
Net loss
88
$
Years Ended December 31,
2022
2021
(in thousands)
26,496 $
13,331
13,165
10,181
3,725
6,920
684
23,763
14,992
8,771
10,256
3,388
6,348
-
(8,345)
(11,221)
(11,176)
(19,521)
(2,303)
(13,524)
(78)
(27)
$
(19,599) $
(13,551)
Year Ended December 31, 2021 Compared to Year Ended December 31, 2022
Revenues
Revenues from sale of products
Revenues from development services
Revenues from license agreements
Years Ended December 31,
2022
2021
$
(in thousands)
5,347 $
9,613
12,943
12,372
8,206
1,778
26,496
23,763
We generated total revenues of approximately $26.5 million for the year ended December 31, 2022 compared to approximately $23.8 million for
the year ended December 31, 2021. Revenues from products in 2022 were $5.3 million, a 44% decrease compared to $9.6 million in 2021. This was
primarily the result of BARDA's $4.3 million decrease in emergency stockpile procurement. Revenues from licenses in 2022 were $8.2 million compared
to $1.8m in 2021, driven by the BLA approval milestone.
Revenues from sale of products
Revenues from sales of products in 2022 were $5.3 million, a 44% decrease compared to $9.6 million in 2021. This was primarily the result of
BARDA's $4.3 million decrease in emergency stockpile procurement.
Revenues from development services
Revenues from development services increased 5% from $12.4 million in 2021 to $12.9 million in 2022.
Revenues from license agreement
In 2022, revenues from licenses were $8.2 million compared to $1.8m in 2021, driven by the BLA approval milestone of $7.5 million from
Vericel.
89
Our revenues, as reported in our consolidated financial statements, are based on the location of the customers, as shown in the below table:
International (excluding U.S.)
U.S.
Years Ended December 31,
2022
2021
$
(in thousands)
4,624 $
21,872
26,496
5,661
18,102
23,718
BARDA contributed 51% and 76% of our total revenues in 2022 and 2021, respectively. Vericel contributed 28% of our total revenues in 2022.
Costs and Expenses
Cost of revenues
Cost of revenues from sales of products
Cost of revenues from development services
Cost of revenues from license agreements
$
Years Ended December 31,
2022
2021
(in thousands)
3,184 $
9,829
318
13,331
4,983
9,907
102
14,992
Cost of revenues as a percentage of total revenues decreased from 63% for 2021 to 50% for 2022.
Cost of revenues from sales of products as a percentage of revenues from sales of products increased to approximately 60% for the year ended
December 31, 2022 from approximately 52% in the year ended December 31, 2021. The increase of cost of revenues from sales of product is primarily
driven by BARDA procurement for emergency response preparedness.
Cost of revenues from development services as a percentage of revenues from development services was approximately 76% in the year ended
December 31, 2022 compared to approximately 80% in the year ended December 31, 2021.
Cost of revenues from license agreements as a percentage of revenues from license agreements were 4% in the year ended December 31, 2022,
due to costs associated with royalties’ payments pursuant to a license agreement with Mark Klein un regard to Vericel milestone payment.
Research and development expenses,
Research and development expenses decreased by 1% from approximately $10.3 million in the year ended December 31, 2021 to approximately
$10.2 million in the year ended December 31, 2022.
Selling and marketing expenses
Selling and marketing expenses increased by 10% in 2022 compared to 2021, from approximately $3.4 million in the year ended December 31,
2021 to approximately $3.7 million in the year ended December 31, 2022.
90
General and administrative expenses
General and administrative expenses increased 9% in 2022 compared to 2021 from approximately $6.3 million in the year ended December 31,
2021 to approximately $6.9 million in the year ended December 31, 2022. The increase in general and administrative expenses was primarily a result of
one-time expenses related to the BLA approval and management changes in mid-2022.
Other expenses
Other one-time expenses for the year ended December 31, 2022 were $0.7 million associated with management replacement and Vericel
milestone payment fee.
Financial income, net
Financial income
Financial expenses
Financial income
Years Ended December 31,
2022
2021
$
(in thousands)
461 $
(11,637)
(11,176)
11
(2,314)
(2,303)
Financial income increased from approximately $0 million in the year ended December 31, 2021 to approximately $0.5 million in the year ended
December 31, 2022. The increase was primarily driven by $0.3 million of interest income from short‑term banks deposits.
Financial expense
Financial expenses increased from approximately $2.3 million in the year ended December 31, 2021 to approximately $11.2 million in the year
ended December 31, 2022. The increase in financial expenses was primarily driven by $10.9 million of revaluation and issuance expenses related to our
issues and outstanding warrants.
B. Liquidity and Capital Resources
Our primary uses of cash are to fund working capital requirements, manufacturing costs, research and development expenses of EscharEx and
other products candidates, as well as sales and marketing activities associated with the commercialization of NexoBrid in Europe.
In February 2020, we entered into an Open Market Sales Agreement with Jefferies LLC to issue and sell our ordinary shares with gross sales
proceeds of up to $15 million, from time to time, through an at the market offering under which Jefferies LLC will act as our sales agent. As of the date
hereof, we have not issued or sold any ordinary shares pursuant to the Open Market Sales Agreement.
Under our current shelf registration statement on Form F-3 declared effective by the SEC on June 3, 2022, we may offer from time to time up to
$125 million in the aggregate of our ordinary shares, warrants and/or debt securities in one or more series or issuances. As of the date hereof, we have
issued approximately $40.76 million of our ordinary shares pursuant to the F-3, including $13.26 million of ordinary shares the RD Offering (as defined
below) and $27.5 million of ordinary shares in the 2023 Offering (as defined below).
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Funding under the BARDA contracts is classified under cash use for continuing operating activities.
As of December 31, 2022, we had $33.9 million of cash, cash equivalents. Our net operating loss was $8.3 million and $11.2 million for the years
ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $157 million. We expect to incur significant
expenses and operating losses for the foreseeable future. The net losses we will incur may fluctuate from quarter to quarter.
Our capital expenditures for fiscal years 2022 and 2021 amounted to $0.6 million and $0.5 million, respectively. Capital expenditures consist
primarily of investments in manufacturing equipment and leasehold improvements.
In March 2022, we entered into an underwriting agreement with Oppenheimer & Co., Inc., a representative of the several underwriters (the
“Underwriters”), relating to the issuance and sale of an aggregate of 744,048 of our ordinary shares at a price per share equal to $13.44. Total gross
proceeds of the offering was approximately $10 million. The offering closed on March 7, 2022 and we received approximately $8.6 million in net proceeds,
after deducting underwriting discounts and commissions and estimated offering expenses. Certain entities affiliated with Clal Biotechnology Industries
Ltd. (“CBI”) purchased approximately $2.8 million of ordinary shares in the offering at the public offering price. The Underwriters received the same
underwriting discount on the shares purchased by these entities as they will on any other shares sold to the public in this offering. The securities purchased
by these entities are subject to lock-up agreements with the Underwriters. We also granted the underwriters a 30-day option to purchase up to an additional
89,012 ordinary shares at the public offering price, less underwriting discounts and commissions.
On September 22, 2022, we entered into a Securities Purchase Agreement with the several purchasers listed on the signature pages thereto (the
“2022 Purchasers”), in connection with the offer and sale of 1,082,223 of our ordinary shares, (the “2022 RD Securities Purchase Agreement”) and,
pursuant to the RD Securities Purchase Agreement, we also agreed to issue to the 2022 Purchasers 1,082,223 unregistered ordinary warrants (the “RD
Warrants”) to purchase up to 1,082,223 Ordinary Shares (the “2022 RD Offering”). The combined purchase price of for one ordinary share and associated
RD Warrant was $12.25. The RD Warrants have an exercise price of $13.475 per ordinary share and became exercisable on November 28, 2022 for four
years. The 2022 RD Offering closed on September 26, 2022. The gross proceeds from the 2022 RD Offering were approximately $13.26 million. As of
December 31, 2022, none of the RD Warrants have been exercised.
Concurrently with the signing of the 2022 RD Securities Purchase Agreement, we entered the PIPE Securities Purchase Agreement with the
several purchasers listed on the signature pages thereto (the “PIPE Purchasers”), in connection with the offer and sale of 1,407,583 pre-funded warrants to
purchase up to 1,407,583 Ordinary Shares (the “Pre-Funded Warrants”) and 1,407,583 ordinary warrants to purchase up to 1,407,583 Ordinary Shares (the
“PIPE Ordinary Warrants,” and together with the Pre-Funded Warrants, the “PIPE Warrants”) (the “PIPE Offering”). The combined purchase price for one
Pre-Funded Warrant and associated PIPE Ordinary Warrant was $12.243. The Pre-Funded Warrants have an exercise price of $0.007 per Ordinary Share
and the PIPE Ordinary Warrants have an exercise price of $13.475 per Ordinary Share and each become exercisable on November 28, 2022. The PIPE
Offering closed on October 6, 2022. The gross proceeds from the PIPE Offering were approximately $17.23 million. As of December 31, 2022, all Pre-
Funded Warrants have been exercised and none of the PIPE Ordinary Warrants have been exercised.
H.C. Wainwright & Co., LLC (“Wainwright”) acted as the exclusive placement agent for the RD Offering and the PIPE Offering (together, the
“2022 Offerings”). Upon closing of the Offerings, we issued Wainwright (or its designees) the warrants to purchase up to 124,491 ordinary shares (the
“Wainwright Warrants”). The warrants have substantially the same terms as the RD Warrants and the Series A Warrants, except that the Wainwright
Warrants have an exercise price equal to $15.3125 per share (which represents 125% of the offering price per Ordinary Share in the Offerings) and will
expire four (4) years after November 28, 2022, but no more than five (5) years following the commencement of the sales pursuant to the RD Offering.
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On February 3, 2023, we entered into a securities purchase agreement (the “2023 Securities Purchase Agreement”) with the purchasers listed on
the signature pages thereto (the “2023 Purchasers”), in connection with the offer and sale of 1,964,286 ordinary shares (the “2023 Offering”). The purchase
price per ordinary share was $14.00. The 2023 Offering closed on February 7, 2023. The gross proceeds from the Offering were approximately $27.5
million.
Our future capital requirements will depend on many factors, including our revenue growth, timing of milestone payments, the timing and extent
of our spending on research and development efforts, and international expansion. We may also seek to invest in or acquire complementary businesses or
technologies. To the extent that existing cash and cash from operations are insufficient to fund our future activities, we may need to raise additional funding
through debt and equity financing. Additional funds may not be available on favorable terms or at all. We believe our existing cash, cash equivalents and
short‑term bank deposits will be sufficient to satisfy our liquidity requirements for at least the next 24 months.
Cash Flows
The following table summarizes our consolidated statement of cash flows for the periods presented. The below discussion beneath the table omits
a description of our cash flows for the year ended December 31, 2020. In order to view that discussion, please see “Item 5. Operating and Financial Review
and Prospects—B. Liquidity and Capital Resources—Cash Flows” in our Annual Report on Form 20-F for the year ended December 31, 2021, which we
filed with the SEC on March 25, 2022:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Net cash used in operating activities
Year Ended December 31,
2022
2021
$
(11,885) $
(481)
35,764
(8,916)
3,548
(1,050)
Net cash used in all periods resulted primarily from our net loss adjusted for non‑cash charges and measurements and changes in components of
working capital. Adjustments for non‑cash items include depreciation and amortization, equity‑based compensation, revaluation of contingent liabilities
and lease liability, and changes in assets and liabilities items.
Net cash used in continuing operating activities increased to approximately $11.9 million in the year ended December 31, 2022 compared to net
cash used by continuing operating activities of approximately $8.9 million in the year ended December 31, 2021, primarily as a result of our operational net
loss, partially offset by various non-cash items such as depreciation, shared based compensation and revaluation of contingent considerations and warrants.
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Net cash provided by (used in) investing activities
Net cash related continuing investing activities primarily provided by proceeds of investments in short‑term banks deposits offset by used in
purchases of property and equipment. Net cash used in investing activities was $0.5 million in the year ended December 31, 2022, compared to $3.5
million provided during the year ended December 31, 2021.
Net cash provided by (used in) financing activities
Net cash provided by continuing financing activities was $35.8 million during the year ended December 31, 2022 compared to use in of $1.1
million during the year ended December 31, 2021. The increase in net cash provided by continuing financing activities was primarily a result of our
proceeds from our 2022 Offerings, net of issuance expenses offset with payments of lease liabilities and repayment pursuant to IIA and TEVA
considerations.
Israeli Corporate-Level Tax Considerations and Government Programs
The following is a brief summary of the material Israeli tax laws applicable to us, and certain Israeli Government programs that benefit us and
therefore impact our results of operations and financial condition. To the extent that the discussion is based on new tax legislation that has not yet been
subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in
this discussion. The discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or
administrative interpretations of Israeli law, which change could affect the tax consequences described below.
General Corporate Tax Structure in Israel
Generally, Israeli companies are subject to a corporate tax on their taxable income. Effective January 1, 2018 and thereafter, the corporate tax rate
is 23%. However, the effective tax rate payable by a company that derives income from an Approved Enterprise, a Beneficiary Enterprise, a Preferred
Enterprise or Technology Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company are generally subject to
the prevailing regular corporate tax rate.
Law for the Encouragement of Industry (Taxes), 5729-1969
The Law for the Encouragement of Industry (Taxes), 5729-1969 (the “Industry Encouragement Law”), provides several tax benefits for “Industrial
Companies.”
The Industry Encouragement Law defines an “Industrial Company” as an Israeli resident-company which was incorporated in Israel, of which
90% or more of its income in any tax year, other than income from certain government loans, is derived from an “Industrial Enterprise” owned by it and
located in Israel or in the “Area”, in accordance with the definition under section 3A of the Israeli Income Tax Ordinance (New Version) 1961. An
“Industrial Enterprise” is defined as an enterprise whose principal activity in a given tax year is industrial production.
The following tax benefits, among others, are available to Industrial Companies:
•
amortization of the cost of purchased a patent, rights to use a patent, and know-how, which are used for the development or advancement of
the Industrial Enterprise, over an eight-year period, commencing on the year in which such rights were first exercised;
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•
•
under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies controlled by it; and
expenses related to a public offering are deductible in equal amounts over a three years period commencing on the year of the offering.
Eligibility for benefits under the Industry Encouragement Law is not contingent upon approval of any governmental authority.
We believe that we currently qualify as an Industrial Company within the meaning of the Industry Encouragement Law. However, there can be no
assurance that we will continue to qualify as an Industrial Company or that the benefits described above will be available in the future.
Law for the Encouragement of Capital Investments, 5719-1959
The Investment Law provides certain incentives for capital investments in production facilities (or other eligible assets).
The Investment Law was significantly amended several times during recent years, with the three most significant changes effective as of April 1,
2005 (the “2005 Amendment”), as of January 1, 2011 (the “2011 Amendment”), and as of January 1, 2017 (the “2017 Amendment”). Pursuant to the 2005
Amendment, tax benefits granted in accordance with the provisions of the Investment Law prior to its revision by the 2005 Amendment remain in force but
any benefits granted subsequently are subject to the provisions of the amended Investment Law. Similarly, the 2011 Amendment introduced new benefits to
replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. However, companies entitled to
benefits under the Investment Law as in effect prior to January 1, 2011 were entitled to choose to continue to enjoy such benefits, provided that certain
conditions are met, or elect instead, irrevocably, to forego such benefits and have the benefits of the 2011 Amendment apply. The 2017 Amendment
introduces new benefits for Technological Enterprises, alongside the existing tax benefits. Prior to 2011, we did not utilize any of the benefits for which we
were eligible under the Investment Law.
The following is a summary of the Investment Law subsequent to its amendments as well as the relevant changes contained in the new legislation.
Tax Benefits Subsequent to the 2005 Amendment
The 2005 Amendment applies to new investment programs and investment programs commencing after 2004, but does not apply to investment
programs approved prior to April 1, 2005 (“Approved Enterprise”). The 2005 Amendment provides that terms and benefits included in any certificate of
approval that was granted before the 2005 Amendment became effective (April 1, 2005) will remain subject to the provisions of the Investment Law as in
effect on the date of such approval. Pursuant to the 2005 Amendment, the Israeli Authority for Investments and Development of the Israeli Ministry of
Economy (the “Investment Center”) will continue to grant Approved Enterprise status to qualifying investments. The 2005 Amendment, however, limits
the scope of enterprises that may be approved by the Investment Center by setting criteria for the approval of a facility as an Approved Enterprise.
The 2005 Amendment provides that Approved Enterprise status will only be necessary for receiving cash grants. As a result, it is no longer
necessary for a company to obtain the advance approval of the Investment Center in order to receive the tax benefits previously available under the
alternative benefits track. Rather, a company may claim the tax benefits offered by the Investment Law directly in its tax returns, provided that its facilities
meet the criteria for tax benefits set forth in the 2005 Amendment. Companies or programs under the new provisions receiving these tax benefits are
referred to as Beneficiary Enterprises. Companies that have a Beneficiary Enterprise, are entitled to approach the Israel Tax Authority for a pre‑ruling
regarding their eligibility for tax benefits under the Investment Law, as amended.
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Tax benefits are available under the 2005 Amendment to production facilities (or other eligible facilities), which are generally required to derive
more than 25% of their business income from export to specific markets with a population of at least 14 million in 2012 (such export criteria will further
increase in the future by 1.4% per annum). In order to receive the tax benefits, the 2005 Amendment states that a company must make an investment which
meets certain conditions, including exceeding a minimum investment amount specified in the Investment Law. Such investment allows a company to
receive “Beneficiary Enterprise” status, and may be made over a period of no more than three years ending in the year in which the company chose to have
the tax benefits apply to its Beneficiary Enterprise. Where the company requests to apply the tax benefits to an expansion of existing facilities, only the
expansion will be considered to be a Beneficiary Enterprise and the company’s effective tax rate will be the weighted average of the applicable rates. In this
case, the minimum investment required in order to qualify as a Beneficiary Enterprise is required to exceed a certain percentage of the value of the
company’s production assets before the expansion.
The extent of the tax benefits available under the 2005 Amendment to qualifying income of a Beneficiary Enterprise depends on, among other
things, the geographic location in Israel of the Beneficiary Enterprise. The location will also determine the period for which tax benefits are available. Such
tax benefits include an exemption from corporate tax on undistributed income for a period of between two to ten years, depending on the geographic
location of the Beneficiary Enterprise in Israel, and a reduced corporate tax rate of between 10% to 25% for the remainder of the benefits period, depending
on the level of foreign investment in the company in each year. A company qualifying for tax benefits under the 2005 Amendment which pays a dividend
out of income attributed to its Beneficiary Enterprise during the tax exemption period will be subject to corporate tax in respect of the amount of the
dividend distributed (grossed‑up to reflect the pre‑tax income that it would have had to earn in order to distribute the dividend) at the corporate tax rate that
would have otherwise been applicable. Dividends paid to Israeli shareholders out of income attributed to a Beneficiary Enterprise (or out of dividends
received from a company whose income is attributed to a Beneficiary Enterprise) are generally subject to withholding tax at source at the rate of 15% (in
the case of non-Israeli shareholders - subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, 15% or such lower
rate as may be provided in an applicable tax treaty, applicable to dividends and distributions out of income attributed to a Beneficiary Enterprise). The
reduced rate of 15% is limited to dividends and distributions out of income attributed to a Beneficiary Enterprise during the benefits period and actually
paid at any time up to 12 years thereafter, except with respect to a qualified Foreign Investment Company (as such term is defined in the Investment Law),
in which case the 12‑year limit does not apply.
The benefits available to a Beneficiary Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law and its regulations.
If a company does not meet these conditions, it would be required to refund the amount of tax benefits, as adjusted by the Israeli consumer price index, and
interest, or other monetary penalties.
We currently have Beneficiary Enterprise programs under the Investment Law, which we believe will entitle us to certain tax benefits. The
majority of any taxable income from our Beneficiary Enterprise programs (once generated) would be tax exempt for a period of ten years commencing in
the year in which we will first earn taxable income relating to such enterprises, subject to the 12-year limitation from the year the company chose to have
its tax benefits apply.
Tax Benefits Under the 2011 Amendment
The 2011 Amendment canceled the availability of the tax benefits granted under the Investment Law prior to 2011 and, instead, introduced new
tax benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in the Investment Law) as of
January 1, 2011. The definition of a Preferred Company includes a company incorporated in Israel that is not fully owned by a governmental entity, and
that has, among other things, Preferred Enterprise status and is controlled and managed from Israel.
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The tax benefits under the 2011 Amendment for a Preferred Company meeting the criteria of the law include, among others, a reduced corporate
tax rate of 15% for preferred income attributed to a Preferred Enterprise in 2011 and 2012, unless the Preferred Enterprise was located in a specified
development zone, in which case the rate was 10%. Under the 2011 Amendment, such corporate tax rate was reduced in 2013 from 15% and 10%,
respectively, to 12.5% and 7%, respectively, and then increased to 16% and 9%, respectively, in 2014 and thereafter until 2016. Pursuant to the 2017
Amendment, in 2017 and thereafter, the corporate tax rate for Preferred Enterprise which is located in a specified development zone was decreased to 7.5%,
while the reduced corporate tax rate for other development zones remains 16%. Income attributed to a Preferred Company from a “Special Preferred
Enterprise” (as such term is defined in the Investment Law) would be entitled, during a benefits period of 10 years, to reduced tax rates of 8%, or 5% if the
Special Preferred Enterprise is located in a certain development zone. As of January 1, 2017, the definition of “Special Preferred Enterprise” includes
less stringent conditions. Dividends paid to Israeli shareholders out of preferred income attributed to a Preferred Enterprise or to a Special Preferred
Enterprise are generally subject to withholding tax at source at the rate of 20% (in the case of non-Israeli shareholders - subject to the receipt in advance of
a valid certificate from the ITA allowing for a reduced tax rate, 20%, or such lower rate as may be provided in an applicable tax treaty. However, if such
dividends are paid to an Israeli company, no tax is required to be withheld (although, if such dividends are subsequently distributed to individuals or a
non‑Israeli company, the aforesaid will apply).
The 2011 Amendment also provided transitional provisions to address companies already enjoying existing tax benefits under the Investment Law.
These transitional provisions provide, among other things, that: unless an irrevocable request is made to apply the provisions of the Investment Law as
amended in 2011 with respect to income to be derived as of January 1, 2011, a Beneficiary Enterprise can elect to continue to benefit from the benefits
provided to it before the 2011 Amendment came into effect, provided that certain conditions are met.
We have examined the possible effect, if any, of these provisions of the 2011 Amendment on our financial statements and have decided, at this
time, not to opt to apply the new benefits under the 2011 Amendment. There can be no assurance that we will comply with the conditions required to
remain eligible for benefits under the Investment Law in the future or that we will be entitled to any additional benefits thereunder.
New Tax benefits under the 2017 Amendment that became effective on January 1, 2017.
The 2017 Amendment was enacted as part of the Economic Efficiency Law that was published on December 29, 2016, and is effective as of
January 1, 2017. The 2017 Amendment provides new tax benefits for two types of “Technology Enterprises,” as described below, and is in addition to the
other existing tax beneficial programs under the Investment Law.
The 2017 Amendment provides that a technology company satisfying certain conditions will qualify as a “Preferred Technology Enterprise” and
will thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as “Preferred Technology Income,” as defined in the Investment Law. The
tax rate is further reduced to 7.5% for a Preferred Technology Enterprise located in development zone A. In addition, a Preferred Technology Company will
enjoy a reduced corporate tax rate of 12% on capital gain derived from the sale of certain “Benefitted Intangible Assets” (as defined in the Investment Law)
to a related foreign company if the Benefitted Intangible Assets were acquired from a foreign company after January 1, 2017 for at least NIS 200 million,
and the sale receives prior approval from the Israeli Innovation Authority.
The 2017 Amendment further provides that a technology company satisfying certain conditions will qualify as a “Special Preferred Technology
Enterprise” and will thereby enjoy a reduced corporate tax rate of 6% on “Preferred Technology Income” regardless of the company’s geographic location
within Israel. In addition, a Special Preferred Technology Enterprise will enjoy a reduced corporate tax rate of 6% on capital gain derived from the sale of
certain “Benefitted Intangible Assets” to a related foreign company if the Benefitted Intangible Assets were either developed by Special Preferred
Technology Enterprise or acquired from a foreign company on or after January 1, 2017, and the sale received prior approval from IIA. A Special Preferred
Technology Enterprise that acquires Benefitted Intangible Assets from a foreign company for more than NIS 500 million will be eligible for these benefits
for at least ten years, subject to certain approvals as specified in the Investment Law.
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Dividends distributed by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise, to Israeli shareholders paid out of
Preferred Technology Income, are generally subject to withholding tax at source at the rate of 20% (in the case of non-Israeli shareholders - subject to the
receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, 20%, or such lower rate as may be provided in an applicable tax treaty.
However, if such dividends are paid to an Israeli company, no tax is required to be withheld (although, if such dividends are subsequently distributed to
individuals or a non-Israeli company, the aforesaid will apply). If such dividends are distributed to a foreign company that holds solely or together with
other foreign companies 90% or more in the Israeli company and other conditions are met, the withholding tax rate will be 4% (or a lower under the tax
treaty, if applicable, subject to the receipt in advance of a valid certificate from the Israeli Tax Authority allowing for a reduced tax rate).
C. Research and Development, Patents and Licenses, etc.
Our research and development strategy is centered on developing our patented proteolytic enzyme technology, which underlies NexoBrid and
EscharEx, into additional products for high‑value indications. Our research and development team is located at our facilities in Yavne, Israel, and consists
of 73 employees as of December 31, 2022 and is supported by highly experienced consultants in various research and development disciplines.
We have received government grants (subject to our obligation to pay royalties) as part of the NexoBrid and EscharEx research and development
programs approved by the IIA. The total gross amount of grants actually received by us from the IIA, including accrued LIBOR interest and net of royalties
actually paid, totaled approximately $13.6 million as of December 31, 2022 and the amortized cost (using the interest method) of the liability totaled
approximately $7.6 million and $8.1 million as of December 31, 2022 and 2021, respectively. Because the repayment of IIA grants is in the form of future
royalties, the balance of the commitments to the IIA is presented as an amortized liability on our balance sheet. As of December 31, 2022, we had accrued
and paid royalties to the IIA totaling $1.6 million.
We received funds from BARDA in accordance with the terms of our BARDA contracts. As of December 31, 2022 we had accrued $82 million of
BARDA’s participation in NexoBrid’s research and development programs.
For a description of our research and development policies for the last three years, see “ITEM 4.B. Business Overview—Research and
Development.”
D. Trend Information
We continue to closely monitor macro-economic conditions, including the headwinds caused by supply chain problems, inflation, increased
interest rates and other trends that have been adversely impacting economic activity on a global scale in the aftermath of the COVID-19 pandemic. We have
been assessing, on an ongoing basis, the implications of those global conditions for our operations, supply chain, liquidity, cash flow and product orders,
and will act in an effort to mitigate adverse consequences as needed. To the extent inflation increases our costs and expenses, we could consider price
increases to offset those cost pressures.
Specific developments that may potentially impact our operating performance in an adverse manner include:
•
•
•
further actions taken by central banks in Europe and the U.S. to increase interest rates as a means to slow down inflation, which may worsen
credit/financing conditions for our customers who purchase our products;
potential contraction of economic activities and recessionary conditions that could arise as a result of interest rate increases and a decrease in
consumer demand; and
the continued depreciated value of the Euro relative to the U.S. dollar, which may have an adverse impact on the U.S.- denominated value of
our European-derived revenues for purposes of our financial statements.
We cannot provide any assurances as to the extent of our resilience to the adverse impact of these specific developments in future periods. See also
“ITEM 3.D. – Risk Factors –“We depend on a sole supplier to obtain our intermediate drug substance, bromelain SP, which is necessary for the production
of our products.”
Other than the foregoing and as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or
events for the period from January 1, 2022 to the present time that are reasonably likely to have a material adverse effect on our net revenue, income,
profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results
or financial condition.
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E. Critical Accounting Estimates
Our consolidated financial statements are prepared in conformity with IFRS, as issued by the IASB. The preparation of these historical financial
statements in conformity with IFRS requires management to make estimates, assumptions and judgments in certain circumstances that affect the reported
amounts of assets, liabilities and contingencies as of the date of the financial statements and the reported amounts of revenue and expenses during the
reporting periods. We evaluate our assumptions and estimates on an ongoing basis. We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or
conditions. [Our critical accounting estimates are described in Notes 2 and 3 to our consolidated financial statements included elsewhere in this annual
report.
Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth the name, age and position of each of our executive officers and directors as of March 15, 2023:
Name
Executive Officers
Ofer Gonen
Boaz Gur-Lavie
Ety Klinger Ph.D.
Robert Snyder
Tzvi Palash
Yaron Meyer
Directors
Nachum (Homi) Shamir (3)(5)
Stephen T. Willis (1)(2)(4)(5)
Assaf Segal
Vickie R. Driver, M.D (4)(5)
Nissim Mashiach (1)(2)(5)
Sharon Kochan (1)(2)(5)
David Fox (3)(5)
Sharon Malka (4)
Age
Position
50
49
61
73
67
44
68
66
51
69
62
54
65
51
Chief Executive Officer
Chief Financial Officer
Chief Research and Development Officer
Chief Medical Officer
Chief Operations Officer
Executive Vice President, General Counsel and Corporate Secretary
Executive Chairman of the Board of Directors
Director
Director
Director
Director
Director
Director
Director
(1) Member of our audit committee.
(2) Member of our compensation committee.
(3) Member of our nominating, governance and sustainability committee.
(4) Member of our research and development committee.
(5)
Independent director under the listing rules of the Nasdaq Stock Market.
Executive Officers
Ofer Gonen has served as our Chief Executive Officer since July 2022 and on our board of directors since September 2003. Mr. Gonen is the
Chief Executive Officer of CBI (TASE: CBI) and Cactus Acquisition Corp. 1 (Nasdaq: CCTS). Mr. Gonen has more than 20 years of experience in
managing life science investments and business collaborations in both the US and Israel. Mr. Gonen serves as a board member of several private and
publicly-traded portfolio companies of CBI, including Gamida Cell (Nasdaq: GMDA), MediWound (Nasdaq: MDWD) and Cactus (Nasdaq: CCTS), as
well as a managing partner at the Anatomy Medical Fund. Before joining CBI, Mr. Gonen was the General Manager of Biomedical Investments Ltd., a
partner at Arte Venture Group, as well as a technology consultant to various Israeli venture capital funds. Mr. Gonen gained extensive experience in R&D
and management of defense-oriented projects at the prestigious “Talpiot” program of the Israeli Defense Forces. He holds a B.Sc. in Physics, Mathematics
and Chemistry from the Hebrew University of Jerusalem, and an M.A. in Economics and Finance from Tel Aviv University, with distinction.
Boaz Gur-Lavie has served as our Chief Financial Officer since June 2019. Prior to joining MediWound, Mr. Gur-Lavie co-founded in 2015 the
Center for Digital Innovation (CDI), a non-profit organization determined to improve the quality of lives by creating innovative new solutions for
challenges in the space of healthy aging and digital health, while focusing on senior citizens. In early 2015, he also co-founded MDClone, which
introduced the world’s first Healthcare Data Sandbox, unlocking healthcare data to enable exploration, discovery and collaboration. Previously, he served
as the chief financial officer of the Nasdaq-listed company, Pluristem Therapeutics, a stem-cell development company, from 2013 to 2015. He also served
as the chief financial officer of STARLIMS, a Nasdaq listed company, until it was acquired by Abbott Laboratories in 2010, after which he served as the
chief financial officer of Abbott’s informatics division until 2013. Mr. Gur-Lavie is a certified public accountant and received his B.A. in economics and
M.B.A. in finance from the Ben-Gurion University in Israel.
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Ety Klinger has served as our Chief Research and Development Officer since May 2014. Prior to joining MediWound, Dr. Klinger was Vice
President of Research and Development at Proteologics Ltd since July 2011, where she was responsible for discovery projects in the ubiquitin system,
conducted in collaboration with GlaxoSmithKline plc and Teva. Prior to this, Dr. Klinger served for 17 years in numerous leadership positions at Teva’s
global innovative R&D division and served as Teva’s Board representative at various biotechnology companies. Dr. Klinger was a key member of the
Copaxone® development team. As a project leader she led the chemistry, manufacture and control, preclinical, clinical and post‑marketing R&D activities
of various innovative treatments for multiple sclerosis (MS), autoimmune and neurological diseases. From 2006 to 2011, as a Senior Director at Teva, Dr.
Klinger was a member of Teva’s global innovative R&D management team. From 2006 to 2008, she served as the Head of MS and Autoimmune Diseases
at Teva, and led the Life Cycle Management (LCM) of innovative R&D. Dr. Klinger holds a B.Sc. in Biology from the Hebrew University in Jerusalem, a
M.S. and a Ph.D. in Biochemistry from Tel‑Aviv University and an MBA degree from Tel Aviv University and Northwestern University.
Dr. Robert Snyder has served as our Chief Medical Officer since January 2023. Dr. Robert J. Snyder (DPM, MSc, MBA, CWSP, FFPM RCPS) is
Dean, Professor, Director of Clinical Research and Fellowship Director in Wound Care and Research at Barry University School of Podiatric Medicine. He
is certified in foot and ankle surgery by the American Board of Podiatric Surgery and is also a board-certified wound specialist. Dr. Snyder is past-president
of the Association for the Advancement of Wound Care and past-president of the American Board of Wound Management. Dr. Snyder has completed an
MBA in Health Management from The George Washington University and the Global Clinical Scholars Research Training Program at Harvard Medical
School. Dr. Snyder is a key opinion leader and sought-after speaker, lecturing extensively throughout the United States and abroad. He has published
several book chapters and over 165 papers in peer reviewed and trade journals on wound care, and was the recipient of the Dr. Robert Warriner Memorial
Award for excellence in wound management. Dr. Snyder serves as the Associate Editor for JAPMA and on the editorial advisory boards of Ostomy Wound
Management, Wounds and as a periodic reviewer for the Lancet and NEJM. He has been a Principal Investigator on more than 65 randomized controlled
trials for innovative wound healing modalities and products.
Tzvi Palash has served as our Chief Oeraptions Officer since July 2022. He joins MediWound from Enlivex, where he leads the design and
construction of the new cGMP manufacturing facility. Prior to this, he served as COO at Gamida Cell, where he directed all operational activities towards
its rolling Biologics License Application (BLA) submission to the U.S. Food and Drug Administration (FDA) for omidubicel. Mr. Palash was COO at
Protalix Biotherapeutics, where he led all operational activities through the company’s FDA approval of Elelyso®. Prior to Protalix, Mr. Palash was a
General Manager at ColBar LifeScience, a biomaterial company acquired by Johnson & Johnson, where he led the planning, construction, scale-up and
regulatory oversight of its Israel-based manufacturing facility. He also successfully led FDA audits for Evolence® and Ossix® and was a member of the
Global Aesthetic Management Team within the Consumer Group of Johnson & Johnson. Earlier in his career, Mr. Palash held operational roles at Teva
Pharmaceutical Industries and Interpham Laboratories.
Yaron Meyer has served as our Executive Vice President since March 2019 and as our General Counsel and Corporate Secretary since December
2013. From April 2008 to November 2013, he served as the Corporate Secretary of CBI. From November 2010 to November 2013, he served as the
General Counsel and Corporate Secretary of D‑Pharm Ltd. From April 2008 to May 2010, he served as a legal counsel of Clal Industries Ltd. From May
2005 to April 2008, he worked as an associate at Shibolet & Co. Advocates. Mr. Meyer holds an LL.B. degree from Haifa University, Israel.
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Directors
Nachum (Homi) Shamir has served as Chairman of our board of directors since August 2022. Mr. Shamir most recently the Chairman, and Chief
Executive Officer of Luminex Corporation from 2014 through its sale to DiaSorin S.p.A.(“DiaSorin”) in 2021. Mr. Shamir continued to serve as President
of Luminex after its sale to DiaSorin pursuant to a transition agreement with DiaSorin until June 2022. Additionally, Mr. Shamir has served as President
and Chief Executive Officer of Given Imaging from 2006 through its sale to Covidien (now Medtronic) in 2014. Mr. Shamir currently serves on the Board
of Directors of IsoPlexis Corporation (Nasdaq: ISO) and Strata Skin Sciences (Nasdaq: SSKN); and as Chairman of the Board of Cactus Acquisition Corp.
(Nasdaq: CCTS). Mr. Shamir holds a Bachelor of Science degree from the Hebrew University of Jerusalem and a Masters of Public Administration from
Harvard University.
Stephen T. Wills has served as a member of our Board since May 2017, as Chairman of our Board since October 2017 and as Executive Chairman
of our board since May 2019. Mr. Wills serves as Chief Financial Officer (since 1997) and Chief Operating Officer (since 2011) of Palatin Technologies,
Inc. (NYSE: PTN), a biopharmaceutical company developing targeted, receptor‑specific peptide therapeutics for the treatment of diseases with significant
unmet medical need and commercial potential. He also serves as Chief Financial Officer of Cactus Acquisition Corp. 1 Limited (Nasdaq: CCTS), a special
purposee acquisition company, since 2021. Mr. Wills serves on the boards of Gamida Cell Ltd. (Nasdaq: GMDA), a leading cellular and immune
therapeutics company since March 2019 (audit and compensation and finance committee member) and of Amryt Pharma, a biopharmaceutical company
focused on developing and delivering treatments to help improve lives of patients with rare and orphan diseases since September 2019 (chairman of audit
committee and member of the compensation and finance committee). Mr. Wills also serves on the board of trustees and executive committee of The Hun
School of Princeton, a college preparatory day and boarding school since 2013, and its chairman since June 2018. Mr. Wills served on the board of
directors of Caliper Corporation, a psychological assessment and talent development company since March 2016 and as chairman from December 2016
until December 2019, when Caliper was acquired by PSI. Mr. Wills served as executive chairman and interim principal executive officer of Derma
Sciences Inc. a provider of advanced wound care product from December 2015 to February 2017, when Derma Sciences was acquired by Integra
Lifesciences (Nasdaq: IART). Previously, Mr. Wills served on the Board of Derma Sciences as the lead director and chairman of the audit committee from
June 2000 to December 2015. Mr. Wills served as the Chief Financial Officer of Derma Sciences from 1997 to 2000. Mr. Wills served as the president and
Chief Operating Officer of Wills, Owens & Baker, P.C., a public accounting firm from 1991 to 2000. Mr. Wills, a certified public accountant, earned his
Bachelor of Science in accounting from West Chester University, and a Master of Science in taxation from Temple University.
Assaf Segal has served as a member of our Board since October 2017. Assaf Segal has served as a member of our board of directors since October
2017. Mr. Segal Serves as Chief Executive Officer of CBI since July 2022. Prior to that Mr. Segal has served as the Chief Financial Officer at CBI since
July 2015. Mr. Segal serves as a board member of several companies, including Biokine therapeutics Ltd., eXIthera Pharmaceuticals Inc., Elicio
Therapeutics Inc., Colospan Ltd., FDNA Inc., and Clal Life Sciences L.P. Prior to that time, Mr. Segal was a Partner at Variance Economic Consulting Ltd.,
from 2004 until June 2015, where he provided in-depth consulting for international and local clients in a wide range of industries, including
telecommunications, internet, biotech, heavy industry and financial sectors. Previously, he founded a start-up software company. Mr. Segal also previously
held a managerial position at PriceWaterhouseCoopers Corporate Finance and was an Economic Department manager at the North American division of
Amdocs Inc. (NYSE: DOX). His experience also includes risk management and house account (“Nostro”) trading at the Union Bank of Israel, and serving
as an economist for capital markets in the Research Department of the Bank of Israel. Mr. Segal also has many years of experience in economic consulting
and company valuations, joint ventures and financial instruments for investments, M&A, and IPOs. He has 15 years of experience in economic consulting
for international and local clients in the Bio-Tech sector as well as in Hi-Tech, financial and other sectors. Mr. Segal is a co-founder of Nextrade Ltd. and
Solid Capital, a start-up financial software company. Mr. Segal holds a B.A. in Economics and Statistics and an M.B.A. (Finance and Information Systems)
from the Hebrew University of Jerusalem.
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Vickie R. Driver has served as a member of our Board since May 2017. She is board certified in foot surgery by the American Board of Podiatric
Surgery and is a Fellow at the American College of Foot and Ankle Surgeons, licensed in Virginia, Massachusetts, and Rhode Island. Dr Driver serves as
Chair, Board of Directors for the Wound Care Collaborative Community, an important collaboration with the FDA, CMS and the NIH and has received a
prestigious honor of receiving The Robert A. Warriner III, MD Memorial Award. She is System Wide Medical Director of the Wound Care and Hyperbaric
Centers at INOVA Healthcare in the DC Metropolitan area and is Professor, University of Virginia, School of Medicine. She is also Fellow, Royal College
of Physicians and Surgeons-Glasgow, PM and Inaugural Fellow, Assoc for the Advancement of Wound Care, FAAWC. She currently serves as Honorary
Visiting Professor at Cardiff University (UK) in the Department of Medicine and Professor at Barry University (USA). She proudly serves as a member of
the Wound Healing Society (WHS) Board of Directors and as member Board of Directors for the Critical Limb Ischemia (CLI) Global Society. She has
completed her tenure as president for the Advancement of Wound Care Association (AAWC) and served for 9 years on the Board of Directors. Dr. Driver is
a former Professor of Surgery in the Department of Orthopedics at Brown University (Clinical) and Associate Professor of Surgery at Boston University.
She has also chaired the Wound Care Experts and U.S. Food and Drug Administration (“FDA”) Clinical Endpoints Project [WEF-CEP]. The project was
successful in developing the research to expand the wound healing clinical endpoints considered by FDA. She and her team proposed a combined effort to
develop the Wound-care Experts/FDA-Clinical Endpoints Project [WEF-CEP] to strategically identify clinically meaningful, evidence-based, and patient-
centered wound care endpoints that are relevant for clinical research and trials. The goal was to collaboratively work with the FDA to expand the list of
acceptable primary endpoints, recognizing that new and innovative treatments, devices, and drugs may not have complete healing as the focus. She has
served as a senior investigator for more than 70 important multi‑center randomized clinical trials, as well as developed and supervised multiple research
fellowship training programs. She has served and chaired multiple committees for large national and international pivotal clinical trials, has authored over
150 publications and abstracts and is former Director, Translational Medicine at Novartis Institute for BioMedical Research. Dr. Driver is credited with the
development and directorship of multiple major multidisciplinary Limb Preservation- Wound Healing Centers of Excellence, including Military/VA,
Hospital and University based programs. Dr Driver served on the Inaugural Educational Committee at the American College of Wound Healing and Tissue
Repair at University of Illinois School of Medicine and was Scientific Director, Colorado Prevention Center, Wound Care Laboratory at the University of
Colorado. Dr. Driver has held several leadership, teaching, research and clinical positions at Academic Medical Centers, Veterans Administration Medical
Centers, and Military Medical Centers. Dr. Driver received a Doctorate of Podiatric Medicine and Surgery from the California College of Podiatric
Medicine and Surgery and a master’s degree in medical education from Samuel Merritt University.
Nissim Mashiach has served as a member of our Board since June 2017, serving as an external director under the Companies Law until December
2022. Mr. Mashiach served as President and Chief Executive Officer of Macrocure Ltd., a Nasdaq‑listed biotechnology company focused on the treatment
of chronic and other hard‑to‑heal wounds, from June 2012 to January 2017. From 2009 to 2012, he served as General Manager at Ethicon, a Johnson &
Johnson company. Prior to Ethicon, he served as President and Chief Operating Officer at Omrix Biopharmaceuticals, Inc., which was acquired by Johnson
& Johnson in 2008. Prior to Omrix, Mr. Mashiach held leadership positions at several pharmaceutical companies. He holds an MBA from the University of
Manchester in Manchester, England, an MPharmSc from the Hebrew University in Jerusalem, Israel, and a B.Sc, Chemical Engineering from the
Technion‑Israel Institute of Technology in Haifa, Israel.
Sharon Kochan has served as a member of our Board since June 2017, serving as an external director under the Companies Law until December
2022. Mr. Kochan has served as Presidnet and CEO of Padagis LLC since its incorporation in July 2021 when it was carved out of Periggo company and
started its independent journey (acquired by Altaris Capital for $1.55 billion). Prior to that, Mr. Kochan served as Executive Vice President & President
international, for Perrigo Company Plc., a global, over‑the‑counter, consumer goods and specialty pharmaceutical company listed on the New York Stock
Exchange, since 2012, and has been a member of the Perrigo Executive Committee since 2007. From March 2007 to July 2012, he served as Executive
Vice President, General Manager of Prescription Pharmaceuticals for Perigo and from 2005 to 2007, he was Senior Vice President of Business
Development and Strategy for Perrigo. Mr. Kochan was Vice President, Business Development of Agis Industries (1983) Ltd. from 2001 until Perrigo
acquired Agis in 2005. He completed the Senior Management Program at the Technion Institute of Management in Haifa, Israel, received a Master of
Science in Operations Research & Management Science from Columbia University in New York City and received a Bachelor of Science in Industrial and
Management Engineering from Tel‑Aviv University in Tel‑Aviv, Israel.
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Mr. Sharon Malka has served as a member of our board of directors since August 2022. Prior to joining our board, Mr. Malka served as our Chief
Executive Officer from May 2019 to June 2022. Prior to that time, he served as our Chief Financial and Operations Officer, beginning in April 2007. From
2002 to 2007, Mr. Malka was a partner at Variance Economic Consulting Ltd., a multi-disciplinary consulting boutique that specializes in financial and
business services. Mr. Malka also served as a Senior Manager at Kesselman Corporate Finance, a division of PricewaterhouseCoopers Global Network,
from 1998 to 2002. Mr. Malka holds a B.Sc. in Business Administration from the Business Management College in Israel and an M.B.A. from Bar Ilan
University, Israel.
Mr. David Fox has served as a member of our board of directors since April 2020. Mr. Fox was most recently a partner at Kirkland & Ellis LLP
and served as a member of its Global Executive Management Committee until 2019. Prior to joining Kirkland, Mr. Fox was partner with Skadden, Arps,
Slate, Meagher & Flom LLP, where he was a member of its top governing committee. Mr. Fox is a member of the executive committee of the board of
directors at the Park Avenue Armory and is the chairman of the leadership council of New Alternatives for Children. In addition, Mr. Fox serves on the
executive committee of the board of governors, and is an honorary fellow of the Hebrew University, Jerusalem. He holds an LL.B. degree from Jerusalem
University, Israel.
B. Compensation
Compensation of Directors and Executive Officers
The table below reflects the compensation granted to our five most highly compensated officers during or with respect to the year ended
December 31, 2022. All amounts reported in the table reflect the cost to the company, as recognized in our financial statements for the year ended
December 31, 2022.
Name and Position
Sharon Malka, Director and former CEO(5)
Ofer Gonen, Chief Executive Officer
Lior Rosenberg, M.D., Chief Medical Technology Officer
Ety Klinger, Chief Research & Development Officer
Boaz Gur-Lavie, Chief Financial Officer
Salary &
Social
Benefits(1)
308
253
324
298
255
Bonus
Share‑Based
Payment(2)
Other
Compensation(3)
Total
( thousand U.S. dollars)(4)
-
200
167
75
60
345
365
90
77
76
316
32
236
20
18
969
850
817
470
409
(1) Represents the officer’s gross salary plus payment of mandatory social benefits made by the company on behalf of such officer. Such benefits may
include, to the extent applicable to the executive, payments, contributions and/or allocations for savings funds (e.g., Managers’ Life Insurance
Policy), education funds (referred to in Hebrew as “keren hishtalmut”), pension, severance, risk insurances (e.g., life or work disability insurance)
and payments for social security.
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(2) Represents the equity‑based compensation expenses recorded in the company’s consolidated financial statements for the year ended December 31,
2022 based on the options’ grant date fair value in accordance with accounting guidance for equity‑based compensation.
(3) Represents the other benefits to such officer, which includes either or both of (i) car expenses, including lease costs, gas and maintenance, provided
to the officers, (ii) vacation benefits and (iii) severance payment.
(4) Converted (i) from NIS into U.S. dollars at the rate of NIS 3.358 = U.S$1, based on the average representative rate of exchange between the NIS and
the U.S. dollar in the year ended December 31, 2022 as reported by the Bank of Israel in the year ended December 31, 2022.
(5)
The compensation received by Mr. Malka in respect of the year ended December 31, 2022 consists of compensation that he received as our CEO
until June 30, 2022 and cash, equity awards and other compensation that he received in his role as active director commencing in July 2022.
The aggregate compensation paid and equity‑based compensation and other payments expensed by us and our subsidiaries to our directors and
executive officers with respect to the year ended December 31, 2022 was $4.9 million. As of December 31, 2022, options to purchase 482,321 ordinary
shares, exercisable at a weighted average exercise price of $25.54 per share, and restricted share units (“RSUs”) that may be settled for 59,169 ordinary
shares, in each case granted to our directors and executive officers, were outstanding under our equity incentive plans. We do not have any written
agreements with any director providing for benefits upon the termination of such director’s relationship with our company or its subsidiaries.
Employment Agreements with Executive Officers
We have entered into written employment agreements with all of our executive officers, which include standard provisions for a company in our
industry regarding non‑competition/solicitation, confidentiality of information and assignment of inventions. Except for Ofer Gonen, our Chief Executive
Officer, our executive officers will not receive benefits upon the termination of their respective employment with us, other than payment of salary and
benefits (and limited accrual of vacation days) during the required notice period for termination of their employment, which varies for each individual.
Upon termination of his employment, Mr. Gonen is entitled to a one‑time termination payment of six months of salary.
Directors’ Service Contracts
Other than with respect to our directors that are also executive officers, 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.
2003 Israeli Share Option Plan
In November 2003, we adopted our 2003 Israeli Share Option Plan (the “2003 Plan”). The 2003 Plan provides for the grant of options to our and
our subsidiaries’ directors, employees, officers, consultants and service providers, among others.
The initial reserved pool under the 2003 Plan was 244,286 ordinary shares and subsequently increased to a total of 461,429 ordinary shares. The
2003 Plan expired on December 31, 2013. Options that remain outstanding under the 2003 Plan continue to be governed by the terms of the plan,
notwithstanding that expiration. The 2003 Plan is administered by our board of directors or a committee designated by our board of directors, which
determines, subject to Israeli law, the grantees of options, the terms of the options, including exercise prices, vesting schedules, acceleration of vesting, the
type of option and the other matters necessary or desirable for, or incidental to the administration of the 2003 Plan. The 2003 Plan provides for the issuance
of options under various tax regimes including, without limitation, pursuant to Sections 102 and 3(i) of the Israeli Income Tax Ordinance (New Version)
1961 (the “Ordinance”).
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Section 102 of the Ordinance allows employees, directors and officers who are not controlling shareholders and who are Israeli residents to
receive favorable tax treatment for compensation in the form of shares or options. Section 102 of the Ordinance includes two alternatives for tax treatment
involving the issuance of options or shares to a trustee for the benefit of the grantees and also includes an additional alternative for the issuance of options
or shares directly to the grantee. Section 102(b)(2) of the Ordinance, which provides the most favorable tax treatment for grantees, permits the issuance to a
trustee under the “capital gains track.” In order to comply with the terms of the capital gains track, all options granted under a specific plan and subject to
the provisions of Section 102 of the Ordinance, as well as the shares issued upon exercise of such options and other shares received following any
realization of rights with respect to such options, such as share dividends and share splits, must be registered in the name of a trustee selected by the board
of directors and held in trust for the benefit of the relevant employee, director or officer. The trustee may not release these options or shares to the relevant
grantee before the second anniversary of the registration of the options in the name of the trustee. However, under this track, we are not allowed to deduct
an expense with respect to the issuance of the options or shares.
The 2003 Plan provides that options granted to our employees, directors and officers who are not controlling shareholders and who are considered
Israeli residents are intended to qualify for special tax treatment under the “capital gains track” provisions of Section 102(b)(2) of the Ordinance. Our
Israeli non‑employee service providers and controlling shareholders may only be granted options under Section 3(i) of the Ordinance, which does not
provide for similar tax benefits.
Options granted under the 2003 Plan are subject to vesting schedules and generally expire ten years from approval of the option and vest over a
four‑year period commencing on the date of grant, such that 25% of the granted options vest annually on each of the first, second, third and fourth
anniversaries of the date of grant. Under the 2003 Plan, in the event of termination of employment or services for reasons of disability or death, the grantee,
or in the case of death, his or her legal successor, may exercise options that have vested prior to termination within a period of six months after the date of
termination. If a grantee’s employment or service is terminated for cause, all of the grantee’s vested and unvested options expire on the date of termination.
If a grantee’s employment or service is terminated for any other reason, the grantee may exercise his or her vested options within 90 days after the date of
termination. Any expired or unvested options are returned to the pool for reissuance.
The 2003 Plan provides that in the event of a merger or consolidation of our company or a sale of all, or substantially all, of our assets, the
unexercised options outstanding may be assumed, or substituted for an appropriate number of shares of each class of shares or other securities as were
distributed to our shareholders in connection with such transaction and the exercise price will be appropriately adjusted. If not so assumed or substituted, all
non‑vested and non‑exercised options will expire upon the closing of the transaction. Our board of directors or its designated committee, as applicable,
may provide in the option agreement that if the acquirer does not agree to assume or substitute the options, vesting of the options shall be accelerated so
that any unvested option or any portion thereof will vest 10 days prior to the closing of the transaction. In the event that such consideration received in the
transaction is not solely in the form of ordinary shares of another company, the board of directors or the designated committee, as applicable, may, with the
approval of the acquirer, provide that in lieu of the assumption or substitution of the options, the options will be substituted by another type of asset or
property, including cash.
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2014 Equity Incentive Plan
In March 2014, we adopted and obtained shareholder approval for our 2014 Equity Incentive Plan, which was amended as of December 18, 2018
(the “2014 Plan”). The 2014 Plan provides for the grant of options, restricted shares, RSUs and other share‑based awards to our and our subsidiaries’ and
affiliates’ directors, employees, officers, consultants and advisors, among others and to any other person whose services are considered valuable to us or
them, to continue as service providers, to increase their efforts on our behalf or behalf of a subsidiary or affiliate and to promote the success of our
business. Following the approval of the 2014 Plan by the Israeli tax authorities, we are only granting options or other equity incentive awards under the
2014 Plan, although previously‑granted options and awards will continue to be governed by our 2003 Plan and the shares underlying such options and
awards will count against the reserved pool for the 2014 Plan. The initial reserved pool under the 2014 Plan was 433,249 ordinary shares, which will
automatically increase on January 1 of each year by a number of ordinary shares equal to the lowest of (i) 2% of our outstanding shares, (ii) 85,714 shares
and (iii) a number of shares determined by our board of directors, if so determined prior to January 1 of the year in which the increase will occur; provided
that the pool of shares reserved under the Plan shall not exceed 15% (fifteen percent) of the then outstanding shares. Pursuant to an “evergreen” provision
in the 2014 Plan, the reserved pool was increased by 61,573, 77,280, 77,654, 77,723 , 77,820 and 357,143 ordinary shares as of January 1, 2016, January
1, 2018, January 1, 2019, January 1, 2020, January 1, 2021 and January 2022 , respectively, representing 2% of our outstanding shares as of each such date.
We did not increase the reserved pool in 2015 or 2017.
The 2014 Plan is administered by our board of directors or by a committee designated by the board of directors, which determine, subject to Israeli
law, the grantees of awards and the terms of the grant, including exercise prices, vesting schedules, acceleration of vesting and the other matters necessary
in the administration of the 2014 Plan. The 2014 Plan enables us to issue awards under various tax regimes, including, without limitation, pursuant to
Sections 102 and 3(i) of the Ordinance, as discussed under “—2003 Share Incentive Plan” above, and under Section 422 of the U.S. Internal Revenue Code
of 1986, as amended (the “Code”).
Options granted under the 2014 Plan to U.S. residents may qualify as “incentive stock options” within the meaning of Section 422 of the Code, or
may be non‑qualified. The exercise price for “incentive stock options” must not be less than the fair market value on the date on which an option is granted,
or 110% of the fair market value if the option holder holds more than 10% of our share capital.
We currently intend to grant awards under the 204 Plan under the capital gains track of Section 102(b)(2) of the Ordinance only to our employees,
directors and officers who are not controlling shareholders and are considered Israeli residents.
Awards under the 2014 Plan may be granted until ten years from the date on which the 2014 Plan was approved by our board of directors.
Options granted under the 2014 Plan generally vest over three or four years commencing on the date of grant, such that 33% or 25%, respectively,
vests annually on the anniversary of the date of grant. Options, other than certain incentive share options, that are not exercised within ten years from the
grant date expire, unless otherwise determined by our board of directors or its designated committee, as applicable. Share options that qualify as “incentive
stock options” and are granted to a person holding more than 10% of our voting power will expire within five years from the date of the grant. In the event
of the death of a grantee while employed by or performing service for us or a subsidiary or within three months thereafter, or the termination of a grantee’s
employment or services for reasons of disability, the grantee, or in the case of death, his or her legal successor, may exercise options that have vested prior
to termination within a period of one year from the date of disability or death. If we terminate a grantee’s employment or service for cause, all of the
grantee’s vested and unvested options will expire on the date of termination. If a grantee’s employment or service is terminated for any other reason, the
grantee may exercise his or her vested options within three months of the date of termination. Any expired or unvested options return to the pool for
reissuance.
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In the event of a merger or consolidation of our company or a sale of all, or substantially all, of our shares or assets or other transaction having a
similar effect on us, then without the consent of the option holder, our board of directors or its designated committee, as applicable, may but is not required
to (i) cause any outstanding award to be assumed or an equivalent award to be substituted by such successor corporation, or (ii) in case the successor
corporation refuses to assume or substitute the award (a) provide the grantee with the option to exercise the award as to all or part of the shares or (b)
cancel the options against payment in cash in an amount determined by the board of directors or the committee as fair in the circumstances.
Notwithstanding the foregoing, our board of directors or its designated committee may upon such event amend or terminate the terms of any award,
including conferring the right to purchase any other security or asset that the board of directors shall deem, in good faith, appropriate. Our board of
directors or its designated committee may, in its discretion, approve that any awards granted under the 2014 Plan shall be subject to additional conditions in
the case of a merger or a consolidation.
Restricted share awards are ordinary shares that are awarded to a participant subject to the satisfaction of the terms and conditions established by
the board of directors or a committee designated by the board of directors. Until such time as the applicable restrictions lapse, restricted shares are subject
to forfeiture and may not be sold, assigned, pledged or otherwise disposed of by the participant who holds those shares. Generally, if a grantee’s
employment or service is terminated for any reason prior to the expiration of the time when the restrictions lapse, shares that are still restricted will be
forfeited.
The following table provides information regarding the outstanding options to purchase our ordinary shares, and RSUs held by each of our
directors and executive officers who beneficially owns greater than 1% of our ordinary shares (after including shares underlying options or RSUs) as of
March 15, 2023:
Name
Number of
Options
Number of
RSUs
Grant Date
Exercise
Price - $
Vested
Options/RSU's Expiration Date
Sharon Malka
17,371
7,142
19,285
5,714
11,595
6,527
28,572
6,428
2,857
1,087
3,571
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24/12/2013
23/12/2015
31/12/2018
24/03/2019
23/04/2020
04/03/2021
07/06/2022
31/12/2018
24/03/2019
04/03/2021
07/06/2022
90.23
67.06
36.05
34.44
12.25
37.52
14.42
0
0
0
0
17,371
7,142
19,285
4,286
5,798
3,264
21,428
6,428
2,142
544
2,678
22/12/2023
20/12/2025
28/12/2028
21/03/2029
21/04/2030
02/03/2031
04/06/2032
28/12/2028
21/03/2029
02/03/2031
04/06/2032
C. Board Practices
Board of Directors
Under the Israeli Companies Law, the management of our company is vested in our board of directors. Our board of directors may exercise all
powers and may take all actions that are not specifically granted 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 of directors. Our Chief Executive Officer is appointed by, and serves
at the discretion of, our board of directors, subject to the employment agreement that we have entered into with him. All other executive officers are also
appointed by our board of directors, and are subject to the terms of any applicable employment agreements that we may enter into with them.
Under our articles of association, our board of directors must consist of at least five and not more than nine directors, including, to the extent then
required to appoint them, at least two external directors, who may be required to be appointed under the Israeli Companies Law. At any time the minimum
number of directors (other than the external directors) shall not fall below three. Other than external directors, for whom special election requirements
apply under the Israeli Companies Law when they are required to be elected, as detailed below, the Israeli Companies Law and our articles of association
provide that directors are elected annually at the general meeting of our shareholders by a vote of the holders of a majority of the voting power represented
present and voting, in person or by proxy, at that meeting. We have only one class of directors.
In accordance with the exemption available to foreign private issuers under Nasdaq rules, we are not required to comply with the requirements of
the Nasdaq rules with regard to having a majority of independent directors on our board of directors, as long as we follow Israeli law and practice, in
accordance with which our board of directors includes at least two external directors. However, because we have elected under the Israeli Companies Law
regulations to opt-out from compliance with Israeli law requirements related to appointment of external directors and audit and compensation committee
composition (as described under “External Directors” below), we are not permitted to also exempt ourselves from the Nasdaq majority independent
directors requirement. Our board of directors has determined that six of our eight current directors are independent under the Nasdaq Stock Market listing
rules such that we comply with the Nasdaq majority independence rule.
In accordance with the exemption available to foreign private issuers under Nasdaq rules, we do not follow the requirements of the Nasdaq rules
with regard to the process of nominating directors, and instead follow Israeli law and practice, in accordance with which our board of directors (or a
committee thereof) is authorized to recommend to our shareholders director nominees for election.
Under the Israeli Companies Law and our articles of association, nominees for directors may also be proposed by any shareholder holding at least
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 Secretary (or, if we have no such Secretary, our Chief Executive Officer). Pursuant to our Articles of Association, 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(s) and any other person pursuant to which the nomination(s) are to be made by the nominating shareholder, the consent of the
proposed director nominee(s) to serve as our director(s) if elected and a declaration signed by the nominee(s) declaring that there is no limitation under the
Israeli Companies Law preventing their election, and that all of the information that is required under the Israeli Companies Law to be provided to us in
connection with such election has been provided. Under the Israeli Companies Law regulations, any such shareholder nomination must be delivered to our
registered Israeli office within seven days after we publish notice of our upcoming annual general meeting of shareholders (or within 14 days after we
publish a preliminary notification of an upcoming annual general meeting).
In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors for a term of
office equal to the remaining period of the term of office of the director(s) whose office(s) have been vacated.
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Under the Israeli Companies Law, our board of directors must 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 of directors must consider, among other things,
the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number of
directors of our company who are required to have accounting and financial expertise is one.
We are not a party to, and are not aware of, any voting agreements among our shareholders. In addition, there are no family relationships among
our executive officers and directors.
External Directors
Under the Israeli Companies Law, the boards of directors of companies, whose shares are publicly traded, including companies with shares traded
in the United States, are generally required to include at least two members who qualify as external directors. Nissim Mashiach and Sharon Kochan had
served as our external directors for the period following their re-election at our 2020 annual general meeting of shareholders held on June 29, 2020 until our
Board elected to be governed by the exemption from appointing external directors (as described below).
Under regulations promulgated under the Israeli Companies Law, Israeli public companies whose shares are traded on certain U.S. stock
exchanges, such as the Nasdaq Global Market, and that lack a controlling shareholder (as defined below) are exempt from the requirement to appoint
external directors. Any such company is also exempt from the Israeli Companies Law requirements related to the composition of the audit and
compensation committees of the Board. Eligibility for these exemptions is conditioned on compliance with U.S. stock exchange listing rules related to
majority Board independence and the composition of the audit and compensation committees of the Board, as applicable to all listed domestic U.S.
companies. Eligibility is furthermore conditioned on our election of a female or male director at any time when we hold elections of directors and the Board
is then composed of solely male or solely female members.
On December 5, 2022, in light of our Board’s determination that Clal Biotechnology Industries Ltd. is no longer a “controlling shareholder” of
our company under the Israeli Companies Law definition (provided further below), the Board elected, pursuant to the Israeli Companies Law regulations,
to exempt our company from compliance with the (i) requirement to appoint external directors, and (ii) required composition of the audit committee and
compensation committees of the Board under the Israeli Companies Law. At the time that it made that election, our Board affirmatively determined that we
meet the conditions for exemption from the external director requirement, including that a majority of the members of our Board, along with each of the
members of the audit and compensation committees of the Board, are independent under the Nasdaq Listing Rules.
Under the Israeli Companies Law regulations, each of our former external directors— Nissim Mashiach and Sharon Kochan— will be entitled to
continue to serve as ordinary directors, and their current term as directors will expire at the three-year anniversary of their election, on June 29, 2023 (or
earlier, if our Board chooses to nominate them for re-election as ordinary directors at our 2023 annual general meeting of shareholders to be held before
June 29, 2023).
Our election to exempt our company from compliance with the external director and related requirements can be reversed at any time by our
Board, in which case we would need to hold a shareholder meeting to once again to appoint external directors, whose election would be for a three-year
term. The election of each external director would require a majority vote of the shares present and voting at a shareholders meeting, provided that either:
• the majority voted in favor of election includes a majority of the shares held by non-controlling shareholders who do not have a personal interest
in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) that are voted at the
meeting, excluding abstentions, which we refer to as a disinterested majority; or
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• the total number of shares held by non-controlling, disinterested shareholders (as described in the previous bullet-point) voted against the
election of the director does not exceed two percent (2%) of the aggregate voting rights in the company.
The term “controlling shareholder” is defined in the Israeli Companies Law as a shareholder with the ability to direct the activities of the company,
other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting
rights in a company or has the right to appoint the majority of the directors of the company or its general manager (i.e., its CEO).
For further information concerning the Israeli Companies Law provisions related to external directors, please see “Item 6. Directors, Senior
Management and Employees— C. Board Practices— Board of Directors— External Directors” in our annual report on Form 20-F for the year ended
December 31, 2021, which we filed with the SEC on March 17, 2022.
Leadership Structure of the Board
In accordance with the Israeli Companies Law and our articles of association, our board of directors is required to appoint one of its members to
serve as chairman of the board of directors. Our board of directors has appointed Homi Shamir to serve as chairman of the board of directors.
Audit Committee
Israeli Companies Law composition requirements
Under the Israeli Companies Law, we are required to have an audit committee comprised of at least three directors. To the extent we are then
required to appoint external directors, this committee must include all of the external directors, one of whom must serve as chairman of the committee.
There are additional requirements as to the composition of the audit committee under the Israeli Companies Law. However, when we elected to exempt our
company from the external director requirement, we concurrently elected to exempt our company from all of such requirements (which exemption is
conditioned on our fulfillment of all Nasdaq listing requirements related to the composition of the audit committee).
Nasdaq listing rules composition requirements
Under the Nasdaq Stock Market listing rules, 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. If we choose to follow requirements under
Israeli law in lieu of those Nasdaq requirements, we must disclose that fact in this annual report.
Our audit committee consists of Sharon Kochan (chairperson), Nissim Mashiach and Stephen T. Wills, each of whom is an independent director in
accordance with Rule 10A‑3(b)(1) under the Exchange Act and satisfies the independent director requirements under the Nasdaq Stock Market listing
rules. All members of our audit committee meet the requirements for financial literacy under the applicable listing rules of the Nasdaq Stock Market. Our
board of directors has determined that Sharon Kochan is an “audit committee financial expert,” as defined in the SEC regulations.
Audit committee role
Our board of directors has adopted an audit committee charter that sets forth the responsibilities of the audit committee consistent with the rules
and regulations of the SEC and the Nasdaq Stock Market listing rules, as well as the requirements for such committee under the Israeli Companies Law,
including the following:
•
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 of directors in accordance with Israeli law;
110
•
•
recommending the engagement or termination of the person filling the office of our internal auditor; and
recommending the terms of audit and non‑audit services provided by the independent registered public accounting firm for pre‑approval by
our board of directors.
Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our
accounting, auditing, financial reporting, internal control and legal compliance functions by pre‑approving the services performed by our independent
accountants and reviewing their reports regarding our accounting practices and systems of internal control over financial reporting. 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.
Under the Israeli Companies Law, our audit committee is responsible for:
•
•
•
•
•
•
•
determining whether there are deficiencies in the business management practices of our company, including in consultation with our internal
auditor or the independent auditor, and making recommendations to the board of directors to improve such practices;
determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest and
whether such transaction is extraordinary or material under the Israeli Companies Law) (see “—Approval of Related Party Transactions
Under Israeli Law”);
establishing the approval process (including, potentially, the approval of the audit committee and conducting a competitive procedure
supervised by the audit committee) for certain transactions with a controlling shareholder or in which a controlling shareholder has a personal
interest;
where the board of directors approves the working plan of the internal auditor, examining such working plan before its submission to the
board of directors and proposing amendments thereto;
examining our internal audit controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and
tools to fulfill his responsibilities;
examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors
or shareholders, depending on which of them is considering the appointment of our auditor; and
establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided to
such employees.
Our audit committee may not approve any actions requiring its approval (see “—Approval of Related Party Transactions Under Israeli Law”),
unless at the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one
external director.
Compensation Committee and Compensation Policy
Israeli Companies Law compensation committee composition requirements
Under the Israeli Companies Law, the board of directors of a public company must appoint a compensation committee. If a company is required to
appoint external directors, the committee must consist of at least three members, including all of the external directors, one of whom must serve as
chairman of the committee. There are additional requirements as to the composition of the audit committee under the Companies Law. However, when we
elected to exempt our company from the external director requirement, we concurrently elected to exempt our company from all of such requirements
(including the three-member minimum). Our exemption under the Companies Law is conditioned on our fulfillment of all Nasdaq listing requirements
related to the composition of the compensation committee.
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Israeli Companies Law committee duties
The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of
engagement of office holders, which we refer to as a compensation policy. That policy must be adopted by the company’s board of directors, after
considering the recommendations of the compensation committee, and must be approved by the company’s shareholders, which approval requires what we
refer to as a Special Majority Approval for Compensation. A Special Majority Approval for Compensation requires shareholder approval by a majority
vote of the shares present and voting at a meeting of shareholders called for such purpose, provided that either (a) such majority includes at least a majority
of the shares held by all shareholders who are not controlling shareholders and do not have a conflict of interest (referred to under the Israeli Companies
Law as a “personal interest”) in such compensation arrangement or (b) the total number of shares of non-controlling shareholders and shareholders who do
not have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting
rights.
Compensation policy requirements
We have adopted a compensation policy, most recently at the extraordinary general meeting of shareholders held on November 28, 2022, which
policy serves as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance,
indemnification or any monetary payment or obligation of payment or other benefit in respect of employment or engagement. Under the Israeli Companies
Law, 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, among other things, the company’s risk management, size and
the nature of its operations. The compensation policy must furthermore consider the following additional factors:
•
•
•
•
•
•
•
the knowledge, skills, expertise and accomplishments of the relevant office holder;
the office holder’s roles and responsibilities and prior compensation agreements with him or her;
the relationship between the terms offered and the average compensation of the other employees of the company, including those employed
through manpower companies;
the impact of disparities in salary upon work relationships in the company;
the possibility of reducing variable compensation at the discretion of the board of directors;
the possibility of setting a limit on the exercise value of non-cash variable equity-based compensation; and
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 under which the person is leaving the company.
The compensation policy must also include the following principles:
•
the link between variable compensation and long-term performance, which variable compensation shall, other than office holder who report
to the CEO, be primarily based on measurable criteria;
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•
•
•
•
the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;
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;
the minimum holding or vesting period for variable, equity-based compensation; and
maximum limits for severance compensation.
The compensation committee is responsible for (a) recommending the compensation policy to the company’s board of directors for its approval (and
subsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well as
functions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders,
including:
•
•
•
•
•
recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three years
(approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three
years, other than following a company’s initial public offering, in which case such approval must occur within 5 years of the initial public
offering);
recommending to the board of directors periodic updates to the compensation policy and assessing implementation of the compensation
policy;
approving compensation terms of executive officers, directors and employees that require approval of the compensation committee;
determining whether the compensation terms of a chief executive officer nominee, which were determined pursuant to the compensation
policy, will be exempt from approval of the shareholders because such approval would harm the ability to engage with such nominee; and
determining, subject to the approval of the board and under special circumstances, whether to override a determination of the company’s
shareholders regarding certain compensation related issues.
A copy of our current compensation policy serves as an exhibit to this annual report on Form 20-F.
Nasdaq listing rules compensation committee composition requirements
Under Nasdaq corporate governance rules, we are required to maintain a wholly-independent compensation committee consisting of at least two
independent directors or, if we choose to follow requirements under Israeli law, we must disclose that fact in this annual report. Each of the members of the
compensation committee is required to be independent under the Nasdaq rules relating to compensation committee members and Rule 10C‑1(b)(1) under
the Exchange Act, which are different than the general test for independence of board members.
Our compensation committee consists of Nissim Mashiach (chairperson), Sharon Kochan and Stephen T. Wills, each of whom is an independent
director under the Nasdaq Stock Market listing rules and each of whom satisfies the above-described additional requirements for compensation committee
members under the Nasdaq rules and Exchange Act.
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Compensation committee charter and role
Our board of directors has adopted a compensation committee charter setting forth the responsibilities of the compensation committee, which
include:
•
•
•
the responsibilities set forth in the compensation policy;
reviewing and approving the granting of options and other incentive awards to the extent such authority is delegated by our board of directors;
and
reviewing, evaluating and making recommendations regarding the compensation and benefits for our non-employee directors.
Nominating, Governance and Sustainability Committee
Our nominating, governance and sustainability committee consists of Nachum Shamir and David Fox, with Mr. Fox serving as chair. Our board of
directors has adopted a nominating committee charter setting forth the responsibilities of the committee, which include:
•
•
•
overseeing and assisting our board in reviewing and recommending nominees for election of directors;
assessing the performance of the members of our board; and
establishing and maintaining effective corporate governance policies and practices, including, but not limited to, developing and
recommending to our board a set of corporate governance guidelines applicable to our business.
Research and Development Committee
The research and development committee is composed of Vickie R Driver, Stephen T. Wills, Nissim Mashiach and Sharon Malka, with Dr. Driver serving
as chairperson. The primary functions of the research and development committee include:
•
•
overseeing the Company's scientific, technical, research and development strategy, and the implementation thereof; and
advising our board of directors and management regarding program prioritization, clinical development strategy, regulatory strategy and
interactions, and related matters.
Internal Auditor
Under the Israeli Companies Law, the board of directors of an Israeli public company must appoint an internal auditor recommended by the audit
committee. An internal auditor may not be:
•
•
•
•
a person (or a relative of a person) who holds 5% or more of the company’s outstanding shares or voting rights;
a person (or a relative of a person) who has the power to appoint a director or the general manager of the company (i.e., the chief executive
officer);
an office holder (including a director) of the company (or a relative thereof); or
a member of the company’s independent accounting firm, or anyone on its behalf.
The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures.
The audit committee is required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal
auditor’s work plan. Our internal auditor is Mr. Yisrael Gewirtz.
Fiduciary Duties of Directors and Executive Officers
The Israeli Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “—Executive
Officers and Directors” is an office holder under the Israeli Companies Law.
An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of
care with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office
holder act in good faith and in the best interests of the company.
The duty of care includes a duty to use reasonable means to obtain:
•
•
information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and
all other important information pertaining to any such action.
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The duty of loyalty includes a duty to:
•
•
•
•
refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal
affairs;
refrain from any activity that is competitive with the business of the company;
refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and
disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or
her position as an office holder.
Disclosure of personal interests of an office holder and approval of certain transactions
The Israeli Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be
aware of and all related material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s
disclosure must be made promptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A
personal interest includes an interest of any person in an act or transaction of a company, including a personal interest of such person’s relative or of a
corporate body in which such person or a relative of such person is a 5% or greater shareholder, director or general manager or in which he or she has the
right to appoint at least one director or the general manager, but excluding a personal interest stemming from one’s ownership of shares in the company.
A personal interest furthermore includes the personal interest of a person for whom the office holder holds a voting proxy or the personal interest
of the office holder with respect to his or her vote on behalf of a person for whom he or she holds a proxy even if such shareholder has no personal interest
in the matter. An office holder is not, however, obliged to disclose a personal interest if it derives solely from the personal interest of his or her relative in a
transaction that is not considered an extraordinary transaction. Under the Israeli Companies Law, an extraordinary transaction is defined as any of the
following:
•
•
•
a transaction other than in the ordinary course of business;
a transaction that is not on market terms; or
a transaction that may have a material impact on a company’s profitability, assets or liabilities.
If it is determined that an office holder has a personal interest in a transaction which is not an extraordinary transaction, approval by the board of
directors is required for the transaction, unless the company’s articles of association provide for a different method of approval. Further, so long as an office
holder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be
deemed a breach of his or her duty of loyalty. However, a company may not approve a transaction or action that is not in the best interest of the company or
that is not performed by the office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first
by the company’s audit committee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office
holder who is not a director requires approval first by the company’s compensation committee, then by the company’s board of directors. If such
compensation arrangement or an undertaking to indemnify or insure is inconsistent with the company’s stated compensation policy, or if the office holder is
the chief executive officer (apart from a number of specific exceptions), then such arrangement is further subject to a Special Majority Approval for
Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require the approval of the compensation committee,
board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a Special Majority Approval for Compensation.
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Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may
not be present at such a meeting or vote on that matter unless the chairman of the relevant committee or board of directors (as applicable) determines that
he or she should be present in order to present the transaction that is subject to approval. If a majority of the members of the audit committee or the board
of directors (as applicable) has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or
the board of directors (as applicable) on such transaction and the voting on approval thereof, but shareholder approval is also required for such transaction.
Disclosure of personal interests of controlling shareholders and approval of certain transactions
Pursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a
controlling shareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes
a shareholder who holds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company.
For this purpose, the holdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit
committee or the compensation committee, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary
transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder
or his or her relative, directly or indirectly, including through a company under the control of the controlling shareholder, for the provision of services to the
company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who is an office holder or (d) the employment of
a controlling shareholder or his or her relative by the company, other than as an office holder. In addition, the shareholder approval requires one of the
following, which we refer to as a Special Majority:
•
•
at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting
at the meeting approves the transaction, excluding abstentions; or
the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at the
meeting do not exceed 2% of the voting rights in the company.
To the extent that any such transaction with a controlling shareholder is for a period extending beyond three years, approval is required once every
three years, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the
circumstances related thereto. Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as
an office holder require the approval of the compensation committee, board of directors and shareholders by a Special Majority, in that order, and the terms
thereof may not be inconsistent with the company’s stated compensation policy.
Pursuant to regulations promulgated under the Israeli Companies Law, certain transactions with a controlling shareholder or his or her relative, or
with directors, that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations
of the audit committee and board of directors.
Shareholder duties
Pursuant to the Israeli Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other
shareholders and to refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder
class meetings with respect to the following matters:
•
an amendment to the company’s articles of association;
116
•
•
•
an increase of the company’s authorized share capital;
a merger; or
the approval of related party transactions and acts of office holders that require shareholder approval.
A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, certain shareholders have a duty of
fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows that he or she has the power to
determine the outcome of a shareholder vote and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the
company or other power towards the company. The Israeli Companies Law does not define the substance of the duty of fairness, except to state that the
remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness.
Exculpation, Insurance and Indemnification of Directors and Officers
Under the Israeli Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli
company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a
breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our articles of association include such a
provision. A company may not exculpate in advance a director from liability arising out of a prohibited dividend or distribution to shareholders.
Under the Israeli Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts
performed by him or her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of
association include a provision authorizing such indemnification:
•
•
•
financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award
approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such
an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities
when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable
under the circumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding
instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed
against such office holder as a result of such investigation or proceeding, and (ii) no financial liability was imposed upon him or her as a
substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed
with respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against
him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was
acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent.
117
Under the Israeli Companies Law, a company may insure an office holder against the following liabilities incurred for acts performed by him or
her as an office holder, if and to the extent provided in the company’s articles of association:
•
•
•
a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that
the act would not harm the company;
a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder;
and
a financial liability imposed on the office holder in favor of a third party.
Under the Israeli Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:
•
•
•
•
a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that
the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;
a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;
an act or omission committed with intent to derive illegal personal benefit; or
a fine or forfeit levied against the office holder.
Under the Israeli Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the
compensation committee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See
“—Approval of Related Party Transactions Under Israeli Law.”
Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by the
Israeli Companies Law. We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain
such coverage and pay all premiums thereunder to the fullest extent permitted by the Israeli Companies Law. In addition, we have entered into agreements
with each of our directors and executive officers exculpating them from liability to us for damages caused to us as a result of a breach of duty of care and
undertaking to indemnify them, in each case, to the fullest extent permitted by our articles of association and Israeli Law.
The maximum indemnification amount set forth in those agreements is limited to an amount equal to the greater of (i) 25% of our total
shareholders’ equity based on our most recently financial statements of the time of the actual payment of the indemnification; (ii) $50 million; (iii) 40% of
our total market cap (which shall mean the average closing price of the Company’s ordinary shares over the 30 trading days prior to the actual payment of
indemnification multiplied by the total number of issued and outstanding shares of the Company as of the date of actual payment); and (iv) in connection
with or arising out of a public offering of our securities, the aggregate amount of proceeds from the sale by us and/or any shareholder of ours securities in
such offering. The maximum amount set forth in those agreements is in addition to amounts actually paid, if any, under insurance policies and/or by a third-
party pursuant to an indemnification arrangement.
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D.
Employees
As of December 31, 2022, we had 83 employees, 73 of whom were based in Israel and 10 based throughout Europe and employed by our German
subsidiary. The distribution of our employees according to main areas of activity is as follows: 10 employees in the administrative department, 24
employees in the research and development department, 39 employees in the manufacturing department and 10 employees in the sales and marketing
department. As of December 31, 2022, we did not employ a significant number of temporary employees.
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 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.
E.
Share Ownership
For information regarding the share ownership of our directors and executive officers, see “ITEM 6.B. Compensation—2014 Equity Incentive
Plan” and “ITEM 7.A. Major Shareholders.”
Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
The following table sets forth information with respect to the beneficial ownership of our shares as of March 15, 2023 by:
each person or entity known by us to own beneficially more than 5% of our outstanding shares;
each of our directors and executive officers individually; and
all of our executive officers and directors as a group.
•
•
•
The beneficial ownership of ordinary shares is determined in accordance with the rules of the SEC and generally includes any ordinary shares over
which a person exercises sole or shared voting or investment power. The percentage of shares beneficially owned is based on 9,474,661 ordinary shares
issued and outstanding as of March 15, 2023. Ordinary shares that are issuable under stock options or RSUs that are currently exercisable or exercisable
within 60 days of March 15, 2023 are deemed to be outstanding and to be beneficially owned by the person holding the stock option for the purpose of
computing the number of shares and percentage ownership of that person. Those shares are not deemed outstanding, however, for the purpose of computing
the percentage ownership of any other person.
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All of our shareholders, including the shareholders listed below, have the same voting rights attached to their ordinary shares. See “ITEM 10.B.
Articles of Association.” None of our principal shareholders nor our directors or executive officers possesses different or special voting rights with respect
to their ordinary shares. Unless otherwise noted below, each shareholder’s address is c/o MediWound Ltd., 42 Hayarkon Street, Yavne 8122745, Israel.
A description of any material relationship that our principal shareholders have had with us or any of our predecessors or affiliates within the past
three years is included under “ITEM 7.B. Related Party Transactions.”
Name of Beneficial Owner
Directors and Executive Officers
Nacchum (Homi) Shamir
Ofer Gonen
Assaf Segal
Vickie R. Driver
Nissim Mashiach
Sharon Kochan
David Fox
Stephen T. Wills
Sharon Malka
Boaz Gur-Lavie
Ety Klinger
Yaron Meyer
All executive officers and directors as a group (13 persons)( 1)
Principal Shareholders (who are not Directors or Executive Officers)
Clal Biotechnology Industries Ltd.(2)
Point72 Associates, LLC
________
*
Less than 1%.
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Number of
Shares
Beneficially
Held
Percentage of
Class
*
*
*
*
*
*
*
*
96,127
*
*
*
309,285
*
*
*
*
*
*
*
*
1.01%
*
*
*
3.30%
1,497,414
821,500
15.80%
8.70%
(1)
(2)
Shares beneficially owned consist of 1,884,067 ordinary shares held directly or indirectly by such executive officers and directors and 268,394
ordinary shares issuable upon exercise of outstanding options that are currently exercisable or exercisable within 60 days of March 15, 2023.
Shares beneficially owned consist of: 1,172,710 ordinary shares held by Clal Life Sciences, LP, whose managing partner is Clal Application Center
Ltd., a wholly-owned subsidiary of CBI; (ii) 308,811 ordinary shares held by CBI and (iii) 15,893 ordinary shares issuable upon exercise of
outstanding options held directly by CBI that are currently exercisable or exercisable within 60 days of March 15, 2023. As reported on a Schedule
13D/A filed on February 13, 2023 by Access Industries Holdings LLC, Access Industries Holdings LLC indirectly owns 100% of the outstanding
shares of Clal Industries Ltd., which owns 47.17% of the outstanding shares of CBI. The address of Clal Industries Ltd. is the Triangular Tower, 3
Azrieli Center, Tel Aviv 67023, Israel and the address of Access Industries Holdings LLC is c/o Access Industries Inc., 40 West 57th Street, New
York, New York 10019, United States
(3) As reported on a Schedule 13G filed on February 8, 2023, shares beneficially owned consist of: 821,500 ordinary shares held by Point72 Associates,
LLC which are controlled by Point72 Asset Management, L.P. pursuant to an investment management agreement. Point72 Capital Advisors Inc. is
the general partner of Point72 Asset Management. Steven Cohen, as manager, controls each of Point72 Asset Management and Point72 Capital
Advisors Inc. and their business address is 72 Cummings Point Road, Stamford, CT 06902.
Changes in Ownership of Major Shareholders
To our knowledge, other than as disclosed in the table above, our other filings with the SEC and this Annual Report, there has been no significant
change in the percentage ownership held by any major shareholder since January 1, 2020. The major shareholders listed above do not have voting rights
with respect to their ordinary shares that are different from the voting rights of other holders of our ordinary shares.
Registered Holders
As of March 15, 2023, we had one holder of record of our ordinary shares in the United States, which is Cede & Co., the nominee of The
Depository Trust Company. This shareholder held in the aggregate 82.7% of the 9,204,306 ordinary shares issued and outstanding as of Mach 15, 2023.
The number of record holders in the United States is not representative of the number of beneficial holders nor is it representative of where such beneficial
holders are resident since many of these ordinary shares were held by brokers or other nominees.
B.
Related Party Transactions
Information Rights Agreement
We have entered into an information rights agreement with CBI, which provides CBI with certain information rights relating to our financial
information of the company and certain other information necessary for CBI to meet Israeli Securities Law requirements. CBI is not required to reimburse
us for expenses we incur in providing such information.
Registration Rights Agreement
We are party to an amended and restated registration rights agreement, dated April 6, 2021, with certain of our shareholders (the “Registration
Rights Agreement”). The Registration Rights Agreement, which was approved by our shareholders at our 2021 annual general meeting of shareholders,
replaced the registration rights agreement, dated March 3, 2014 (the “Original Registration Rights Agreement”), that we had entered into in connection
with our initial public offering with certain of our pre-IPO shareholders, which expired by its own terms on its seven-year anniversary. The ordinary shares
held by most of our pre-IPO shareholders who were party to the Original Registration Rights Agreement were no longer entitled to registration rights under
that agreement as of the time that it expired, given their ability to freely sell their shares in the open market under Rule 144 of the Securities Act. However,
each of CBI and Professor Lior Rosenberg, and their affiliated entities that hold ordinary shares (consisting of Clal Life Sciences LP and L.R. Research &
Development Ltd., respectively) remained entitled to registration rights as of the time of the expiration of the Original Registration Rights Agreement, and
we therefore entered into the Registration Rights Agreement with them as a means of extending those rights. The Registration Rights Agreement provides
to the holders of our ordinary shares that are party to the agreement the right to demand that we file a registration statement or request that their ordinary
shares be covered by a registration statement that we are otherwise filing. In May 2022, we filed, and the SEC declared effective, on June 3, 2022, a shelf
registration statement on Form F-3 that registered the resale of the 1,819,780 shares that were then entitled to registration rights under the Registration
Rights Agreement. That registration statement remains in effect as of the date of this Annual Report. The registration rights under the Registration Rights
Agreement are described in more detail under “ITEM 10.B. Articles of Association” and in Exhibit 2.1 to this Annual Report, which is incorporated by
reference in that ITEM 10.B.
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Founders’ and Shareholders’ Agreement
In January 2001, we entered into a founders’ and shareholders’ agreement (the “Founders Agreement”), with CBI, Prof. Lior Rosenberg, and LR, a
private company which is wholly-owned by Prof. Rosenberg. The Founders Agreement was amended in 2006. Pursuant to the Founders Agreement, in
exchange for the issuance of ordinary shares and certain rights thereunder and the payment of certain fixed amounts, Prof. Rosenberg granted to us a
perpetual, exclusive, non-revocable, royalty-free, sub-licensable, worldwide license for intellectual property relating to debridement using products based
on our proteolytic enzyme technology. As of the date hereof, all of the payments under the Founders Agreement were paid by us to Prof. Rosenberg in
accordance with the Founders Agreement. The Founders Agreement also provided for anti-dilution, pre-emptive rights, a right of first refusal on the sale of
our ordinary shares and bring-along rights, all of which were subsequently terminated. In September 2022 we entered into an additional license agreement
with LR for intellectual property rights related to the development of a synthetic hyaluronic acid polyurethane dressing for debrided and non-debrided
burns. Under this license LR received an upfront payment of $150,000.
Sub-Lease Agreement
In January 2018, we entered into a sub-lease agreement (the “Sub-Lease Agreement”), with Clal Life Sciences, L.P. (“CLS”), a subsidiary of CBI,
our controlling shareholder, which was amended in February 2019. Pursuant to the Sub-Lease Agreement, we currently sublease approximately 32,300
square feet of laboratory, office and clean room space from CLS and our yearly rent is $0.4 million. The Sub-Lease Agreement is scheduled to expire on
October 30, 2025.
Agreements with Directors and Officers
Employment Agreements
We have entered into employment agreements with each of our executive officers, which include standard provisions for a company in our
industry regarding non-competition/solicitation, confidentiality of information and assignment of inventions. However, the enforceability of the non-
competition provisions may be limited under applicable law. Our executive officers will not receive benefits upon the termination of their respective
employment with us, other than payment of salary and benefits (and limited accrual of vacation days) during the required notice period for termination of
their employment, which varies for each individual.
Options
Since our inception, we have granted options to purchase our ordinary shares to our directors and executive officers. Such option agreements may
contain acceleration provisions upon certain merger, acquisition or change of control transactions. We describe our option plans under “ITEM 6.B.
Compensation—2003 Israeli Share Option Plan” and “ITEM 6.B. Compensation—2014 Equity Incentive Plan.” Upon the consummation of a merger or
acquisition transaction, an executive officer’s options will be assumed or substituted by the surviving company, if applicable, or, in the compensation
committee’s sole discretion, will vest immediately or be amended, modified or terminated. Our compensation committee approved accelerated vesting in
the case of a merger or an acquisition transaction for certain of our directors and executive officers with respect to the option agreements dated December
23, 2015, June 22, 2017, January 16, 2018, December 31, 2018, May 2, 2019, April 23, 2020, March 4, 2021 and February 15, 2023.
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RSUs
Under the 2014 Plan, we have granted RSUs to our executive officers and our chairman of the board. The RSU agreements generally provide for
vesting of RSUs over a four-year period of continuous employment or service, with 25% of the RSUs vesting at the lapse of one year following the vesting
commencement date, and the remaining 75% of the RSUs vesting in three equal installments, at the lapse of each of the following three years. Absent a
specific acceleration provision, if a grantee’s service is terminated for any reason, all RSUs that have not vested will immediately terminate. RSUs that
have vested but have not been settled yet for underlying ordinary shares may generally be settled within the three months following the termination of the
service of the grantee, other than in the case of termination due to death or disability (in which case the grantee or his/her estate will have one year to settle
the vested RSUs for underlying ordinary shares) or termination for cause (in which case all unsettled RSUs will immediately terminate). Upon the
consummation of a merger or acquisition transaction, an executive officer’s or the chairman’s RSUs will be assumed or substituted by the surviving
company, if applicable, or, in the compensation committee’s sole discretion, will vest immediately or be amended, modified or terminated. The RSUs that
we grant may contain acceleration provisions upon certain merger, acquisition or change of control transactions, if approved by our board of directors with
respect to a specific grant. The RSUs are generally subject to the further terms of the 2014 Plan, which we describe under “ITEM 6.B. Compensation—
2014 Equity Incentive Plan.”
Exculpation, indemnification and insurance
Our articles of association permit us to exculpate, indemnify and insure each of our directors and office holders to the fullest extent permitted by
the Israeli Companies Law. Additionally, we have entered into indemnification agreements with each of our directors and executive officers, undertaking to
indemnify them to the fullest extent permitted by Israeli law, including with respect to liabilities resulting from a public offering of our shares, to the extent
that these liabilities are not covered by insurance. We have also obtained Directors and Officers insurance for each of our executive officers and directors.
See “ITEM 6.C. Board Practices—Exculpation, Insurance and Indemnification of Directors and Officers.”
C.
Interests of Experts and Counsel
Not applicable.
Item 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
Consolidated Financial Statements
See Item 18. “Financial Statements”.
Legal and Arbitration Proceedings
From time to time, we may be party to litigation or subject to claims incident to the ordinary course of business.
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Settlement of Litigation Involving Our Company and Teva
Under a previously reported settlement agreement, as amended, we are obligated to pay Teva up to $10.2 million of which twelve quarterly equal
installments are being paid during the period commencing on January 1, 2021 and ending on December 31, 2023. In addition, commencing on January 1,
2021, we agreed to pay Teva an aggregate annual amount of $1 million in four quarterly equal installments, unless we do not recognize any revenues
generated from the sale or license of NexoBrid in any such quarter, up to an aggregate amount equal to $7.2 million regardless of the number of quarters
required for purposes of the payment of such aggregate amount. we also agreed to indemnify Teva and its controlled affiliates from and against claims
relating to a certain milestone related to PolyHeal under an agreement associated with our collaboration agreements with Teva, for up to an amount of
$10.2 million, if a notice of such claim has been received by us prior to December 31, 2023.
Dividend Policy
We have never declared or paid cash dividends to our shareholders and we do not intend to pay cash dividends in the foreseeable future. We intend
to reinvest any earnings in developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our
board of directors and will depend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions,
capital requirements, business prospects, our strategic goals and plans to expand our business, applicable law and other factors that our board of directors
may deem relevant.
B.
Significant Changes
No significant changes have occurred since December 31, 2021, except as otherwise disclosed in this annual report.
Item 9. THE OFFER AND LISTING
A.
Listing Details
Our ordinary shares trade on the Nasdaq Global Market under the symbol “MDWD”.
B.
Plan of Distribution
Not applicable.
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C.
Markets
See “—Listing Details” above.
D.
Selling Shareholders
Not applicable.
E.
Dilution
Not applicable.
F.
Expenses of the Issue
Not applicable.
ADDITIONAL INFORMATION
Item
10.
A.
Share Capital
Not applicable.
B.
Articles of Association
A copy of our amended and restated articles of association is attached as Exhibit 1.1 to this Annual Report. Other than as disclosed below, the
information called for by this Item is set forth in Exhibit 2.1 to this Annual Report on Form 20-Fm which is incorporated by reference into this Annual
Report.
Election of directors
Our ordinary shares do not have cumulative voting rights for the election of directors. As a result, the holders of a majority of the voting power
represented at a meeting of shareholders have the power to elect each of our directors. Under our articles of association, our board of directors must consist
of at least five and not more than nine directors, including, when we are then required to appoint them (we are not current required to do so), at least two
external directors appointed under the Israeli Companies Law. At any time the minimum number of directors (other than the external directors) shall not
fall below three. Pursuant to our articles of association, each of our directors, other than the external directors, for whom special election requirements
apply under the Israeli Companies Law, will be appointed by a simple majority vote of holders of our voting shares, participating and voting at an annual
general meeting of our shareholders. Each director will serve until his or her successor is duly elected and qualified or until his or her earlier death,
resignation or removal by a vote of the majority voting power of our shareholders at a general meeting of our shareholders or until his or her office expires
by operation of law, in accordance with the Israeli Companies Law. Our articles of association allow our board of directors to appoint directors to fill
vacancies on the board of directors to serve until the next annual general meeting of shareholders. External directors are elected for an initial term of three
years, may be elected for additional terms of three years each under certain circumstances, and may be removed from office pursuant to the terms of the
Israeli Companies Law. Under regulations promulgated under the Israeli Companies Law, Israeli public companies whose shares are traded on certain U.S.
stock exchanges, such as the Nasdaq Global Market and that lack a controlling shareholder are exempt from the requirement to appoint external directors.
See “ITEM 6.C. Board Practices—Board of Directors and External Directors.”
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C.
Material Contracts
For a description of the registration rights that are subject to our Registration Rights Agreement, see “ITEM 7.B. Related Party Transactions—
Registration Rights Agreement.”
For a description of our contract with the U.S. Biomedical Advanced Research and Development Authority, see “ITEM 4.B. Our Focus—Burn
Care—BARDA Contract.”
For a description of our exclusive license and supply agreements with Vericel, see “ITEM 4.B. Business Overview— Marketing, Sales and
Distribution— Vericel License and Supply Agreements.”
For a description of our license agreement with Mark Klein, see “ITEM 4.B. Business Overview—Intellectual Property—Klein License
Agreement.”
We have entered into an agreement with Challenge Bioproducts Corporation Ltd. (“CBC”), a corporation organized and existing under the laws of
the Republic of China, dated January 11, 2001, as amended on February 28, 2010, pursuant to which CBC uses proprietary methods to manufacture
bromelain SP and supplies us with this intermediate drug substance in bulk quantities. According to the terms of the agreement, CBC shall not, and shall
not permit related companies or a third party to, manufacture, use, supply or sell the raw materials for the use or production of a product directly or
indirectly competing with any of our products. Our supply agreement with CBC has no fixed expiration date and can be voluntarily terminated by us, with
at least six months’ advance written notice, or by CBC, with at least 24 months’ advance written notice.
D.
Exchange Controls
In 1998, Israeli currency control regulations were liberalized significantly, so that Israeli residents generally may freely deal in foreign currency
and foreign assets, and non-residents may freely deal in Israeli currency and Israeli assets. There are currently no Israeli currency control restrictions on
remittances of dividends on the ordinary shares or the proceeds from the sale of the shares provided that all taxes were paid or withheld; however,
legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.
Non-residents of Israel may freely hold and trade our securities. Neither our articles of association nor the laws of the State of Israel restrict in any
way the ownership or voting of ordinary shares by non-residents, except that such restrictions may exist with respect to citizens of countries which are in a
state of war with Israel. Israeli residents are allowed to purchase our ordinary shares.
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E.
Taxation
The following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and
disposition of our ordinary shares. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax
consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.
Israeli Tax Considerations for Our Shareholders
Capital gains taxes applicable to non‑Israeli resident shareholders
A non‑Israeli resident (whether an individual or a corporation) who derives capital gains from the sale of shares in an Israeli resident company that
were purchased after the company was listed for trading on the Tel Aviv Stock Exchange or on a recognized stock exchange outside of Israel, will generally
be exempt from Israeli capital gain tax so long as the shares were not held through a permanent establishment that the non‑resident maintains in Israel (and
with respect to shares listed on a recognized stock exchange outside of Israel, so long as the particular capital gain is otherwise subject to the Israeli Income
Tax Law (Inflationary Adjustments) 5745‑1985. These provisions dealing with capital gain are not applicable to a person whose gains from selling or
otherwise disposing of the shares are deemed to be business income. However, non‑Israeli corporations will not be entitled to the foregoing exemption if
Israeli residents (i) have a controlling interest of more than 25% in such non‑Israeli corporation or (ii) are the beneficiaries of, or are entitled to, 25% or
more of the revenues or profits of such non‑Israeli corporation, whether directly or indirectly.
If not exempt, a non-Israeli resident shareholder would generally be subject to tax on capital gain at the ordinary corporate tax rate (23% in 2022),
if generated by a company, or at the rate of 25%, if generated by an individual, or 30%, if generated by an individual who is a “substantial shareholder” (as
defined under the Tax Ordinance), at the time of sale or at any time during the preceding 12-month period (or if the shareholder claims a deduction for
interest and linkage differences expenses in connection with the purchase and holding of such shares). A “substantial shareholder” is generally a person
who alone or together with such person’s relative or another person who collaborates with such person on a permanent basis, holds, directly or indirectly, at
least 10% of any of the “means of control” of the corporation. “Means of control” generally include, among others, the right to vote, receive profits,
nominate a director or an executive officer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of
the source of such right. Individual and corporate shareholders dealing in securities in Israel are taxed at the tax rates applicable to business income (a
corporate tax rate for a corporation (23% in 2022) and a marginal tax rate of up to 47% for an individual in 2022 (excluding excess tax as discussed below))
unless contrary provisions in a relevant tax treaty apply.
Additionally, a sale of shares by a non‑Israeli resident may also be exempt from Israeli capital gains tax under the provisions of an applicable tax
treaty. For example, under the Convention Between the Government of the United States of America and the Government of the State of Israel with respect
to Taxes on Income, as amended (the “United States‑Israel Tax Treaty”), the sale, exchange or other disposition of shares by a shareholder who is a United
States resident (for purposes of the United States‑Israel Tax Treaty) holding the shares as a capital asset and is entitled to claim the benefits afforded to such
a resident by the United States‑Israel Tax Treaty (a “Treaty U.S. Resident”) is generally exempt from Israeli capital gains tax unless: (i) the capital gain
arising from such sale, exchange or disposition is attributed to real estate located in Israel; (ii) the capital gain arising from such sale, exchange or
disposition is attributed to royalties; (iii) the capital gain arising from the such sale, exchange or disposition can be attributable to a permanent
establishment of the shareholder maintained in Israel, under certain terms; (iv) such Treaty U.S. Resident holds, directly or indirectly, shares representing
10% or more of the voting capital of a company during any part of the 12‑month period preceding such sale, exchange or disposition, subject to certain
conditions; or (v) such Treaty U.S. Resident is an individual and was present in Israel for a period or periods aggregating to 183 days or more during the
relevant taxable year. In each case, the sale, exchange or disposition of our ordinary shares would be subject to such Israeli tax, to the extent applicable;
However, under the United States‑Israel Tax Treaty, such Treaty U.S. Resident would be permitted to claim a credit for such taxes against the U.S. federal
income tax imposed with respect to such sale, exchange or disposition, subject to the limitations in U.S. laws applicable to foreign tax credits. The United
States-Israel Tax Treaty does not provide such credit against any U.S. state or local taxes.
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In some instances where our shareholders may be liable for Israeli tax on the sale of their ordinary shares, the payment of the consideration may be
subject to the withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order
to avoid withholding at source at the time of sale. Specifically, in transactions involving a sale of all of the shares of an Israeli resident company, in the
form of a merger or otherwise, the Israel Tax Authority may require from shareholders who are not liable for Israeli tax to sign declarations in forms
specified by this authority or obtain a specific exemption from the Israel Tax Authority to confirm their status as non‑Israeli resident, and, in the absence of
such declarations or exemptions, may require the purchaser of the shares to withhold taxes at source.
Taxation of non‑Israeli shareholders on receipt of dividends
Non‑Israeli residents (whether individuals or corporations) are generally subject to Israeli income tax on the receipt of dividends paid on our
ordinary shares at the rate of 25% unless a relief is provided in a treaty between Israel and a shareholder's country of residence (provided that a valid
certificate from the Israeli Tax Authority allowing for a reduced withholding tax rate is obtained in advance). With respect to a person who is a “substantial
shareholder” at the time of receiving the dividend or on any time during the preceding 12 months, the applicable tax rate is 30%. Such dividends are
generally subject to Israeli withholding tax at a rate of 25% so long as the shares are registered with a nominee company (whether or not the recipient is a
substantial shareholder), unless relief is provided in a treaty between Israel and the shareholder’s country of residence and provided that a valid certificate
from the Israel Tax Authority allowing for a reduced withholding tax rate is obtained in advance. However, a distribution of dividends to non‑Israeli
residents is generally subject to withholding tax at source at a rate of 15% if the dividend is distributed from income attributed to a Beneficiary Enterprise,
or such a reduced tax rate as may be provided under an applicable tax treaty (provided that a valid certificate from the Israel Tax Authority allowing for a
reduced withholding tax rate or such lower tax rate as may be provided in an applicable tax treaty is obtained in advance). For example, under the United
States‑Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our ordinary shares who is a Treaty U.S.
Resident is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated by an Approved Enterprise or Beneficiary
Enterprise, that are paid to a U.S. corporation holding 10% or more of the outstanding voting capital throughout the tax year in which the dividend is
distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of the gross income for such preceding year consists of
certain types of dividends and interest. Notwithstanding the foregoing, dividends distributed from income attributed to an Approved Enterprise or
Beneficiary Enterprise are not entitled to such reduction under the tax treaty but are subject to a withholding tax rate of 15% for such a U.S. corporation,
provided that the condition related to our gross income for the previous year (as set forth in the previous sentence) is met. The aforementioned rates under
the United States-Israel Tax Treaty would not apply if the dividend income is derived through a permanent establishment of the U.S. resident in Israel. If
the dividend is attributable partly to income derived from an Approved Enterprise, Beneficiary Enterprise or Preferred Enterprise, and partly to other
sources of income, the withholding rate will be a blended rate reflecting the relative portions of the two types of income. We cannot assure you that we will
designate the profits that we may distribute in a way that will reduce shareholders’ tax liability.
A non‑Israeli resident who receives dividends from which tax was withheld, is generally exempt from the obligation to file tax returns in Israel
with respect to such income, provided that (i) such income was not derived from a business conducted in Israel by the taxpayer, (ii) the taxpayer has no
other taxable sources of income in Israel with respect to which a tax return is required to be filed and (iii) the tax payer is not obligated to pay the excess
tax (as further explained below).
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Excess Tax
Individuals who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) are also subject to an
additional tax at a rate of 3% on annual income exceeding a certain level, which amount is linked to the annual change in the Israeli consumer price index,
including but not limited to, dividends, interest and capital gain. In 2022, the additional tax was at a rate of 3% on annual income exceeding NIS 663,240.
United States Federal Income Taxation
The following is a description of the material U.S. federal income tax consequences of the ownership and disposition of our ordinary shares by a
U.S. Holder that holds the ordinary shares as capital assets. This description does not address tax considerations applicable to holders that may be subject to
special tax rules, including, without limitation:
•
•
•
•
•
•
•
•
•
•
•
•
•
banks, financial institutions or insurance companies;
real estate investment trusts, regulated investment companies or grantor trusts;
dealers or traders in securities, commodities or currencies;
tax‑exempt entities or organizations, including an “individual retirement account” or “Roth IRA” as defined in Section 408 or 408A of the
Code, respectively;
certain former citizens or long‑term residents of the United States;
persons that received our shares as compensation for the performance of services;
persons that holds our shares as part of a “hedging,” “integrated” or “conversion” transaction or as a position in a “straddle” for U.S. federal
income tax purposes;
partnerships (including entities classified as partnerships for U.S. federal income tax purposes) or other pass‑through entities, or holders that
will hold our shares through such an entity;
S corporations;
holders that acquired ordinary shares as a result of holding or owning our preferred shares;
U.S. Holders (as defined below) whose “functional currency” is not the U.S. dollar;
persons that are residents of ordinarily resident in or have a permanent establishment in a jurisdiction outside the United States; or
holders that own directly, indirectly or through attribution 10.0% or more of the voting power or value of our shares.
Moreover, this description does not address the U.S. federal estate, gift or alternative minimum tax consequences, Medicare consequences, or any
state, local or foreign tax consequences, of the ownership and disposition of our ordinary shares.
This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), administrative pronouncements, judicial decisions and
final, temporary and proposed Treasury regulations, all as currently in effect and available. These authorities are subject to change or differing
interpretation, possibly with retroactive effect. U.S. Holders should consult their tax advisors concerning the U.S. federal, state, local and foreign tax
consequences of owning and disposing of our ordinary shares in their particular circumstances.
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For purposes of this summary, a “U.S. Holder” is a beneficial owner of our ordinary shares who is, for U.S. federal income tax purposes:
an individual who is a citizen or individual resident of the United States;
a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the
United States, any state thereof, or the District of Columbia;
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust that (1) is subject to the primary supervision of a U.S. Court and one or more U.S. persons that have the authority to control all
substantial decisions of the trust or (2) has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.
•
•
•
•
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds our ordinary shares, the tax treatment of a
partner in such partnership generally will depend upon the status of the partner and upon the activities of the partnership. Investors who are partners in a
partnership should consult their tax advisors as to the particular U.S. federal income tax consequences of owning and disposing of our ordinary shares in
their particular circumstances.
A “Non‑U.S. Holder” is a beneficial owner of our ordinary shares that is neither a U.S. Holder nor a partnership for U.S. federal income tax
purposes.
Unless otherwise indicated, this discussion assumes that the company is not, and will not become, a “passive foreign investment company,” or a
PFIC, for U.S. federal income tax purposes. See “ITEM 10.E. Taxation—United States Federal Income Taxation—Passive Foreign Investment Company
Considerations” below. Further, this summary does not address the U.S. federal estate and gift, state, local or non‑U.S. tax consequences to U.S. Holders of
owning and disposing of our ordinary shares. Investors should consult their own tax advisors regarding the U.S. federal, state and local, as well as non‑U.S.
income and other tax consequences of owning and disposing of our ordinary shares in their particular circumstances.
Distributions
If you are a U.S. Holder, the gross amount of any distribution made to you with respect to our ordinary shares before reduction for any Israeli
taxes withheld therefrom, other than certain distributions, if any, of our ordinary shares distributed pro rata to all our shareholders, generally will be
includible in your income as dividend income to the extent such distribution is paid out of our current or accumulated earnings and profits as determined
under U.S. federal income tax principles. We do not expect to maintain calculations of our earnings and profits under U.S. federal income tax principles.
Therefore, if you are a U.S. Holder you should expect that the entire amount of any distribution generally will be taxable as dividend income to you.
Non‑corporate U.S. Holders may qualify for the lower rates of taxation with respect to dividends on ordinary shares applicable to long‑term capital gains
(i.e., gains from the sale of capital assets held for more than one year), provided that certain conditions are met, including certain holding period
requirements and the absence of certain risk reduction transactions. However, such dividends will not be eligible for the dividends received deduction
generally allowed to corporate U.S. Holders.
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If you are a U.S. Holder, dividends paid to you with respect to our ordinary shares will generally be treated as foreign source income, which may
be relevant in calculating your foreign tax credit limitation. Subject to certain conditions and limitations, Israeli tax withheld on dividends may be deducted
from your taxable income or credited against your U.S. federal income tax liability. The limitation on foreign taxes eligible for credit is calculated
separately with respect to specific classes of income. For this purpose, dividends that we distribute generally should constitute “passive category income.”
A foreign tax credit for foreign taxes imposed on distributions may be denied if you do not satisfy certain minimum holding period requirements. The rules
relating to the determination of the foreign tax credit are complex, and you should consult your tax advisor to determine whether and to what extent you
will be entitled to this credit.
Subject to the discussion below under “—Backup Withholding Tax and Information Reporting Requirements,” if you are a Non‑U.S. Holder, you
generally will not be subject to U.S. federal income (or withholding) tax on dividends received by you on your ordinary shares, unless you conduct a trade
or business in the United States and such income is effectively connected with that trade or business (or, if required by an applicable income tax treaty, the
dividends are attributable to a permanent establishment or fixed base that such holder maintains in the United States).
Sale, Exchange or Other Taxable Disposition of Ordinary Shares
If you are a U.S. Holder, you generally will recognize gain or loss on the sale, exchange or other taxable disposition of our ordinary shares equal
to the difference between the amount realized on such sale, exchange or other taxable disposition and your adjusted tax basis in our ordinary shares, and
such gain or loss will be capital gain or loss. The initial tax basis in an ordinary share generally will be equal to the cost of such ordinary share. Except with
respect to foreign currency gain or loss, if you are a non‑corporate U.S. Holder, capital gain from the sale, exchange or other taxable disposition of ordinary
shares is generally eligible for a preferential rate of taxation applicable to capital gains, if your holding period for such ordinary shares exceeds one year
(i.e., such gain is long‑term capital gain). The deductibility of capital losses for U.S. federal income tax purposes is subject to limitations under the Code.
Any such gain or loss that a U.S. Holder recognizes generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes.
Subject to the discussion below under “—Backup Withholding Tax and Information Reporting Requirements,” if you are a Non‑U.S. Holder, you
generally will not be subject to U.S. federal income or withholding tax on any gain realized on the sale or exchange of such ordinary shares unless:
•
•
such gain is effectively connected with your conduct of a trade or business in the United States (or, if required by an applicable income tax
treaty, the gain is attributable to a permanent establishment or fixed base that such holder maintains in the United States); or
you are an individual and have been present in the United States for 183 days or more in the taxable year of such sale or exchange and certain
other conditions are met.
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Passive Foreign Investment Company Considerations
If we were to be classified as a “passive foreign investment company,” or “PFIC,” in any taxable year, a U.S. Holder would be subject to special
rules generally intended to reduce or eliminate any benefits from the deferral of U.S. federal income tax that a U.S. Holder could derive from investing in a
non‑U.S. company that does not distribute all of its earnings on a current basis.
A non‑U.S. corporation will be classified as a PFIC for federal income tax purposes in any taxable year in which, after applying certain
look‑through rules with respect to the income and assets of subsidiaries, either:
•
•
at least 75% of its gross income is “passive income”; or
at least 50% of the average quarterly value of its total gross assets (which may be determined in part by the market value of our ordinary
shares, which is subject to change) is attributable to assets that produce “passive income” or are held for the production of passive income.
Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions, the
excess of gains over losses from the disposition of assets which produce passive income, and includes amounts derived by reason of the temporary
investment of funds raised in offerings of our ordinary shares. If a non‑U.S. corporation owns at least 25% by value of the stock of another corporation, the
non‑U.S. corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation and as receiving
directly its proportionate share of the other corporation’s income. If we are classified as a PFIC in any year with respect to which a U.S. Holder owns our
ordinary shares, we will continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding years during which the U.S. Holder owns our
ordinary shares unless we cease to be a PFIC and the U.S. holder has made a “deemed sale” election under the PFIC rules.
Based on our current estimates of our gross income and the estimated fair market value of our gross assets and the nature of our business, we do
not believe we were classified as a PFIC for the taxable year ending December 31, 2022. However, we must determine our PFIC status annually based on
tests which are factual in nature, and our status in future years will depend on our income, assets and activities in those years. Further, because the value of
our gross assets is likely to be determined in large part by reference to our market capitalization, a decline in the value of our ordinary shares or an increase
in the value of our passive assets (including cash and short term investments) may result in our becoming a PFIC. There can be no assurance that we will
not be considered a PFIC for any taxable year. If we were a PFIC and you are a U.S. Holder, then unless you make one of the elections described below, a
special tax regime will apply to both (a) any “excess distribution” by us to you (generally, your ratable portion of distributions in any year which are greater
than 125% of the average annual distribution received by you in the shorter of the three preceding years or your holding period for our ordinary shares) and
(b) any gain realized on the sale or other disposition of the ordinary shares. Under this regime, any excess distribution and realized gain will be treated as
ordinary income and will be subject to tax as if (a) the excess distribution or gain had been realized ratably over your holding period, (b) the amount
deemed realized in each year had been subject to tax in each year of that holding period at the highest marginal rate for such year (other than income
allocated to the current period or any taxable period before we became a PFIC, which would be subject to tax at the U.S. Holder’s regular ordinary income
rate for the current year and would not be subject to the interest charge discussed below) and (c) the interest charge generally applicable to underpayments
of tax had been imposed on the taxes deemed to have been payable in those years. In addition, dividend distributions made to you will not qualify for the
lower rates of taxation applicable to long‑term capital gains discussed above under “Distributions.” Certain elections may be available that would result in
an alternative treatment (such as mark‑to‑market treatment) of our ordinary shares.
If a U.S. Holder makes a valid mark‑to‑market election for the first tax year in which such U.S. Holder holds (or is deemed to hold) ordinary
shares in a corporation and for which such corporation is determined to be a PFIC, the U.S. Holder generally will recognize as ordinary income any excess
of the fair market value of the ordinary shares at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of
any excess of the adjusted tax basis of the ordinary shares over their fair market value at the end of the taxable year (but only to the extent of the net
amount of income previously included as a result of the mark‑to‑market election). If a U.S. Holder makes the election, the U.S. Holder’s tax basis in the
ordinary shares will be adjusted to reflect these income or loss amounts. Any gain recognized on the sale or other disposition of ordinary shares in a year
when we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income
previously included as a result of the mark‑to‑market election). The mark‑to‑market election is available only if we are a PFIC and our ordinary shares are
“regularly traded” on a “qualified exchange.” Our ordinary shares will be treated as “regularly traded” in any calendar year in which more than a de
minimis quantity of the ordinary shares, are traded on a qualified exchange on at least 15 days during each calendar quarter. Nasdaq is a qualified exchange
for this purpose and, consequently, if the ordinary shares are regularly traded, the mark‑to‑market election will be available to a U.S. Holder.
132
If we are a PFIC, the general tax treatment for U.S. Holders described in this section would apply to indirect distributions and gains deemed to be
realized by U.S. Holders in respect of any entity in which we hold equity that is also a PFIC (a "lower tier PFIC"). Because a mark‑to‑market election
generally would not be available with respect to any lower‑tier PFICs, a U.S. Holder may continue to be subject to the PFIC rules with respect to such
holder’s indirect interest in any investments held by us that are treated as an equity interest in such lower-tiers PFICs.
We do not intend to provide the information necessary for U.S. Holders to make qualified electing fund elections if we are classified as a PFIC.
U.S. Holders should consult their tax advisors to determine whether any of these elections would be available and if so, what the consequences of the
alternative treatments would be in their particular circumstances.
If a U.S. Holder owns ordinary shares during any year in which we are a PFIC, the U.S. Holder generally will be required to file an IRS Form
8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) or successor form with respect to the
company, generally with the U.S. Holder’s federal income tax return for that year. If the company was a PFIC for a given taxable year, then you should
consult your tax advisor concerning your annual filing requirements.
U.S. Holders should consult their tax advisors regarding whether we are a PFIC and the potential application of the PFIC rules.
Backup Withholding Tax and Information Reporting Requirements
U.S. backup withholding tax and information reporting requirements may apply to certain payments to certain holders of stock. Information
reporting generally will apply to payments of dividends on, and to proceeds from the sale, exchange or redemption of, our ordinary shares made within the
United States, or by a United States payor or United States middleman, to a holder of our ordinary shares, other than an exempt recipient (including a payee
that is not a United States person that provides an appropriate certification and certain other persons). Payments made (and sales or other dispositions
effected at an office) outside the U.S. will be subject to information reporting in limited circumstances. A payor will be required to withhold backup
withholding tax from any payments of dividends on, or the proceeds from the sale or redemption of, ordinary shares within the United States, or by a
United States payor or United States middleman, to a holder, other than an exempt recipient, if such holder fails to furnish its correct taxpayer identification
number or otherwise fails to comply with, or establish an exemption from, such backup withholding tax requirements, or to report dividends required to be
shown on the holder’s U.S. federal income tax returns. Back up withholding is not an additional tax. Any amounts withheld under the backup withholding
rules will be allowed as a credit against the beneficial owner’s U.S. federal income tax liability, if any, and any excess amounts withheld under the backup
withholding rules may be refunded, provided that the required information is timely furnished to the IRS.
Foreign Asset Reporting
Certain U.S. Holders who are individuals and certain entities may be required to report information relating to an interest in our ordinary shares,
subject to certain exceptions (including an exception for shares held in accounts maintained by certain financial institutions) by filing IRS Form 8938
(Statement of Specified Foreign Financial Assets) with their federal income tax return. U.S. Holders are urged to consult their tax advisors regarding their
information reporting obligations, if any, with respect to their ownership and disposition of our ordinary shares.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
133
H. Documents on Display
We are required to make certain filings with the SEC. The SEC maintains an internet website that contains reports, proxy statements and other
information about issuers, like us, that file electronically with the SEC. The address of that site is www.sec.gov.
We also make available on our website, free of charge, our annual reports on Form 20-F and the text of our reports on Form 6-K, including any
amendments to these reports, as well as certain other SEC filings, as soon as reasonably practicable after they are electronically filed with or furnished to
the SEC. Our website address is www.mediwound.com. The information contained on our website is not incorporated by reference in this document.
I. Subsidiary Information
Not applicable.
J. Annual Report to Security Holders
Not Applicable.
Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to a variety of risks, including foreign currency exchange fluctuations, changes in interest rates and inflation. We regularly assess
currency, interest rate and inflation risks to minimize any adverse effects on our business as a result of those factors.
Foreign Currency Risk
The U.S. dollar is our functional and reporting currency. A significant portion of our operating expenses are denominated in Israeli shekels,
accounting for approximately 44%, 45% and 47% of our operating expenses in the years ended December 31, 2020, 2021 and 2022, respectively. We also
have expenses in other non‑dollar currencies, in particular the Euro, and for the next few years, we expect that a substantial portion of our revenues will be
denominated in U.S dollar. A devaluation of the shekel in relation to the U.S. dollar has the effect of reducing the U.S. dollar amount of our expenses or
payables that are payable in shekels, unless those expenses or payables are linked to the U.S. dollar. Conversely, any increase in the value of the shekel in
relation to the U.S. dollar has the effect of increasing the U.S. dollar value of our unlinked shekel expenses, which would have a negative impact on our
profit margins.
Because exchange rates between the U.S. dollar and both the shekel and the Euro (as well as between the U.S. dollar and other currencies)
fluctuate continuously, such fluctuations have an impact on our results and period‑to‑period comparisons of our results. The effects of foreign currency
re‑measurements are reported in our consolidated financial statements of operations.
134
The following table presents information about the changes in the exchange rates of the shekel against the U.S. dollar and changes in the exchange
rates of the Euro against the U.S. dollar:
Period
2020
2021
2022
Appreciation (Devaluation) of
Shekel against
the U.S. dollar
(%)
Euro
against the
U.S. dollar
(%)
7.0
3.3
(13.2)
8.0
7.7
5.8
A 10% increase (decrease) in the value of the NIS and Euro against the U.S. dollar would have increased (decreased) our net profit by (loss)
approximately $1.65 million for the year ended December 31, 2022.
As we are marketing and selling NexoBrid in Europe and conducting clinical trials of outside the United States, we will continue to monitor
exposure to currency fluctuations. We do not currently engage in currency hedging activities in order to reduce this currency exposure, but we may begin to
do so in the future. Instruments that may be used to hedge future risks may include foreign currency forward and swap contracts. These instruments may be
used to selectively manage risks, but there can be no assurance that we will be fully protected against material foreign currency fluctuations.
Other Market Risks
We do not believe that we have material exposure to interest rate risk due to the fact that we have no long‑term debt.
We do not believe that we have any material exposure to inflationary risks. We do not believe that the rate of inflation in Israel has had a material
impact on our business to date. However, our costs in Israel will increase if inflation in Israel exceeds the devaluation of the shekel against the U.S. dollar
(to the extent that it devalues at all) or if the timing of such devaluation lags behind inflation in Israel.
Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
135
Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
Item 15. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
Our management, including 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, 2022. Based on such evaluation, our
Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2022, our disclosure controls and procedures were effective.
(b) Management Annual 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 financial reporting as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act.
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, 2022. In making this assessment, our management used the criteria established in Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our management has concluded, based
on its assessment, that our internal control over financial reporting was effective as of December 31, 2022.
(d) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a‑15(f) and 15d‑15(f) under the
Exchange Act) that occurred during the period covered by this annual report that have materially affected, or that are reasonably likely to materially affect,
our internal control over financial reporting.
Item 16. [Reserved]
Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Sharon Kochan qualifies as an “audit committee financial expert,” as defined under the U.S. federal
securities laws and has the requisite financial experience defined by the Nasdaq Marketplace Rules. In addition, Sharon Kochan is independent as such
term is defined in Rule 10A‑3(b)(1) under the Exchange Act and under the listing standards of the Nasdaq Global Market.
Item 16B. CODE OF ETHICS
We have adopted a code of business conduct and ethics applicable to our executive officers, directors and all other employees. A copy of the code
is delivered to every employee of MediWound Ltd. and its subsidiaries and is available to our investors and others on our website http://ir.mediwound.com/
or by contacting our investor relations department. 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. Any waivers of this code for executive officers or directors will be disclosed through the filing of
a Form 6‑K or on our website. We granted no waivers under our code of ethics in 2022.
136
Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Principal Accountant Fees and Services
We paid the following fees for professional services rendered by Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, who was our
independent registered public accounting firm until April 28, 2021:
Audit Fees
Audit‑Related Fees
Tax Fees
Total
2021
2022
$
$
75,000 $
—
—
75,000 $
—
—
—
—
We also paid the following fees for professional services rendered by Somekh Chaikin, a member firm of KPMG International Haifa, Israel,
Auditor firm ID: 1057, who became our independent registered public accounting firm on June 15, 2021 for the year ended December 31, 2022 and 2021:
Audit Fees
Audit‑Related Fees
Tax Fees
Total
2021
2022
170,000 $
—
15,000
185,000 $
270,000
—
28,549
298,549
$
$
“Audit fees” are the aggregate fees paid for the audit of our annual financial statements for the years 2022 and 2021. This category also includes
services that generally the independent accountant provides, such as consents and assistance with and review of documents filed with the SEC.
“Audit‑related fees” are the aggregate fees paid for assurance and related services that are reasonably related to the performance of the audit and
are not reported under audit fees. These fees primarily include accounting consultations regarding the accounting treatment of matters that occur in the
regular course of business, implications of new accounting pronouncements and other accounting issues that occur from time to time.
“Tax fees” include fees for professional services rendered by our independent registered public accounting firm for tax compliance, transfer
pricing and tax advice on actual or contemplated transactions.
The Audit Committee pre‑approves all audit and non‑audit services provided by the independent registered public accounting firm.
Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
Item 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
The information required by this Item 16F was previously reported in our report of foreign private issuer on Form 6‑K (File No. 001‑36349) filed
with the SEC on March 2, 2022.
137
Item 16G. CORPORATE GOVERNANCE
As a foreign private issuer, we are permitted to comply with Israeli corporate governance practices instead of the Nasdaq Stock Market
requirements, provided that we disclose those Nasdaq Stock Market requirements with which we do not comply and the equivalent Israeli requirement that
we follow instead. We currently rely on this “foreign private issuer exemption” with respect to the following requirements:
•
•
Quorum. As permitted under the Israeli Companies Law pursuant to our articles of association, the quorum required for an ordinary meeting
of shareholders will consist of at least two shareholders present in person, by proxy or by other voting instrument in accordance with the
Israeli Companies Law, who hold at least 25% of the voting power of our shares (and in an adjourned meeting, with some exceptions, at least
two shareholders), instead of 33 1/3% of the issued share capital required under the Nasdaq Stock Market listing rules.
Shareholder approval. We do not intend to follow Nasdaq Stock Market rules which require shareholder approval in order to enter into any
transaction, other than a public offering, involving the sale, issuance or potential issuance by the Company of ordinary shares (or securities
convertible into or exercisable for ordinary shares) equal to 20% or more of the outstanding share capital of the Company or 20% or more of
the voting power outstanding before the issuance for less than the greater of book or market value of the ordinary shares. We will follow
Israeli law with respect to any requirement to obtain shareholder approval in connection with any private placements of equity securities.
Item 16H. MINE SAFETY DISCLOSURE
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
[Not applicable.]
Item 17. FINANCIAL STATEMENTS
Not applicable.
Item 18. FINANCIAL STATEMENTS
See pages F‑1 through F-50 of this annual report.
PART III
138
Item 19. EXHIBITS
Exhibit No.
Description
1.1
1.2
2.1
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Amended and Restated Articles of Association of the Registrant, as amended
Memorandum of Association of the Registrant(1)
Description of Securities
Amended and Restated Registration Rights Agreement dated April 6, 2021 by and among the Registrant and certain shareholders of the
Registrant(2)
Information Rights Agreement by and between Clal Biotechnology Industries Ltd. and the Registrant(1)
Founders and Shareholders Agreement, dated January 2001, by and among Clal Biotechnology Industries Ltd., L.R. R & D Ltd., Professor
Lior Rosenberg and the Registrant(3)
Patent Purchase Agreement, dated November 24, 2010, by and between the Registrant and L.R. R & D Ltd.(3)
Form of Indemnification Agreement(16)
Supply Agreement, dated January 11, 2001, as amended, by and between the Registrant and Challenge Bioproducts Corporation Ltd.†(3)
License Agreement, dated September 22, 2000, as amended, by and between the Registrant and Mark Klein†(3)
2003 Israeli Share Option Plan(3)
2014 Equity Incentive Plan(4)
4.10 MediWound Ltd.’s Compensation Policy for Executive Officers and Directors(5)
4.11.1 BARDA Contract, dated September 29, 2015, by and between the Registrant and the U.S. Biomedical Advanced Research and Development
Authority†(6)
4.11.2 Modification to the BARDA Contract, dated October 7, 2015, by and between the Registrant and the U.S. Biomedical Advanced Research and
Development Authority(7)
4.11.3 Modification to the BARDA Contract, dated January 29, 2017, by and between the Registrant and the U.S. Biomedical Advanced Research
and Development Authority†(8)
4.11.4 Modification to the BARDA Contract, dated July 9, 2017, by and between the Registrant and the U.S. Biomedical Advanced Research and
Development Authority(9)
4.11.5 Modification to the BARDA Contract, dated May 24, 2019, by and between the Registrant and the U.S. Biomedical Advanced Research and
Development Authority(4)
4.11.6 Modification to the BARDA Contract, dated February 28, 2020, by and between the Registrant and the U.S. Biomedical Advanced Research
and Development Authority(6)
139
4.11.7 Modification to the BARDA Contract, dated February 9, 2022, by and between the Registrant and the U.S. Biomedical Advanced Research
and Development Authority†(17)
4.13
BARDA Contract, dated September 30, 2018, by and between the Registrant and the U.S. Biomedical Advanced Research and Development
Authority†(10)
4.14.1 Unprotected Sub‑Lease Agreement, dated March 18, 2018, by and between the Registrant and Clal Life Sciences L.P. (unofficial English
translation of Hebrew original) (11)
4.14.2 Addendum to Sub‑Lease Agreement, dated March 18, 2018, by and between the Registrant and Clal Life Sciences L.P. (unofficial English
translation of Hebrew original) (12)
4.15
4.16
Settlement Agreement and Mutual General Release, dated as of March 24, 2019, by and among Teva Pharmaceuticals Ltd. and MediWound
Ltd. and Certain Indemnity in connection with Settlement Agreement dated as of March 24, 2019 by MediWound Ltd.(13)
Amendment No. 1 to Settlement Agreement and Mutual General Release as of December 13, 2020, by and among Teva Pharmaceuticals Ltd.
and MediWound Ltd.(6)
4.17
License Agreement, dated as of May 6, 2019, by and between the Registrant and Vericel Corporation† (14)
4.18
Supply Agreement, dated as of May 6, 2019, by and between the Registrant and Vericel Corporation† (15)
4.19
Form of Series A Ordinary Share Purchase Warrant issued in September 2022 pursuant to a registered direct offering of the Registrant (18)
4.20
Form of Series A Ordinary Share Purchase Warrant issued in October 2022 pursuant to a private placement (PIPE) of the Registrant (19)
4.21
4.22
Form of Placement Agent Ordinary Share Purchase Warrant issued by the Registrant in October 2022 to its exclusive placement agent for its
registered direct offering and PIPE (20)
Registration Rights Agreement, entered into in October 2022, by and between the Registrant and the purchasers of its securities in a registered
direct offering (21)
8.1
List of subsidiaries of the Registrant(6)
12.1
12.2
13.1
13.2
Certificate of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a‑14(a) and 15d‑14(a) as adopted pursuant to §302 of the
Sarbanes‑Oxley Act of 2002
Certificate of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a‑14(a) and 15d‑14(a) as adopted pursuant to §302 of the
Sarbanes‑Oxley Act of 2002
Certificate of Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes‑Oxley Act of 2002, furnished
herewith
Certificate of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes‑Oxley Act of 2002, furnished
herewith
15.1
Consent of Somekh Chaikin, a member firm of KPMG International, an independent registered public accounting firm
15.2
Consent of Kost Forer Gabbay & Kasierer, a member firm of Ernst & Young Global, an independent registered public accounting firm
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (the cover page iXBRL tags are embedded within the Inline XBRL document)
140
†
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
Portions of this exhibit have been omitted pursuant to Instruction 4(a) to Exhibits to Form 20-F because they are both (i) not material and
(ii) the type that the Registrant treats as private or confidential.
Previously filed with the SEC on March 3, 2014 pursuant to the Registrant’s registration statement on Form F‑1 (File No. 333‑193856) and
incorporated by reference herein.
Previously furnished to the SEC on May 5, 2021 as Appendix B to the Registrant’s proxy statement for its 2021 annual general meeting of
shareholders held on June 15, 2021, attached as Exhibit 99.1 to the Registrant’s report of foreign private issuer on Form 6‑K (File No.
001‑36349) and incorporated by reference herein.
Previously filed with the SEC on February 10, 2014 pursuant to the Registrant’s registration statement on Form F‑1 (File No. 333‑193856) and
incorporated by reference herein.
Previously filed with the SEC on February 25, 2020 pursuant to the Registrant’s annual report on Form 20-F for the year ended December 31,
2019 (File No. 001-36349) and incorporated by reference herein.
Previously furnished to the SEC on August 14, 2019 as Appendix A to the Registrant’s proxy statement for its extraordinary general meeting of
shareholders held on September 23, 2019, attached as Exhibit 99.1 to the Registrant’s report of foreign private issuer on Form 6‑K (File No.
001‑36349) and incorporated by reference herein.
Previously filed with the SEC on February 25, 2021 pursuant to the Registrant’s annual report on Form 20-F for the year ended December 31,
2020 (File No. 001-36349) and incorporated by reference herein.
Previously filed with the SEC on January 25, 2016 as Exhibit 4.14 to the Registrant’s annual report on Form 20‑F for the year ended December
31, 2015 (File No. 001‑36349) and incorporated by reference herein.
Previously filed with the SEC on February 21, 2017 as Exhibit 4.15 to the Registrant’s annual report on Form 20‑F for the year ended
December 31, 2016 (File No. 001‑36349) and incorporated by reference herein.
Previously filed with the SEC on March 19, 2018 as Exhibit 4.16 to the Registrant’s annual report on Form 20‑F for the year ended December
31, 2017 (File No. 001‑36349) and incorporated by reference herein.
Previously filed with the SEC on March 25, 2019 as Exhibit 4.17 to the Registrant’s annual report on Form 20‑F for the year ended December
31, 2018 (File No. 001‑36349) and incorporated by reference herein.
Previously filed with the SEC on March 19, 2018 as Exhibit 4.17 to the Registrant’s annual report on Form 20‑F for the year ended December
31, 2017 (File No. 001‑36349) and incorporated by reference herein.
Previously filed with the SEC on March 25, 2019 as Exhibit 4.20 to the Registrant’s annual report on Form 20‑F for the year ended December
31, 2018 (File No. 001‑36349) and incorporated by reference herein.
Previously filed with the SEC on March 25, 2019 as Exhibit 4.21 to the Registrant’s annual report on Form 20‑F for the year ended December
31, 2018 (File No. 001‑36349) and incorporated by reference herein.
Previously filed with the SEC by Vericel Corporation on August 6, 2019 as Exhibit 10.9 to its quarterly report on Form 10-Q for the quarter
ended June 30, 2019 (File No. 001‑35280) and incorporated by reference herein.
Previously filed with the SEC by Vericel Corporation on August 6, 2019 as Exhibit 10.10 to its quarterly report on Form 10-Q for the quarter
ended June 30, 2019 (File No. 001‑35280) and incorporated by reference herein.
Previously furnished to the SEC on June 9, 2022 as Appendix A to the Registrant’s proxy statement for its 2022 annual general meeting of
shareholders held on July 19, 2022, attached as Exhibit 99.1 to the Registrant’s report of foreign private issuer on Form 6‑K (File No.
001‑36349) and incorporated by reference herein.
Previously filed with the SEC on March 17, 2022 as Exhibit 4.11.7 to the Registrant’s annual report on Form 20‑F for the year ended December
31, 2021 (File No. 001‑36349) and incorporated by reference herein.
Previously furnished to the SEC on September 26, 2022 as Exhibit 4.1 to the Registrant’s report of foreign private issuer on Form 6‑K (File No.
001‑36349) and incorporated by reference herein.
Previously furnished to the SEC on September 26, 2022 as Exhibit 4.2 to the Registrant’s report of foreign private issuer on Form 6‑K (File No.
001‑36349) and incorporated by reference herein.
Previously furnished to the SEC on September 26, 2022 as Exhibit 4.4 to the Registrant’s report of foreign private issuer on Form 6‑K (File No.
001‑36349) and incorporated by reference herein.
Previously furnished to the SEC on September 26, 2022 as Exhibit 10.3 to the Registrant’s report of foreign private issuer on Form 6‑K (File
No. 001‑36349) and incorporated by reference herein.
141
The registrant hereby certifies that it meets all of the requirements for filing on Form 20‑F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.
SIGNATURES
Date: March 16, 2023
MediWound Ltd.
By: /s/ Boaz Gur-Lavie
Boaz Gur-Lavie
Chief Financial Officer
142
MEDIWOUND LTD. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022
INDEX
Report of Independent Registered Public Accounting Firm
(Firm Name: KPMG (Somekh Chaikin) / PCAOB ID No. 1057)
(Firm Name: KOST FORER GABBAY & KASIERER / PCAOB ID No. 1281)
Consolidated Statements of Financial Position
Consolidated Statements of Profit or Loss and Other Comprehensive Income or Loss
Consolidated Statements of Changes in Shareholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
- - - - - - - - - - - - - - - - - - - - -
F - 1
Page
F-2 – F-5
F-6
F -7
F-8
F-9 - F-10
F-11 - F-50
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
MediWound Ltd.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of MediWound Ltd. and its subsidiaries (hereinafter – “the Company”) as
of December 31, 2022 and 2021, the related consolidated statements of profit or loss and other comprehensive income (loss), changes in shareholders’
equity (deficit), and cash flows for each of the years in the two‑year period ended December 31, 2022, and the related notes (collectively, “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, 2022
and 2021, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2022, in conformity with
International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain
an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis
for our opinion.
F - 2
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Critical Audit Matter
Israeli Innovation Authority grant liability
As discussed in Notes 3g and 13 to the consolidated financial statements, in previous years the Company received grants from the Israeli Innovation
Authority (“IIA”) to finance its research and development efforts. These grants were recognized as a liability to the extent the Company expected to refund
them through royalties on its revenues derived from sales of products or services developed in whole or in part using the grants. The amount of the liability
is reexamined each period using the Company’s updated future revenue forecasts discounted to their present value. Any changes in the IIA grant liability
are recognized in profit or loss. The IIA grant liability was $7,566 thousand as of December 31, 2022.
We identified the evaluation of the subsequent period end measurement of the IIA grant liability as a critical audit matter. Specifically, a high degree of
subjective auditor judgment was involved in evaluating certain significant assumptions used by the Company to develop its future revenue forecasts,
including the likelihood and timing of achievement of regulatory approvals and potential market demand and market share for the Company’s products,
which were based on external market research. These significant assumptions were forward-looking and could be affected by future economic and market
conditions.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal controls related to
the Company’s process for measuring the IIA grant liability, including controls related to the determination of the above referenced significant assumptions
used to develop future revenue forecasts. We compared the Company’s assumption of the likelihood and timing for obtaining regulatory approvals for its
products, based on the specific phases of their development, to relevant data in industry research reports. We evaluated the Company’s assumption of
potential market demand and market share by evaluating the relevance and reliability of the external market research upon which the Company based its
future revenue forecasts. We performed sensitivity analyses over these significant assumptions to assess the impact of changes in the assumptions on the
period end IIA grant liability.
/s/ Somekh Chaikin
Somekh Chaikin
Member Firm of KPMG International
We have served as the Company’s auditor since 2021.
Haifa, Israel
March 16, 2023
F - 3
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Kost Forer Gabbay & Kasierer
144 Menachem Begin Rd.
Tel-Aviv 6492102, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Board of Directors of
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of MediWound Ltd and subsidiaries (the "Company") as of December 31, 2020, the related
consolidated statements of comprehensive or loss, shareholders' equity and cash flows for the year then ended, and 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 at December 31, 2020, and the results of its operations and its cash flows for the year then ended in conformity with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion
on the critical audit matter or on the account or disclosure to which it relates.
F - 4
Liabilities in respect of Israel Innovation Authority (IIA) grants
Description of the matter
As more fully described in Note 16b to the consolidated financial statements, under the Research and Development Lawthe
Company undertook to pay royalties of 3% on the revenues derived from sales of products or services developed in whole
or in part using IIA grants, up to the amount of total grants received, plus LIBOR interest. The liability to the IIA is
measured at amortized cost using the effective interest method and amounted as of December 31, 2020 to $7,529 thousands.
Auditing the Company's IIA contingent liability involved a high degree of subjectivity as it is based on assumptions about
future revenues forecast, such as long-term demand for the Company’s products and licenses and revenue growth rates.
These significant assumptions are forward looking and could be affected by future economic and market conditions.
How we addressed the matter
in our audit
Our substantive audit procedures included, among others, evaluating the significant assumptions and operating data used.
For example, we analyzed the reasonableness of significant assumptions used to estimate future revenues based on
historical trends, we did look back analyses, we obtained support to evaluate the accuracy of the data used in management's
calculation and performed some independent recalculations.
Tel-Aviv, Israel
February 25, 2021
We have served as the Company's auditor since 2001 to 2020
F - 5
/s/ KOST FORER GABBAY & KASIERER
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
Consolidated Statements of Financial Position
U.S. dollars in thousands
Cash and cash equivalents
Trade receivables
Inventories
Other receivables
Total current assets
Other receivables
Property, plant and equipment, net
Right-of-use assets, net
Intangible assets, net
Total non-current assets
Total assets
Current maturities of long-term liabilities
Trade payables and accrued expenses
Other payables
Total current liabilities
Deferred revenues
Warrants, net
Liabilities in respect of IIA grants
Liabilities in respect of TEVA
Lease liabilities
Severance pay liability, net
Total non-current liabilities
Total liabilities
Shareholders' equity:
Ordinary shares of NIS 0.01 par value:
Authorized * : 12,857,143 shares as of December 31, 2022 and 7,142,858 shares as of December
31, 2021; Issued and Outstanding 7,240,020 shares as of December 31, 2022 and 3,896,117 shares
as of December 31, 2021
Share premium
Foreign currency translation reserve
Accumulated deficit
Total equity (deficit)
Total liabilities and equity
The accompanying notes are an integral part of the consolidated financial statements.
* Restated to reflect 1:7 reverse ratio of shares (See note 18b)
F - 6
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Note
4
5
6
7, 24
8
9
10
11
12, 24
18c
13, 16b
16c
10
15
18
As of December 31
2022
2021
33,895
9,332
1,963
650
45,840
364
2,366
1,215
231
4,176
11,046
1,779
1,200
927
14,952
469
2,478
1,548
297
4,792
50,016
19,744
2,242
5,656
4,159
12,057
-
15,606
7,445
2,788
846
360
27,045
2,408
4,693
3,620
10,721
119
-
7,885
3,922
1,391
288
13,605
39,102
24,326
143
178,882
(5)
(168,106)
10,914
75
143,869
(19)
(148,507)
(4,582)
50,016
19,744
Consolidated Statements of Profit or Loss and Other Comprehensive Income or Loss
U.S. dollars in thousands (except of share and per share data)
Revenues from sale of products
Revenues from development services
Revenues from license agreements
Total revenues
Cost of revenues from sale of products
Cost of revenues from development services
Cost of revenues from license agreements
Total cost of revenues
Gross profit
Research and development
Selling and marketing
General and administrative
Other expenses
Total operating expenses
Operating loss
Financial income
Financial expense
Financing expenses, net
Loss before taxes on income
Taxes on income
Loss from continuing operations
Profit from discontinued operations
Net loss for the year
Other comprehensive income (loss):
Foreign currency translation adjustments
Total comprehensive loss
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Note
2022
Year Ended December 31
2021
2020
22a
22b
22c
22d
22e
22f
22g
5,347
12,943
8,206
26,496
3,184
9,829
318
13,331
9,613
12,372
1,778
23,763
4,983
9,907
102
14,992
7,445
13,935
383
21,763
3,151
11,067
-
14,218
13,165
8,771
7,545
10,181
3,725
6,920
684
21,510
10,256
3,388
6,348
-
19,992
7,698
3,228
5,459
-
16,385
(8,345)
(11,221)
(8,840)
461
(11,637)
(11,176)
11
(2,314)
(2,303)
843
(1,279)
(436)
(19,521)
(13,524)
(9,276)
(78)
(27)
-
16c,21
(19,599)
-
(13,551)
-
(9,276)
80
(19,599)
(13,551)
(9,196)
14
(19,585)
21
(13,530)
(23)
(9,219)
Loss per share data
23,18
Total basic and diluted net loss per share - USD
(3.93)
*(3.48)
*(2.38)
Number of shares used in calculating basic loss per share
4,987,069
*3,892,068
*3,882,692
*Restated to reflect 1:7 reverse ratio of shares (See note 18b)
The accompanying notes are an integral part of the consolidated financial statements.
F - 7
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Consolidated Statements of Changes in Shareholders’ Equity (Deficit)
U.S. dollars in thousands
Share capital
premium
Share
Foreign
currency
translation
reserve
Accumulated
deficit
Total
equity
(deficit)
Balance as of January 1, 2022
75
143,869
(19)
(148,507)
(4,582)
Net loss
Other comprehensive income
Total comprehensive loss
Exercise of options
Issuance of ordinary shares, net of issuance expenses (see
note 18c)
Exercise of pre-funded warrants (see note 18c)
Share-based compensation
Balance as of December 31, 2022
-
-
-
(*)
40
28
-
143
-
-
-
(*)
17,389
15,678
1,946
178,882
-
14
14
-
-
-
-
(5)
(19,599)
-
(19,599)
-
-
-
-
(168,106)
(19,599)
14
(19,585)
(*)
17,429
15,706
1,946
10,914
Balance as of January 1, 2021
75
142,193
(40)
(134,956)
7,272
Net loss
Other comprehensive income
Total comprehensive loss
Exercise of options
Share-based compensation
Balance as of December 31, 2021
-
-
-
(*)
-
75
-
-
-
3
1,673
143,869
-
21
21
-
-
(19)
(13,551)
-
(13,551)
-
-
(148,507)
(13,551)
21
(13,530)
3
1,673
(4,582)
Balance as of January 1, 2020
75
140,871
(17)
(125,760)
15,169
Net loss
Other comprehensive loss
Total comprehensive loss
Exercise of options
Share-based compensation
Balance as of December 31, 2020
* Represents an amount lower than $1.
-
-
-
(*)
-
75
-
-
-
(*)
1,322
142,193
-
(23)
(23)
-(*)
-
(40)
(9,196)
-
(9,196)
-
-
(134,956)
(9,196)
(23)
(9,219)
(*)
1,322
7,272
The accompanying notes are an integral part of the consolidated financial statements.
F - 8
Consolidated Statements of Cash Flows
U.S. dollars in thousands
Cash flows from operating activities:
Loss for the year
Adjustments to reconcile net loss to net cash used in continuing operating activities:
Adjustments to profit and loss items:
Profit from discontinued operation
Depreciation and amortization
Share-based compensation
Revaluation of warrants accounted at fair value
Issuance expenses of warrants through profit and loss
Revaluation of liabilities in respect of IIA grants
Revaluation of liabilities in respect of TEVA
Revaluation of lease liabilities
Increase in severance pay liability, net
Net financing income
Un-realized foreign currency loss (gain)
Changes in asset and liability items:
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Decrease (increase) in other receivables
Increase (decrease) in trade payables and accrued expenses
Increase (decrease) in other payables and deferred revenues
Net cash used in continuing operating activities
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Year ended December 31,
2021
2022
2020
(19,599)
(13,551)
(9,196)
-
1,272
1,946
8,977
1,911
(132)
533
(109)
109
(74)
525
-
1,238
1,673
-
-
919
590
188
13
(11)
(137)
(80)
1,090
1,322
-
-
828
(433)
305
33
(297)
(211)
14,958
4,473
2,557
(7,582)
(721)
364
414
281
929
257
(763)
1,723
(1,984)
1,386
141
(13)
(1,096)
(479)
(7,244)
162
(61)
(11,885)
(8,916)
(6,700)
Net cash used in discontinued operating activities
-
-
(195)
Net cash used in operating activities
(11,885)
(8,916)
(6,895)
The accompanying notes are an integral part of the consolidated financial statements.
F - 9
Consolidated Statements of Cash Flows
U.S. dollars in thousands
Cash flows from investing activities:
Purchase of property and equipment
Interest received
Proceeds from short term bank deposits, net
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Repayment of leases liabilities
Proceeds from exercise of options
Proceeds from exercise of pre-funded warrants
Proceeds from issuance of shares and warrants, net
Repayment of IIA grants, net
Repayment of liabilities in respect of TEVA
Net cash provided by (used in) continuing financing activities
Exchange rate differences on cash and cash equivalent balances
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Year ended December 31,
2021
2022
2020
(555)
74
-
(489)
35
4,002
(923)
274
18,034
(481)
3,548
17,385
(701)
(*)
10
38,380
(258)
(1,667)
(693)
3
-
-
(360)
-
35,764
(1,050)
(549)
88
(508)
(*)
-
-
(121)
-
(629)
273
Increase (decrease) in cash and cash equivalents from continuing activities
Decrease in cash and cash equivalents from discontinued activities
Balance of cash and cash equivalents at the beginning of the year
22,849
-
11,046
(6,330)
-
17,376
10,329
(195)
7,242
Balance of cash and cash equivalents at the end of the year
33,895
11,046
17,376
Supplement disclosure of Non-cash transactions:
ROU asset, net recognized with corresponding lease liability
* Represents an amount lower than $1.
The accompanying notes are an integral part of the consolidated financial statements.
F - 10
117
155
261
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 1:
General
a.
Description of the Company and its operations:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
MediWound Ltd. Was incorporated in Israel. The Company which is located in Yavne, Israel (The "Company" or "MediWound"), is
biopharmaceutical company that develops, manufactures and commercializes novel, cost effective, bio-therapeutic, non-surgical
solutions for tissue repair and regeneration. The Company’s strategy leverages its breakthrough enzymatic technology platform into
diversified portfolio of biotherapeutics across multiple indications to pioneer solutions for unmet medical needs. The Company’s
current portfolio is focused on next-generation protein-based therapies for burn care, wound care and tissue repair.
The Company's first innovative biopharmaceutical product, NexoBrid, has received in December 2022, an approval from the U.S.
Food and Drug Administration (“FDA”) and marketing approval in each of India, Switzerland and Japan. In addition its has a
marketing authorization from the European Medicines Agency (“EMA”) and regulatory agencies in other international markets for
removal of dead or damaged tissue, known as eschar, in adults with deep partial and full thickness thermal burns.
The Company commercialize NexoBrid globally through multiple sales channels.
•
•
•
The Company sell NexoBrid to burn centers in the European Union, United Kingdom and Israel, primarily through its
commercial organizations.
The Company have established local distribution channels in multiple international markets, focusing on Asia Pacific,
EMEA, CEE and LATAM, which local distributors are also responsible for obtaining local marketing authorization within the
relevant territories.
In the United States, the Company entered into exclusive license and supply agreements with Vericel Corporation (“Vericel”)
to commercialize NexoBrid in North America upon FDA approval.
On September 20, 2022, The Company announced that EMA has validated for review the Type II Variation to expand the currantly
approved indication for NexoBrid (removal of eschar in adults with deep partial-and full-thickness thermal burn wounds) into the
pediatric population.
The Company’s second investigational next-generation enzymatic therapy product, EscharEx, a topical biological drug being
developed for debridement of chronic and other hard-to-heal wounds, is currently under discussions with the FDA regarding the
pivotal Phase 3 study design.
The third clinical-stage innovative product candidate, MW005, is a topical applied biological drug candidate for the treatment of non-
melanoma skin cancers. A U.S. phase 1/2 study of MW005 for the treatment of low-risk basal cell carcinoma (BCC) was initiated in
July 2021, and an investigator-initiated phase II trial of MW005 in non-melanoma skin cancer is being conducted in parallel in Israel.
In December 2022, the Company announced final positive results from the study. Based on the positive results, The Company plan to
continue enrolling patients in its Phase 1/2 study.
F - 11
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 1:
General (Cont.)
b.
The Company's securities are listed for trading on NASDAQ since March 2014.
On November 28, 2022, the Company’s shareholders general meeting has approved a reverse stock split. Following to that approval,
on December 5, 2022, the Company’s board of directors approved a reverse stock split, in a range of 1-for-7 ratio. The reverse split
went effective on December 20, 2022.(see also Note 18b).
During March, September and October 2022, the Company completed a series of capital public and private offerings. The gross
proceeds before deducting underwriting discounts and commissions and offering expenses, were approximately $41,700. (see also
Note 25).
c.
d.
e.
The Company has three wholly owned subsidiaries: MediWound Germany GmbH, acting as Europe (“EU”) marketing authorization
holder and EU sales and marketing arm, and MediWound UK Limited and MediWound US, Inc. which are currently inactive
companies.
The Company awarded two contracts with the U.S. Biomedical Advanced Research and Development Authority ("BARDA") valued
at up to $200,000 for the advancement of the development, manufacturing and emergency readiness for NexoBrid deployment as well
as the procurement of NexoBrid as a medical countermeasure as part of BARDA preparedness for mass casualty events. In February
2022 BARDA has expanded its awarded contract providing supplemental funding of approxemently $9,000 to support the NexoBrid
BLA resubmission to the FDA and the continuous expanded access program.
On February 17, 2022 the Company engaged with the U.S. Department of Defense (DoD), through the Medical Technology Enterprise
Consortium (MTEC), for a $1,800 contract for the development of NexoBrid as a non-surgical solution for field-care burn treatment
for the U.S. Army.
Note 2:
Basis of Preparation of the Consolidated Financial Statements
a.
Statement of compliance with International Financial Reporting Standards
These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by
the International Accounting Standards Board ("IASB").
These consolidated financial statements were approved by the board of directors on March 16, 2023.
F - 12
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 2:
Basis of Preparation of the Consolidated Financial Statements (Cont.)
b.
Functional currency, reporting currency and foreign currency:
1.
Functional currency and reporting currency:
The reporting currency of the financial statements is the U.S. dollar.
The Company determines the functional currency based on the currency in which it primarily generates and expends cash. The
Company determined that its functional currency is the U.S. dollar since most of the Company's expenses are in U.S. dollars
and the economic environment in which the Company operates in and performs its transactions is mostly affected by the U.S
dollar. A certain portion of the Company's costs are denominated in NIS mainly due to payroll and related benefit costs
incurred in Israel. To further support the Company's determination, the Company has analyzed the currency in which funds
from financing activities are generated or held and the currency in which receipts from operating activities are usually retained.
In this respect, funds from financing activities were principally derived from significant funds raising in U.S. dollars and U.S
governmental funds.
The Company operates and plans its activities in U.S. dollars and accordingly its periodic budgets and internal management
reports are prepared and monitored using the U.S. dollar as the primary currency and provides the basis for the determination
of share-based compensation.
The functional currency of the Company's subsidiary in Germany has been determined to be its local currency - the EURO.
Assets and liabilities of this subsidiary are translated at year end exchange rates and its statement of operations items are
translated using the averegae exchange rates at the quarter of which those items are recognized. Such translation adjustments
are recorded as a separate component of accumulated other comprehensive income (loss) in shareholders' equity (deficit).
2.
Transactions, assets and liabilities in foreign currency:
Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate on the date of the
transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are translated at the end of
each reporting period into the functional currency at the exchange rate at that date.
Exchange differences are recognized in profit or loss.
F - 13
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 2:
Basis of Preparation of the Consolidated Financial Statements (Cont.)
c.
Use of estimates and judgments
The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Discussed below are the key assumptions made in the financial statements concerning uncertainties at the end of the reporting period
and the critical estimates computed by the Company that may result in a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
Determining the fair value of share based compensation to employees and directors:
The fair value of share based compensation to employees and directors is determined using the binomial option pricing models.The
assumptions used in the models include the expected volatility, early exercise factor, expected dividend and risk-free interest rate.
Liabilities in respect to IIA grants:
Government grants received from the IIA are recognized as a liability if future economic benefits are expected from the research and
development activity that will result in royalty‑bearing sales. As the contingent liability is calculated based on future royalty-bearing
sales, there is uncertainty regarding the estimated future cash flows and the estimated discount rate used to measure the amortized cost
of the liability.
•
•
•
Fair value estimations of warrants
The Company completed financing transactions in which it issued shares and warrants to purchase additional shares. The fair value of
the warrants, which are not traded on an active market, is determined by using valuation techniques. These valuation techniques
maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates.
Note 3:
Significant Accounting Policies
The accounting policies set out below have been consistently applied for all periods presented in these consolidated financial statements:
a.
Basis of consolidation:
Consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control is
achieved when the Company is exposed, or has rights, to variable returns from its investment with the investee and has the ability to
affect those returns through its power over the investee.
F - 14
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 3:
Significant Accounting Policies (Cont.)
MEDIWOUND LTD. AND ITS SUBSIDIARIES
The financial statements of the Company and its subsidiaries are prepared as of the same dates and periods. The consolidated financial
statements are prepared using uniform accounting policies by all entities in the Group. Significant intercompany balances and
transactions and gains or losses resulting from intercompany transactions are eliminated in full in the consolidated financial
statements.
b.
Cash equivalents:
Cash equivalents are considered as highly liquid investments, including unrestricted short‑term bank deposits with an original
maturity of three months or less from the date of deposit.
c.
Short-term bank deposits:
Short-term bank deposits have a maturity of more than three months, but less than one year, from the deposit date.
d.
Inventories:
Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion and the estimated selling costs. The Company periodically
evaluates the condition and age of inventories and makes provisions for slow moving inventories accordingly.
Cost of inventories is determined as follows:
Raw materials
Finished goods
- At cost of purchase using the first-in, first-out method.
- On the basis of average standard costs (which approximates actual cost on a weighted
average basis) including materials, labor and other direct and indirect manufacturing
costs based on practical capacity.
e.
Property, plant and equipment, net:
Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation, accumulated
impairment losses and excluding day-to-day servicing expenses. Cost includes spare parts and auxiliary equipment that are used in
connection with the plant and equipment.
Depreciation is calculated on a straight‑line basis over the useful life of the assets at annual rates as follows:
Office furniture
Manufacturing machinery and lab equipment
Computers
Leasehold improvements
F - 15
%
7-10
15-33
33
See below
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 3:
Significant Accounting Policies (Cont.)
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Leasehold improvements are depreciated on a straight‑line basis over the shorter of the lease term (including the renewal option held
by the Company which is expected to be exercised) and the expected life of the improvement.
The useful life, depreciation method and residual value of an asset are reviewed at least each year-end and any changes are accounted
for prospectively as a change in accounting estimate.
f.
Intangible assets, net:
Separately acquired intangible assets with finite useful life are measured on initial recognition at cost.
Intangible assets are amortized over their useful life using the straight‑line method beginning in the period in which the intangible
assets generates net cash inflows to the Company. The useful life is over the length of the patent or knowledge life. The intangible
assets are reviewed for impairment at each reporting date until they begin generating net cash inflows and subsequently whenever
there is an indication that the asset may be impaired
g.
Liability in respect of Israeli Innovation Authority ("IIA"):
Grants from the IIA in respect of research and development projects are accounted for as forgivable loans according to IAS 20. Grants
received from the IIA are recognized as a liability according to their fair value on the date of their receipt, unless on that date it is
reasonably certain that the amount received will not be refunded. If future economic benefits are expected from the project that will
result in royalty-bearing revenues from sale of products it will be treated as a contingent liability.
At the end of each reporting period, the Company evaluates whether there is reasonable assurance that the liability recognized, in
whole or in part, will not be repaid based on its best estimate of future sales and any changes in the present value of the cash flows
discounted at the original interest rate of the grant are recognized in profit or loss. The difference between the amount received and the
fair value on the date of receiving the grant is recognized as a deduction of research and development expenses.
h.
Leases:
The Company accounts for a contract as a lease when the contract terms convey the right to control the use of an identified asset for a
period of time in exchange for consideration.
For leases in which the Company is the lessee, the Company recognizes on the commencement date of the lease a right-of-use
(“ROU”) asset and a lease liability, excluding leases whose term is up to 12 months and leases for which the underlying asset is of low
value. For these excluded leases, the Company has elected to recognize the lease payments as an expense in profit or loss on a
straight-line basis over the lease term. In measuring the lease liability, the Company has elected to apply the practical expedient in the
Standard and does not separate the lease components from the non-lease components (such as management and maintenance services,
etc.) included in a single contract.
F - 16
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 3:
Significant Accounting Policies (Cont.)
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Following are the amortization periods of the ROU assets by class of underlying asset:
Motor vehicles
Buildings and equipment
Years
3
5-8
The Company tests for impairment of the ROU asset whenever there are indications of impairment pursuant to the provisions of IAS
36.
•
Variable lease payments that depend on an index:
On the commencement date, the Company uses the index rate prevailing on the commencement date to calculate the future
lease payments.
For leases in which the Company is the lessee, the aggregate changes in future lease payments resulting from a change in the
index are discounted (without a change in the discount rate applicable to the lease liability) and recorded as an adjustment of
the lease liability and the ROU assets, only when there is a change in the cash flows resulting from the change in the index
(that is, when the adjustment to the lease payments takes effect).
•
Lease extension and termination options:
A non-cancelable lease term includes both the periods covered by an option to extend the lease when it is reasonably certain
that the extension option will be exercised and the periods covered by a lease termination option when it is reasonably certain
that the termination option will not be exercised.
In the event of any change in the expected exercise of the lease extension option or in the expected non-exercise of the lease
termination option, the Company remeasures the lease liability based on the revised lease term using a revised discount rate as
of the date of the change in expectations. The total change is recognized in the carrying amount of the ROU asset until it is
reduced to zero, and any further reductions are recognized in profit or loss.
•
Lease modifications:
If a lease modification does not reduce the scope of the lease and does not result in a separate lease, the Company remeasures
the lease liability based on the modified lease terms using a revised discount rate as of the modification date and records the
change in the lease liability as an adjustment to the ROU asset.
If a lease modification reduces the scope of the lease, the Company recognizes a gain or loss arising from the partial or full
reduction of the carrying amount of the ROU asset and the lease liability. The Company subsequently remeasures the carrying
amount of the lease liability according to the revised lease terms, at the revised discount rate as of the modification date and
records the change in the lease liability as an adjustment to the ROU asset.
F - 17
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 3:
Significant Accounting Policies (Cont.)
i.
Revenues recognition:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
The Company recognizes revenue when the customer obtains control over the promised goods or services. The revenue is measured
according to the amount of the consideration to which the Company expects to be entitled in exchange for the goods or services
promised to the customer, other than amounts collected for third parties.
To determine revenue recognition for arrangements the Company evaluates the following criteria’s, which are within the scope of
IFRS 15, it performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in
the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations within the contract
and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step
model to contracts when it determines that it is probable it will collect the consideration it is entitled to in exchange for the goods or
services it transfers to the customer.
Performance obligations are promises commitments in a contract to transfer a distinct good or service to the customer that (i) the
customer can benefit from on its own or together with other readily available resources, and (ii) is separately identifiable from other
promises commitments in the contract. Goods or services that are not individually distinct performance obligations are combined with
other promised commitment goods or services until such combined group of promises commitments meet the requirements of a
performance obligation.
The Company determines transaction price based on the amount of consideration the Company expects to receive for transferring the
promised goods or services in the contract.
Consideration may be fixed, variable, or a combination of both. At contract inception for arrangements that include variable
consideration, the Company estimates the probability and extent of consideration it expects to receive under the contract utilizing
either the most likely amount method or expected amount method, whichever best estimates the amount expected to be received. The
Company then considers any constraints on the variable consideration and includes in the transaction price variable consideration to
the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty
associated with the variable consideration is subsequently resolved. The Company then allocates the transaction price to each
performance obligation based on the relative standalone selling price and recognizes as revenue the amount of the transaction price
that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance
obligation is satisfied.
The Company records amounts as accounts receivable when the right to consideration is deemed unconditional. Amounts received, or
that are unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract are
recognized as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date
are classified as the current portion of deferred revenue. Amounts not expected to be recognized as revenue within the 12 months
following the balance sheet date are classified as deferred revenue, net of current portion.
F - 18
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 3:
Significant Accounting Policies (Cont.)
MEDIWOUND LTD. AND ITS SUBSIDIARIES
The Company’s revenue-generating arrangements typically include licensing arrangements, which comprise of upfront license fees,
milestone payments and/or royalties and products sale arrangements.
The promised goods or services in the Company’s licensing arrangements typically consist of a license to the Company’s intellectual
property and/or research and development services.
If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes
revenue from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is
able to use and benefit from the license. For performance obligations which consist of licenses and other promises, the Company
utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance
obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company
evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue
recognition.
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, where the license is
deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the
related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied
(or partially satisfied).
In 2019, the Company entered into exclusive license and supply agreements with Vericel to commercialize NexoBrid in North
America (see Note 22). The Company identified three distinct performance obligations: (1) license rights (2) development services for
BLA approval and (3) manufacturing and supply of NexoBrid.
Since the manufacturing and development services are at market value, then the upfront payment was fully attributed to the license
performance obligation and as such revenues are recognized at the point in time that control of the license is transferred to the
customer.
Future milestone payments are considered variable consideration and are subject to the variable consideration constraint, i.e. will be
recognized once concluded that it is “probable” that a significant reversal of the cumulative revenues recognized under the contract
will not occur in future periods when the uncertainty related to the variable considerations are resolved. (see Note 22).
Revenues from royalties under this agreement will be payable based on future commercial sales, up on an occurrence.
Revenues from the sale of products to Vericel will be recognized when all the significant risks and rewards of ownership of the
products have passed to the buyer and the seller no longer retains continuing managerial involvement. The delivery date of the
products is usually the date of which ownership passes.
F - 19
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 3:
Significant Accounting Policies (Cont.)
Revenues from distribution licensing arrangements:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
The Company accounts for the bundled license provided to the distributers and related high specialized services as a single
performance obligation and consequently recognize revenue using the cost-to-cost method, where the extent of progress towards
completion is measured based on the ratio of actual costs incurred to the total estimated costs expected to be incurred upon satisfying
such single performance obligation. The revenues from such bundled performance obligation are included within “Revenues from
license agreements”. Significant finance components related to such arrangements are recognized as finance expense.
Revenues from development services:
Revenues from development services are recognized over time, during the period the customer receives and consumes the benefits
provided by the Company's performance.
Revenues from the sale of products:
The Company generates revenues from sales of its innovative biopharmaceutical product, NexoBrid, to burn centers and hospital burn
units in Europe, U.S Israel and local international markets through its its commercial organizations and local distributors.
Revenues from sale of goods is recognized in profit or loss at the point in time when the control of the goods is transferred to the
customer, generally upon delivery of the goods to the customer. The transaction price is the amount of the consideration that is
expected to be received based on the contract terms.
j.
Research and development expenses:
Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development
project or from the development phase of an internal project is recognized if the Company can demonstrate the technical feasibility of
completing the intangible asset so that it will be available for use or sale; the Company's intention to complete the intangible asset and
use or sell it; the Company's ability to use or sell the intangible asset; how the intangible asset will generate future economic benefits;
the availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to
measure reliably the expenditure attributable to the intangible asset during its development. Since the Company's research and
development projects are often subject to regulatory approval procedures and other uncertainties, the conditions for the capitalization
of costs incurred before receipt of approvals are not normally satisfied and, therefore, research and development expenses are
recognized in profit or loss when incurred.
F - 20
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 3:
Significant Accounting Policies (Cont.)
k.
Impairment of non-financial assets:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
The Company evaluates the need to record an impairment of the carrying amount of non-financial assets whenever events or changes
in circumstances indicate that the carrying amount is not recoverable. If the carrying amount of non‑financial assets exceeds their
recoverable amount, the assets are reduced to their recoverable amount. The recoverable amount of an asset that does not generate
independent cash flows is determined for the cash‑generating unit to which the asset belongs, and is calculated based on the projected
cash flows that will be generated by the cash generating unit.
An impairment loss of an asset, is reversed only if there have been changes in the estimates used to determine the asset's recoverable
amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, may not increase the value above the
lower of (i) the carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been
recognized for the asset in prior years, and (ii) its recoverable amount.
l.
Financial instruments:
The accounting policy for financial instruments in accordance with IFRS 9, "Financial Instruments" ("the Standard") is as follows:
1.
Financial assets:
Financial assets are measured upon initial recognition at fair value plus transaction costs that are directly attributable to the
acquisition of the financial assets, except for financial assets measured at fair value through profit or loss in respect of which
transaction costs are recorded in profit or loss.
The Company classifies and measures debt instruments in the financial statements based on the following criteria:
-
-
The Company's business model for managing financial assets; and
The contractual cash flow terms of the financial asset.
Impairment of financial assets:
The Company evaluates at the end of each reporting period the loss allowance for financial debt instruments which are not
measured at fair value through profit or loss.
The Company has short-term financial assets such as trade receivables in respect of which the Company applies a simplified
approach and measures the loss allowance in an amount equal to the lifetime expected credit losses.
An impairment loss on debt instruments measured at amortized cost is recognized in profit or loss with a corresponding loss
allowance that is offset from the carrying amount of the financial asset.
F - 21
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 3:
Significant Accounting Policies (Cont.)
2.
Financial liabilities:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
a)
Financial liabilities measured at amortized cost:
Financial liabilities are initially recognized at fair value less transaction costs that are directly attributable to the issue of
the financial liability.
After initial recognition, the Company measures all financial liabilities at amortized cost using the effective interest rate
method, except for Financial liabilities at fair value through profit or loss such as derivatives;
b)
Financial liabilities measured at fair value through profit or loss:
At initial recognition, the Company measures financial liabilities that are not measured at amortized cost at fair value.
Transaction costs are recognized in profit or loss.
After initial recognition, changes in fair value are recognized in profit or loss.
3.
Fair value:
Fair value is 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.
Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal
market, or in the absence of a principal market, in the most advantageous market.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic
benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its
highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
F - 22
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 3:
Significant Accounting Policies (Cont.)
MEDIWOUND LTD. AND ITS SUBSIDIARIES
4.
Classification of financial instruments by fair value hierarchy:
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair
value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a
whole:
Level 1
Level 2
Level 3
-
-
-
quoted prices (unadjusted) in active markets for identical assets or liabilities.
inputs other than quoted prices included within level 1 that are observable either directly or
indirectly.
inputs that are not based on observable market data (valuation techniques which use inputs
that are not based on observable market data).
5.
Offsetting financial instruments:
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial
position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net
basis, to realise the assets and settle the liabilities simultaneously.
m. Warrants:
Receipts in respect of warrants are classified as equity to the extent that they confer the right to purchase a fixed number of shares for
a fixed exercise price. In the event that the exercise price or the numbers of shares to be issued are not deemed to be fixed (for
example, in case of net share settlement provision), or warrants redemption in cash on the occurrence of Fundamental Transaction the
warrants are classified as a non-current derivative financial liability. This liability is initially recognized at its fair value on the date
the contract is entered into and subsequently accounted for at fair value at each reporting date. The fair value changes are charged to
non-operating income and expense on the statement of comprehensive income or loss. Issuance costs allocable to warrants are also
recorded as non-operating expense on the statement of comprehensive income or loss.
n.
Provisions:
A provision in accordance with IAS 37 is recognized when the Company has a present (legal or constructive) obligation as a result of
a past event, it is expected to require the use of economic resources to clear the obligation and a reliable estimate has been made.
o.
Short-term employee benefits and severance pay liability, net:
The Company has several employee benefit plans:
1. Short-term employee benefits:
Short-term employee benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are
recognized as expenses as the services are rendered. A liability in respect of a cash bonus is recognized when the Company has a legal
or constructive obligation to make such payment as a result of past service rendered by an employee and a reliable estimate of the
amount can be made.
F - 23
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 3:
Significant Accounting Policies (Cont.)
2. Post-employment benefits:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
The Company has liabilities for severance pay for its employees in several of jurisdictions and in Israel.
Post-employment benefit plans in Israel are normally financed by contributions to insurance companies and classified as defined
contribution plans or as defined benefit plans. The Company has defined contribution plans for Israeli employees pursuant to the
Severance Pay Law into which the Company pays fixed contributions and has no legal or constructive obligation to pay further
contributions on account of severance pay if the fund does not hold sufficient amounts to pay all employee benefits relating to
employee service in current and prior periods.
The Company recognizes liability for severance pay due to its employees in EU in accordancewith local laws.
p.
Share-based compensation:
Certain Company employees and directors are entitled to remuneration in the form of equity-settled share-based compensation.
Equity-settled transactions
The cost of equity-settled transactions with employees is measured at the fair value of their equity instruments granted at grant date.
The fair value is determined using the binomial option pricing model.
The cost of equity-settled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the
period which the performance or service conditions are to be satisfied, ending on the date on which the relevant employees become
fully entitled to the award.
q.
Discontinued operation:
A discontinued operation is a component of the Company that either has been disposed of or is classified as held for sale. Disposal
group to be abandoned meets the criteria for being a discontinued operation at the date of which it ceases to be used. The operating
results relating to the discontinued operation are separately presented in the consolidated statements of comprehensive income or loss.
F - 24
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 3:
Significant Accounting Policies (Cont.)
r.
Profit / Loss per share:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the
profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding
during the year, adjusted for treasury shares. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary
shareholders of the Company and the weighted average number of ordinary shares outstanding, after adjustment for treasury shares,
for the effects of all dilutive potential ordinary shares, which comprise of warrants, share options and share options granted to
employees.
s.
New standards, amendments to standards and interpretations not yet adopted:
Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current (amendment to IAS 1)
The Amendment to IAS 1 replaces certain requirements for classifying liabilities as current or non-current. According to the
Amendment, a liability will be classified as non-current when the entity has the right to defer settlement for at least 12 months after
the reporting period, and it "has substance" and is in existence at the end of the reporting period.
According to the subsequent amendment, as published in October 2022, covenants with which the entity must comply after the
reporting date, do not affect classification of the liability as current or non-current. Additionally, the subsequent amendment adds
disclosure requirements for liabilities subject to covenants within 12 months after the reporting date, such as disclosure regarding the
nature of the covenants, the date they need to be complied with and facts and circumstances that indicate the entity may have difficulty
complying with the covenants Furthermore, the Amendment clarifies that the conversion option of a liability will affect its
classification as current or non-current, other than when the conversion option is recognized as equity.
F - 25
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 4:
Cash and Cash Equivalents
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Balance in USD
Balance in other currencies
Note 5:
Trade Receivables
Vericel (Note 17b)
BARDA (Note 17a)
Other trade receivables
Less provision for impairment
Note 6: Inventories
Raw materials
Finished goods
Note 7:
Other Receivables- Short Term
Government authorities
Contract asset related to BARDA
Prepaid expenses and other
Note 8:
Other Receivables- Long Term
Income receivables
Restricted bank deposits (1)
(1)
Restricted bank deposits which are primarily used as security for the Company’s office leases.
F - 26
December 31
2022
2021
24,475
9,420
7,735
3,311
33,895
11,046
December 31,
2022
2021
7,500
701
1,133
(2)
-
1,085
696
(2)
9,332
1,779
December 31,
2022
2021
913
1,050
694
506
1,963
1,200
December 31,
2022
2021
193
-
457
650
141
347
439
927
December 31,
2022
2021
180
184
364
280
189
469
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 9: Property, Plant And Equipment, Net
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Cost
Balance as of January 1, 2022
Additions
Disposals
Foreign currency translation
Manufacturing
machinery
and lab
equipment
Computers
Office
furniture
Leasehold
improvements
Total
257
37
-
(1)
4,764
327
-
-
176
49
(59)
-
3,137
142
-
-
8,334
555
(59)
(1)
Balance as of December 31, 2022
293
5,091
166
3,279
8,829
Balance as of January 1, 2021
Additions
Disposals
Foreign currency translation
332
18
(89)
(4)
4,775
193
(205)
1
169
45
(36)
(2)
2,904
233
-
-
8,180
489
(330)
(5)
Balance as of December 31, 2021
257
4,764
176
3,137
8,334
Accumulated Depreciation
Balance as of January 1, 2022
Additions
Disposals
Foreign currency translation
133
25
-
(1)
3,370
448
-
-
94
62
(59)
-
2,259
132
-
-
5,856
667
(59)
(1)
Balance as of December 31, 2022
157
3,818
97
2,391
6,463
Balance as of January 1, 2021
Additions
Disposals
Foreign currency translation
204
22
(89)
(4)
3,092
483
(204)
(1)
76
55
(35)
(2)
2,178
81
-
-
5,550
641
(328)
(7)
Balance as of December 31, 2021
133
3,370
94
2,259
5,856
Carrying amounts of all fixed asset items
December 31, 2022
December 31, 2021
136
124
1,273
1,394
69
82
888
878
2,366
2,478
F - 27
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 10:
Leases
a.
Lease Agreements:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
The Company's offices and its production facility in Israel are located in a building that the Company leases from its Related party
(see Note 24a), in accordance with a sub-lease agreement. The Company subleases approximately 3,000 square meters of laboratory,
office and clean rooms space at a monthly rent fee NIS 125 (approximately $40). This sub-lease agreement was amended on October
2021, to extand the priod up to October 2025 which was included in the calculation of the lease liability and RoU asset.
In addition the Company and its subsidiary have lease agreements for 13 vehicles for a the remaining period of one year in average.
b.
Amounts recognized in profit or loss and in the statement of cash flows
Interest expense on lease liabilities
Depreciation expenses relating to short-term leases
Cash outflow for leases
Year ended December
31,
2022
2021
102
537
701
120
531
693
The Company was assisted by external third party valuation expert in determining the appropriate interest rate for discounting its
leases based on: credit risk, the weighted average term of the leases and other economic variables. A weighted average incremental
borrowing in a range of 1% to 6.7% was used to discount future lease payments in the calculation of the lease liability on the date of
initial application of the standard (IFRS 16).
F - 28
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 10:
Leases (Cont.)
c.
Disclosures in respect of Right- of- Use assets:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Cost
Balance as of January 1, 2022
New leases
Adjustments for indexation
Disposals
Balance as of December 31, 2022
Accumulated depreciation
Balance as of January 1, 2022
Depreciation and amortization
Disposals
Balance as of December 31, 2022
Balance as of December 31, 2022
Depreciated cost
Cost
Balance as of January 1, 2021
New leases
Adjustments for indexation
Disposals
Balance as of December 31, 2021
Accumulated depreciation
Balance as of January 1, 2021
Depreciation and amortization
Disposals
Buildings
Motor
vehicles
Total
2,267
-
74
-
654
125
9
(238)
2,921
125
83
(238)
2,341
550
2,891
1,028
314
-
345
225
(236)
1,373
539
(236)
1,342
334
1,676
999
216
1,215
Buildings
Motor
vehicles
Total
2,225
-
42
-
512
162
7
(27)
2,737
162
49
(27)
2,267
654
2,921
698
330
-
155
201
(11)
853
531
(11)
Balance as of December 31, 2021
1,028
345
1,373
Balance as of December 31, 2021
Depreciated cost
1,239
309
1,548
F - 29
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 10:
Leases (Cont.)
d.
Disclosures of the Company's lease liabilities :
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Balance as of January 1, 2022
Repayment of leases liabilities
Effect of changes in exchange rates
New finance lease obligation recognized
Adjustments for indexation
Financial expenses
Disposals-Termination of leases
Balance as of December 31, 2022
Current maturities of long-term leases
Lease liability Balance as of December 31, 2022
Balance as of January 1, 2021
Repayment of leases liabilities
Effect of changes in exchange rates
New finance lease obligation recognized
Adjustments for indexation
Financial expenses
Disposals-Termination of leases
Balance as of December 31, 2021
Current maturities of long-term leases
Lease liability Balance as of December 31, 2021
Note 11:
Intangible Assets, Net
Balance as of January 1,
Additions
Balance as of December 31,
Balance as of January 1,
Additions
Balance as of December 31,
Balance as of December 31,
Cost
Accumulated Amortization
Amortized cost
F - 30
Buildings
Motor
vehicles
Total
1,691
(477)
(182)
-
74
93
-
1,199
(399)
800
299
(224)
(28)
117
9
8
(2)
179
(133)
46
1,990
(701)
(210)
117
83
101
(2)
1,378
(532)
846
Buildings
Motor
vehicles
Total
1,953
(477)
55
-
42
118
-
1,691
(403)
1,288
354
(216)
13
155
7
2
(16)
299
(196)
103
2,307
(693)
68
155
49
120
(16)
1,990
(599)
1,391
License and
Knowhow
2022
2021
1,538
-
1,538
1,241
66
1,307
1,538
-
1,538
1,175
66
1,241
231
297
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 11:
Intangible Assets, Net (Cont.)
Intangible assets include exclusive licenses to use patents, know-how and intellectual property for the development, manufacturing and
marketing of products related to burn treatments and other products in the field of wound care. These licenses were purchased from third
parties and from one of the Company's shareholders.
Note 12: Other Payables
Employees and payroll accruals
Liability in respect of TEVA (see Note 16c)
Related parties
Deferred revenues
Other
Note 13: Liabilities in Respect of IIA Grants
Balance as of January 1,
Royalties
Amounts carried to Profit or Loss
Balance as of December 31,
Current maturities
Long term liabilities in respect of IIA grants
December 31,
2022
2021
2,471
417
307
63
901
4,159
1,639
417
241
543
780
3,620
December 31
2022
2021
8,105
(407)
(132)
7,566
(121)
7,445
7,528
(342)
919
8,105
(220)
7,885
The Company is committed to pay royalties to the IIA up to the total grants received plus the applicable accrued interest. The total amount of
grants received from IIA including accrued LIBOR interest, net of royalties as of December 31, 2022 is approximately $13,614, while the
amortized cost of this liability as of that date is $ 7,566, using the interest method.
F - 31
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 14:
Financial Instruments
a.
Risk management:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.
The Company’s risk management practice was formulated to identify and analyze the risks that the Company faces, to set appropriate
limits for the risks and controls, and to monitor the risks and their compliance within the limits. The risk policy and risk management
methods are reviewed regularly to reflect changes in market conditions and in the Company’s operations.
The Company Audit Committee oversees how management monitors compliance with the Company’s risk management policies and
procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Company
Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk
management controls and procedures, the results of which are reported to the Audit Committee.
The Company's activities expose it to various financial market risks mainly foreign currency risk, interest rate risk and liquidity risk.
1. Foreign currency risk
The Company operates primarily in an international environment and is exposed to foreign exchange risk resulting from the fact
that a certain portion of the Company's costs are denominated in NIS and EURO, mainly due to payroll and related benefit costs
incurred in Israel and additionally due to marketing expenses incurred in Europe.
2. Sensitivity tests relating to changes in market factors:
The Company operates in an international environment and is exposed to foreign exchange risk resulting from the exposure to
different currencies, mainly NIS and EURO. Foreign exchange risks arise from recognized assets and liabilities denominated in a
foreign currency other than the functional currency.
Gain (loss) from change:
5% increase in NIS and EURO exchange rate
5% decrease in NIS and EURO exchange rate
December 31
2022
2021
$
$
257 $
(257) $
3
(3)
The Company has performed sensitivity tests of principal market risk factors that may affect its reported operating results or
financial position.
The sensitivity tests present the profit or loss for the relevant risk variables chosen as of each reporting date.
F - 32
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 14:
Financial Instruments (Cont.)
3. Liquidity risk
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to timely meet its
liabilities, under both normal and stressed conditions, without incurring unwanted losses.
The Company manages the liquidity risk by holding cash balances, short-term deposits and secured bank credit facilities.
December 31, 2022
Carrying 12 months
amount
or less
1-2 years 2-8 years
Non-derivative financial liabilities
Current liabilities
Current maturities of long-term liabilities
Trade payables and accrued expenses
Other payables
Non-current liabilities
Liabilities in respect of IIA grants
Liabilities in respect of TEVA
Lease liabilities
Non-derivative financial liabilities
Current liabilities
Current maturities of long-term liabilities
Trade payables and accrued expenses
Other payables
Non-current liabilities
Liabilities in respect of IIA grants
Liabilities in respect of TEVA
Lease liabilities
2,814
5,656
4,159
2,814
5,656
4,159
-
-
-
-
-
-
15,464
4,200
902
-
-
-
312
1,000
508
15,152
3,200
394
December 31, 2021
Carrying 12 months
amount
or less
1-2 years 2-8 years
3,024
4,693
3,620
3,024
4,693
3,620
-
-
-
-
-
-
15,286
5,867
1,522
-
-
-
369
1,667
589
14,917
4,200
933
F - 33
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 14:
Financial Instruments (Cont.)
b.
Fair value:
(1) Financial instruments measured at fair value for disclosure purposes only.
The carrying amounts of certain financial assets and liabilities, including cash, trade receivables, other receivables, deposits, trade
and other payables are the same as or approximate to their fair value.
(2) Fair value hierarchy of financial instruments measured at fair value.
The financial instruments measured at fair value on a temporal basis, use valuation methodology in accordance with the fair value
hierarchy levelas defined in Note 3l.3. When determining the fair value of an asset or liability, the Company uses observable
market data as much as possible.
Details regarding fair value measurement at Level 2
The fair value of the warrants which are classified as non-currents liabilities was measured by Black and Scholes model .The
following inputs were used to determine the fair value:
Expected period of warrant– 4 years.
Expected volatility – 68%
Risk-free interest rate (3) – 4.26%-2.37%.
Expected dividend yield – 0%.
The fair value of liabilities in respect to IIA grants with fixed interest is based on a calculation of the present value of the cash
flows at the interest rate for a loan with similar terms. The Company used a discount rate of 12% based in part of the Company’s
estimation at the time of the Company’s recognition of the IIA grants which approximates the fair value at the respective balance
sheet date.
The liability in respect of TEVA as presented in balance sheet which is approximate its fair value, based on a calculation of the
present value of future payments. The expected cash flows already reflect assumptions about the uncertainty in future defaults,
and therefore the Company used a discount rate of 14% that is commensurate with the risk inherent in the expected cash flows
(Note 16).
Note 15:
Severance Pay Liabilty, Net
The Company has liabilities for severance pay for its employees in Israel and in several EU jurisdictions. The Company’s liability for
employee benefits is based on local laws, valid labor agreements, the employee’s salary and the applicable terms of employment, which
together generate a right to severance compensation. Post‑employment employee benefits are partially financed by deposits with defined
contribution plans, as detailed below.
The Israeli Severance Pay Law, 1963 (“Severance Pay Law”), specifies that Israeli employees are entitled to severance payment, following
the termination of their employment.
F - 34
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 15:
Severance Pay Liabilty, Net (Cont.)
Under the Severance Pay Law, the severance payment is calculated as one month salary for each year of employment, or a portion thereof.
Under Section 14 of the Severance Pay Law (“Section 14”), employees are entitled to have monthly deposits, at a rate of 8.33% of their
monthly salary, made on their behalf to their insurance funds. Payments in accordance with Section 14 release the Company from the
liability for any future severance payments in respect of those employees.
The majority of the Company’s liability for severance pay is covered by Section 14. Acordingly, the Company does not recognize any
liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balance
sheet. These contributions for compensation represent defined contribution plans. The Company recognizes liability for severance pay due to
its employees in EU in accordance with local laws and its Israeli employees which are not under Section 14.
Note 16:
Liabilities and Commitments
a.
In 2000, the Company signed an exclusive license agreement (as amended in 2007) with a third party with regard to its patents and
intellectual property. Pursuant to the agreement, the Company received an exclusive license to use the third party’s patents and
intellectual property, for the purpose of developing, manufacturing, marketing, and commercializing products for treatment of burns
and other wounds.
The Company paid an aggregate amount of $950 and undertook to pay royalties of 1.5% to 2.5% from future revenues from sales of
products which are based on this patent for a period of 12 years from the first commercial delivery in a major country, and thereafter
the Company will have a fully paid-up royalty-free license for these patents. In addition, royalties will be paid at the rate of 10% -
20% from sub-licensing of such patents and for lump sum amounts paid to the Company by a third party, the Company will pay 2% of
the proceeds up to $1,000 and 4% above this amount. Moreover, the Company agreed to pay a one-time lump-sum amount of $1,500
when the aggregate revenues based on these patents reach $100,000. The amount of royalty payments for the years 2021 and 2022
amounted to $149 and $363 respectively.
b.
c.
Under the Research and Development Law, (the “R&D Law”) the Company undertook to pay royalties of 3% on the revenues derived
from sales of products or services developed in whole or in part using IIA grants. The maximum aggregate royalties paid cannot
exceed 100% of the grants received by the Company, plus annual interest equal to the 12-month LIBOR applicable to dollar deposits,
as published on the first business day of each calendar year. The total royalties amount paid as of December 31, 2022 is $1,562. (Note
13).
In December 2020, Teva has agreed to revise the Settlement Agreement from March 2019, which was comprised of past agreement for
collaboration in the development, manufacturing and commercialization of solutions for the burn and chronic wound care markets, as
well as the Company’s repurchase of shares from Teva. Under the new settlement the Company paid $1,000 in cash and became
obligated to pay an amount of $2,000 over three years and an addition amount of $7,200 in quarterly fixed payments starting 2021 as
long as there are revenues generated from sales of NexoBrid.
F - 35
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 16:
Liabilities and Commitments (Cont.)
Total liabilities recorded as of December 31, 2022 and 2021 were approximately$4,794 and $5,928, respectively, and financial expenses of
$533 and $590, respectively, were recorded in profit or loss within financial expenses.
Note 17:
Materials Agreements
a.
BARDA Contracts
The Company was awarded the First BARDA Contract for treatment of thermal burn injuries in Sep 2015. This contract was amended
multipal time to extand the total value, up to a total amount of $158,500. In February 2022 BARDA has expanded its awarded
contract providing supplemental funding of $9,000 to support the NexoBrid BLA resubmission to the FDA and the continuous
expanded access study.
Under the First BARDA Contract, BARDA provided a total of up to $91,000 in funding for NexoBrid development activities towards
U.S. marketing approval from the FDA, and committed to an additional $16,500 to procure NexoBrid for public health medical
emergencies. The contract further includes a $10,000 option to fund development of other potential NexoBrid indications and an
option to procure additional NexoBrid valued at up to $50,000.
The Company was awarded the second BARDA contract, to develop NexoBrid for the treatment of Sulfur Mustard injuries as part of
BARDA’s preparedness for mass casualty events. The contract provides up to $12,000 of funding to support research and
development activities and contains options to provide additional funding of up to $29,000 for additional development activities,
animal pivotal studies, and the BLA submission for licensure of NexoBrid for the treatment of Sulfur Mustard injuries. The total
aggregate value awarded by BARDA Contracts is up to $209,000 comprised of $142,500 to support research and development
activities and $66,500 to procure NexoBrid for U.S. emergency preparedness (which will be splited between the Company and Vericel
following Vericel agreement (see Note 17b)).
As of December 31, 2022, the Company has received approximately $82,200 in funding in the aggregate, from BARDA under the two
contracts, and an additional of $16,500 for procurement of NexoBrid for U.S. emergency preparedness which were recorded at the net
amount of approximately $10,500 following the split of gross profit agreement with Vericel for the initial BARDA procurement.
b.
Vericel Agreement:
On May 6, 2019, the Company entered into exclusive license and supply agreements with Vericel to commercialize NexoBrid in North
America (the “Collaboration Agreements”). Pursuant to the Collaboration Agreements, Vericel will obtain the authority over and
control of the development, regulatory approval and commercialization of licensed products in the North America territory.
MediWound will be responsible for the development of the product through BLA approval, supported and funded by BARDA, as well
as the manufacture and supply of NexoBrid. In addition, MediWound retains the commercial rights to NexoBrid in non-North
American territory.
F - 36
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 17:
Materials Agreememts (Cont.)
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Under the terms of the license agreement, Vericel has made an upfront payment to MediWound of $17,500 which was recorded as
revenues from license agreements in 2019 as well as an additional milestone payment of $7,500 recorded as revenues from license
agreements in 2022 upon BLA approval received in December 2022. Fourthermore, Vericel has also agreed to pay MediWound up to
$125,000 in payments contingent upon meeting certain annual sales milestones, tiered royalties on net sales ranging from high single-
digit to teen-digit percentages, a split of gross profit on committed BARDA procurement orders and a teen-digits royalty on any
additional future BARDA purchases of NexoBrid. Under the terms of the supply agreement, Vericel will procure NexoBrid from
MediWound at a transfer price of cost plus a fixed margin percentage.
As of the financial statements date, the Company did not recognize any revenues from royalties.
Note 18:
Equity
a.
Share capital:
Authorized number of shares
Issued and outstanding number of shares
*Restated o reflect 1:7 reverse ratio of shares (See note 18b)
December 31
2022
2021
12,857,143 *7,142,858
7,240,020 *3,896,117
An ordinary share confers upon its holder(s) a right to vote at the general meeting, a right to participate in distribution of dividends,
and a right to participate in the distribution of surplus assets upon liquidation of the Company.
b.
Movement in share capital:
1. During 2020 and 2021 the Company issued additional 4,852 ordinary shares for each year upon vesting of outstanding RSU’s.
2. On November 28, 2022, at the Company’s extraordinary general meeting of shareholders, its shareholders approved:
(a) An increases of the Company’s authorized share capital from NIS 500,000, consisting of 50,000,000 ordinary shares, per
value NIS 0.01 per share to NIS 900,000 consisting of 90,000,000 ordinary shares, per value NIS 0.01 per share.
(b) A reverse stock split, in a range of between 1-for-5 and 1-for-10, subject to the discretion of our board of directors to
implement it within 12 months.
Following that approval, on December 5, 2022, the Company’s board of directors approved a reverse split of 1-for-7 ratio.
The reverse split went effective on December 20, 2022.
F - 37
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 18:
Equity (Cont.)
MEDIWOUND LTD. AND ITS SUBSIDIARIES
No fractional shares were issued as a result of the reverse share split. Instead, such shares were rounded up to the next whole
number of shares. The reverse share split affected all shareholders uniformly and did not alter any person’s percentage
interest in our outstanding ordinary shares, except for negligible adjustments that may have resulted from the treatment of
fractional shares.
In connection with the reverse share split, The Company also amended and reduced the authorized number of ordinary
shares from 90,000,000 to 12,857,143, which reflected a reduction at the same 1-for-7 ratio as the reduction to the number of
issued and outstanding ordinary shares.
Concurrently, the par value of the Company’s ordinary shares was increased proportionately, from NIS 0.01 per share to NIS
0.07 per share, in order to maintain the same overall authorized share capital under our Amended and Restated Articles of
Association.
3. During 2022 the Company issued additional 11,827 ordinary shares upon vesting of outstanding RSU’s.
c.
Financial transactions:
1. On March 7, 2022, the Company completed a public offering in total of 744,048 new ordinary shares which were issued in
consideration to offering price of $13.44 per share. The net proceeds were $8,653, after deducting commissions and other offering
expenses. In addition, on March 22, 2022 the underwriters exercised their options to purchase an additional 89,012 ordinary
shares at the same public offering price. The net consideration to the Company , less underwriting discounts and commissions
was at additional of $1,021.
As part of the above- mentioned public offering, certain entities affiliated with CBI purchased 208,334 of ordinary shares at the
public offering price.
2. On September 26, 2022, the Company completed a registered direct (the “RD”) offering in an aggregate amount of $13,257
represent a combine purchase price of $12.25 for issuance of 1,082,223 ordinary shares and 1,082,223 warrants that become
exercisable on November 28, 2022, at an exercise price of $13.475 per ordinary share which will expire in four years.
The warrants issued have been classified as a non-current financial liability due to a net share settlement provision and as they
can be settled in cash on the occurrence of Fundamental Transaction as determined in the agrement. This liability was initially
recognized at its fair value on the date the contract was entered into and is subsequently accounted for fair value at each balance
sheet date and recorded through profit and loss.
The fair value of the warrants has been evaluated with the assistance of external independed valuator and was computed based on
then current price of the shares, a risk-free interest rate of 4.37% and an average standard deviation of 68%.
F - 38
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 18:
Equity (Cont.)
MEDIWOUND LTD. AND ITS SUBSIDIARIES
The net proceeds from this offering in the amount of $11,698 have been received on September 28, 2022. The issuance expenses
related to the non-current financial liability were recorded through profit and lost and the issuance expenses related to the
issuance of shares recorded as a deduction from the proceed in equity.
3. Concurrently, on October 6, 2022, the Company entered into a Private Issuance Purchase Equity agreement (the “PIPE”) with
several purchasers, in connection with the offering of 1,407,583 unregistered pre-funded warrants to purchase up to 1,407,583
ordinary shares and 1,407,583 warrants to purchase up to 1,407,583 ordinary shares. Pre-Funded warrants become exercisable on
November 28, 2022, at an exercise price of $0.007 per ordinary share and the warrants would be also exercisable upon the
Authorized Share Increase Date at an exercise price of $13.475 per ordinary share and expire in four years.
The Pre-Funded warrants and warrants issued have been classified as a non-current financial liabilities due to a net share
settlement provision and as they can be reedemed in cash on the occurrence of Fundamental Transaction as determined in the
agrement. The initial fair value of the financial liabilities issued in the transaction was approximately $20,788, which comprised
of: 1.The warrants which were valuated by Black and Sholtes model based on then current price of the shares and a risk-free
interest rate of 4.26%, and 2. The pre-funded warrants which were valued in an amount which is approxemate its share price upon
their issuance. The consideration received from this transaction was $17,233. As the fair value on initial recognition of the
warrants differs from the transaction price, the difference, represents the First day loss at the amount of $3,555, and has been
allocated to the warrants with respect to this transaction and is amortized on a straight line basis over the term of the the warrants.
The net proceeds from this offering amounted at approximately $15,920. The issuance expenses were recorded through profit and
lost.
During December 2022, the 1,407,583 pre-funded warrants were exercised into ordinary shares..
4. Upon closing of the RD and PIPE Offerings, the Company also issued the placement agent up to 124,491 warrants to purchase up
to 124,491 ordinary Shares. The warrants have substantially the same terms as the RD and PIPE Warrants, except that the
placement agent’s warrants have an exercise price equal to $15.312 per share (which represents 125% of the offering price per
ordinary Share in the offerings). The Fair value of the placement agent’s options was recorded as an issuance expenses through
profit and lost and as a deduction from proceed in equity based on the financial treatment of both RD and PIPE offering and in
accordance to their part.
5. See also Note 25.1 regarding a public offering after the reporting date.
F - 39
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 19: Share‑Based Compensation
a.
Expense recognized in the financial statements:
The expenses recognized for services received from employees and directors is as follows:
Year ended December 31
2021
2022
2020
Cost of revenues
Research and development
Selling and marketing
General and administrative
Total share-based compensation
184
406
42
1,314
153
333
-
1,187
115
179
3
1,025
1,946
1,673
1,322
b.
Share-based payment plan for employees and directors:
The Company has granted options and restricted stock units ("RSUs") for total of 806,910 ordinary shares.
As of December 31, 2022, 145,131 ordinary shares of the Company were still available for future grant.
Any options or RSUs, which are forfeited or not exercised before expiration, become available for future grants.
Options granted under the Company's 2003 Israeli Share Option Plan ("Plan") are exercisable in accordance with the terms of the
Plan, within 5-10 years from the date of grant, against payment of an exercise price or cashless exercise. The options generally vest
over a period of 3-4 years.
In March 2014, the Company adopted and obtained shareholder approval for its 2014 Equity Incentive Plan (the “2014
Plan”). Options and RSU's granted under the Company's 2014 Plan are exercisable in accordance with the terms of the Plan. Options
are exercisable within 5-10 years from the date of grant, against payment of an exercise price or cashless exercise and share units are
granted immediately upon vesting of the RSU's. The options and the RSU's generally vest over a period of 1-4 years.
F - 40
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 19: Share‑Based Compensation (Cont.)
c.
Share options activity:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
The following table lists the number of share options, the weighted average exercise prices of share options and changes that were
made in the option plan to employees and directors
2022
2021*
2020*
Weighted
Average
Exercise
price
Number
of
options
Weighted
Average
Exercise
price
Number
of
options
Weighted
Average
Exercise
price
Number of
options
Outstanding
Options
at
beginning of year
Options Granted
Options Exercised
Options
expired
Forfeited
and/or
Outstanding options and at end
of year
Option's Exercisable at end of
year
537,288
320,775
(807)
44.45
14.25
12.23
513,973
53,970
(536)
45.85
37.52
20.16
333,490
182,054
-
64.26
10.01
-
(92,489)
55.58
(30,119)
56.91
(1,571)
50.33
764,767
30.44
537,288
44.45
513,973
45.85
373,681
46.18
333,618
58.38
278,859
69.86
*Restated o reflect 1:7 reverse ratio of shares (See note 18b)
The following table summarizes information about share options outstanding:
Range of exercise prices ($ )
12.25-14.42
26.88-37.52
42.14-67.06
90.23-96.32
Total
Range of exercise prices ($)
12.25-37.52
42.14-67.06
90.23-96.32
Total
Options outstanding as of
December 31, 2022
Weighted
Average
Remaining
contractual
life
Weighted
average
exercise
price
Number
of
options
470,693
145,354
68,662
80,058
764,767
7.84
6.43
2.85
0.91
6.40
13.60
35.95
63.94
90.65
30.44
Options outstanding as of
December31, 2021*
Weighted
Average
Remaining
contractual
life
Weighted
average
exercise
price
Number
of
options
329,638
91,750
115,900
537,288
6.19
3.68
1.92
4.84
23.03
63.07
90.51
44.45
F - 41
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 19: Share‑Based Compensation (Cont.)
The following table summarizes information about RSU's outstanding:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Outstanding at beginning of year
Granted
Forfeited
Vested
RSU's
2022
RSU's
2021*
RSU's
2020*
14,581
39,286
(27)
(11,827)
10,655
8,992
(215)
(4,851)
15,506
-
-
(4,851)
Outstanding at the end of the period
42,013
14,581
10,655
*Restated o reflect 1:7 reverse ratio of shares (See note 18b)
The fair value of the options and RSU's granted to employees and directors at the grant date for the years ended December 31, 2020,
2021 and 2022 was $1,819 , $1,392 and $2,970 respectively.
The options and RSU’s of the Company are managed by a trustee.
1.
2.
3.
On April 23, 2020, the Company's Board of Directors approved the grant of 182,055 options to purchase ordinary shares under
the "2014 Share Incentive Plan", for an exercise price of $ 12.25 per share to its employees, managments and board members of
the Company. The fair value of the options granted, as of the grant date, was estimated at approximately $1,819.
On March 4, 2021, the Company's Board of Directors approved the grant of: (a) 34,013 options to purchase ordinary shares and
5,669 RSU's under the "2014 Share Incentive Plan" to its CEO, officers and board members of the Company at a fair value of
$663 and $196, respectively, and (b) 19,958 options to purchase ordinary shares and 3,324 RSU's under the "2014 Share
Incentive Plan" to its employees at a fair value of $417 and $116, respectively. The options are exercisable for an exercise
price of $ 37.52 per share.
Over the second quarter of 2022, the Company’s Board of Directors approved the grant of 292,203 options to purchase the
Company’s ordinary shares, for an exercise price of $ 14.42 per share as well as 39,286 restricted share units (“RSU’s”) to its
CEO, officers and employees. The fair value of the options and RSU’s as of the grant date, was estimated at $2,314 and $498
respectively.
The above-mentioned grant includes the grant of 151,786 options to purchase the Company’s ordinary shares and 39,286
restricted share units (“RSU’s”) to the directors and the CEO of the Company which are required to be approved by the
Company’s General meeting as well. The fair value of the options and RSU’s, as of the approval date, was estimated at
approximately $1,171 and $498, respectively.
4.
On July 19, 2022, the Company’s Shareholders General meeting approved the abovementioned grants (Note 3p, Note 19) to the
directors and the CEO, the compensation terms of Mr. Ofer Gonen as the Company’s new Chief Executive Officer, which terms
will be effective as of July 1, 2022 and the termination terms for the previous CEO.
F - 42
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 19: Share‑Based Compensation (Cont.)
MEDIWOUND LTD. AND ITS SUBSIDIARIES
5.
On August 18, 2022, the Company’s Shareholders General meeting approved the compensation terms and grant of 28,572
options to the Chairman of the Board of Directors which approved earlier by the board. The fair value of the options as of the
grant date, was estimated at $284.
d. The fair value of the Company's share options granted to employees and directors for the years ended December 31, 2020, 2021 and
2022 was estimated using the binomial option pricing models using the following assumptions:
December 31
2021
2022
2020
Dividend yield (%)
Expected volatility of the share prices (%)
Risk-free interest rate (%)
Early exercise factor (%)
Weighted average share prices (Dollar)
0
55-78
0.1-1.5
0
0
51-71
59-77
0.2-0.9
2.1-5.2
100-150 100-150 100-150
17.01
20.16
7.98
Measurement inputs include the share price on the measurement date, the exercise price of the instrument, expected volatility (based
on the weighted average volatility of the Company’s shares, over the expected term of the options), expected term of the options
(based on general option holder behavior and expected share price), expected dividends, and the risk-free interest rate (based on
government debentures).
Note 20:
Income Tax
a.
The Company operates in two main tax jurisdictions: Israel and Germany. As such, the Company is subject to the applicable tax rates
in the jurisdictions in which it conducts its business.
b.
Corporate tax rate in Israel:
The tax rates relevant to the Company in the years 2020-2022 is 23%.
c.
Benefits under the Law for the Encouragement of Capital Investments:
Tax benefits under the Israel Law for the Encouragement of Capital Investments, 1959 (the "Investment Law"):
Under the Investment Law, the Company has been granted "Beneficiary Enterprise" status which provides certain benefits, including
tax exemptions and reduced tax rates. Income not eligible for Beneficiary Enterprise benefits is taxed at a regular rate.
During the benefit period, the Company will be tax exempt in the first two years of the benefit period and subject to tax at the reduced
rate of 10%- 25% for an additional period of five to eight years (depending on the percentage of foreign investments in the Company)
of the benefit period. The benefit entitlement period starts from the first year that the Beneficiary Enterprise first earned taxable
income, and is limited to 12 years from the year in which the Company requested to have tax benefits apply. In the event of
distribution of dividends from the said tax exempt income, the amount distributed will be subject to corporate tax at the reduced rate
ordinarily applicable to the Beneficiary Enterprise's income.
F - 43
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 20:
Income Tax (Cont.)
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Tax exempt income generated under the Company's "Beneficiary Enterprise" program will be subject to taxes upon dividend
distribution or complete liquidation. The entitlement to the above benefits is conditional upon the Company's fulfilling the conditions
stipulated by the Investment Law and regulations published thereunder. Should the Company fail to meet such requirements in the
future, income attributable to its Beneficiary Enterprise programs could be subject to the statutory Israeli corporate tax rate and the
Company could be required to refund a portion of the tax benefits already received, with respect to such programs.
d.
The principal tax rates applicable to the subsidiary whose place of incorporation is outside of Israel is:
The statutory corporate tax rate in Germany was 29.79% in 2022, 2021 and 2020.
e.
Final tax assessments:
The Company has finalized its tax assessments through the 2016 tax year.
The Company's subsidiary has not received a final tax assessment since its incorporation.
f.
Net operating carryforward losses for tax purposes and other temporary differences:
As of December 31, 2022, the Company had carryforward losses and other temporary differences mainly from R&D expenses
together amounting to approximately $156,700.
g.
Deferred taxes:
The Company did not recognize deferred tax assets for temporary differences because their utilization in the foreseeable future is not
probable.
h.
Current taxes on income:
The Company did not record any current taxes for the years ended December 31, 2020, 2021 and 2022 as a result of its carryforward
losses.
i.
Theoretical tax:
The reconciliation between the tax expense, assuming that all the income and expenses, gains and losses in the statement of income
were taxed at the statutory tax rate and the taxes on income recorded in profit or loss, does not provide significant information and
therefore was not presented (the main reconciliation item is due to operating losses and other temporary differences for which deferred
tax assets were not recognized).
F - 44
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 21: Discontinued Operation
In 2020 the Company finalized PolyHeal Settlement Agreements with some shareholders of Polyheal related to '2010 PolyHeal Agreement'
in which PolyHeal granted the Company an exclusive global license to manufacture, develop and commercialize all the Polyheal Products in
consideration for royalty payments, and paid $195 for 1,558 shares of PolyHeal. As of December 31, 2020, the provision for liability in
respect of discontinued operation, was fully offset by an impairment of the royalty rights and settlement fees.
Note 22:
Supplementary Information to the Statements of Comprehensive Profit or Loss
a.
Additional information on Revenues:
Major customers:
BARDA contributed 51%, 76% and 83% of the Company’s total revenues in 2022, 2021, and 2020 respectively . Verical
contributed 28% in 2022. (see also Note 17b).
No other customer contributed 10% or more of the Company’s revenues in 2022, 2021 and 2020.
Geographic information:,
The revenues reported in the financial statements are based on the location of the customers, as follows:
Year ended December 31
2021
2020
2022
USA ( see also Note 17a, 17b)
EU and other international markets
b.
Cost of Revenues:
1. Cost of Revenues from sale of products
21,872
4,624
18,102
5,661
18,030
3,733
26,496
23,763
21,763
Year ended December 31
2021
2020
2022
Salary and benefits (including share-based compensation)
Subcontractors
Depreciation and amortization
Cost of materials
Other manufacturing expenses
Decrease (increase) in inventory of finished products
1,828
58
426
636
779
(543)
2,047
190
559
1,039
906
242
1,532
118
387
300
659
155
3,184
4,983
3,151
F - 45
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 22:
Supplementary Information to the Statements of Comprehensive Profit or Loss (Cont.)
2. Cost of Revenues from development services
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Salary and benefits
Subcontractors
3. Cost of Revenues from license agreements
Salary and benefits
Royalties payments
Year ended December 31
2021
2020
2022
1,691
8,138
2,003
7,904
2,320
8,747
9,829
9,907
11,067
Year ended December 31
2021
2020
2022
38
280
102
-
318
102
-
-
-
Total Cost of Revenues
13,331
14,992
14,218
c.
Research and development expenses, net of participations:
Year ended December 31
2021
2022
2020
Salary and benefits (including share-based compensation)(1)
Subcontractors
Depreciation and amortization
Cost of materials
Other research and development expenses
4,494
4,054
571
572
490
2,864
6,323
396
347
326
2,701
3,208
512
922
355
Total Research and development, net of participations
10,181
10,256
7,698
(1) The salary costs for the year ended December 31,2022 includes one time payment of $205 derived from termination agreement
with the CMO of the company.
F - 46
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 22:
Supplementary Information to the Statements of Comprehensive Profit or Loss (Cont.)
d.
Selling and marketing expenses:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Year ended December 31
2021
2022
2020
Salary and benefits (including share based compensation)
Marketing and medical support
Depreciation and amortization
Shipping and delivery
Registration and marketing license fees
e.
General and administrative expenses:
1,637
1,152
49
385
502
1,643
627
44
490
584
1,700
740
82
282
424
3,725
3,388
3,228
Year ended December 31
2021
2022
2020
Salary and benefits (including share‑based compensation)
Professional fees
Depreciation and amortization
Other
3,344
2,589
225
762
2,905
2,480
239
724
2,784
2,267
108
300
6,920
6,348
5,459
f.
Other expenses:
The other one-time expenses amounted $684 for the year ended December 31, 2022, are associated with the management changes and
FDA milestone payment fee ( see Note 17b).
F - 47
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 22:
Supplementary Information to the Statements of Comprehensive Profit or Loss (Cont.)
g.
Financial income and expense:
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Year ended December 31
2021
2022
2020
Financial income:
Interest income
Revaluation of liabilities in respect of TEVA
Revaluation of liabilities in respect of IIA grants
Exchange differences, net
Financial expense:
Interest in respect of IIA grants
Revaluation of liabilities in respect of IFRS16
Finance expenses in respect of deferred revenues
Revaluation of liabilities in respect of TEVA
Exchange differences, net
Revaluation of Warrants
Issuance expenses of warrants through profit and loss
Other
Financial expenses, net
Note 23:
Net Profit (Loss) Per Share
270
-
132
59
461
-
102
54
533
-
8,977
1,911
60
11
-
-
-
11
903
120
143
590
511
-
-
47
297
433
-
113
843
832
144
247
-
-
-
-
56
11,637
2,314
1,279
(11,176)
(2,303)
(436)
a.
Details of the number of shares and loss used in the computation of loss per share from continuing operations:
2022
Weighted
average
number of
shares
Loss
Year ended December 31
2021*
Weighted
average
number of
shares
Loss
2020*
Weighted
average
number of
shares
Loss
4,987,069
(19,599)
3,892,068
(13,551)
3,882,692
(9,276)
F - 48
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 23:
Net Profit (Loss) Per Share (Cont.)
b.
Net profit (loss) per share :
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Year ended December 31
2021*
2022
2020*
Basic and diluted loss per share:
(3.93)
(3.48)
(2.38)
* Restated to reflect 1:7 reverse ratio of shares (See note 18b)
In 2022, 2,614,288 warrants, 764,767 options and 42,013 RSU’s were excluded from the diluted weighted average number of
Ordinary Shares calculation as their effect would have been anti-dilutive. In addition the impact of 1,407,583 pre-funded warrants
which were exercised in December 2022, have not taken in the diluted weighted average number of Ordinary Shares calculation as
their effect would have been unti-dilutive as well.
Note 24:
Balances and Transactions With Related Parties and Key Officers
a.
Related parties consist of:
• Clal Biotechnologies Industries Ltd.- Related party.
• Directors of the Company.
1.
Balances of related parties:
Related Party:
As of December 31, 2021
As of December 31, 2022
Directors:
As of December 31, 2021
As of December 31, 2022
2.
Transactions with related parties:
Rental fee:
Related party
Professional fee *:
Directors
Related party
Number of Directors
*
*
Not included share based compensation detailed in Note 19.
During 2022 two members of the board of directors were replaced.
F - 49
Other
Payables
144
177
96
130
Year ended December 31
2021
2022
2020
457
469
446
Year ended December 31
2021
2022
2020
484
63
547
*10
375
85
460
8
272
54
326
8
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
Note 24:
Balances and Transactions With Related Parties and Key Officers (Cont.)
b.
Key Officers:
1.
Balances of Key Officers of the Company
Key Officers of the Company
As of December 31, 2022
As of December 31, 2021
Other
Payables
754
353
•
Represents the officer’s gross salary, bonuses and vacation provisions without share based compensation.
2.
Compensation of Key Officers of the Company:
The following amounts disclosed in the table are recognized as an expense during the reporting period related to officers:
Year ended December 31
2021
2022
2020
Short-term employee benefits (*)(**)
Share-based compensation
Number of officers
2,880
797
1,788
518
3,677
7
2,306
5
1,993
467
2,460
5
(*) One-time expenses amounted $309 for the year ended December 31, 2022, are associated with the management changes.
(**) In December 2007, the Company's board of directors approved one‑time bonus payments to the Chief Medical Officer in
the amounts of $120, which was recorded in profit and loss in December 2022 upon achieving marketing approval in the
United States.
Note 25:
Subsiquents events:
1.
2.
On February 7, 2023, the Company completed a registered direct offering. A total of 1,964,286 new ordinary shares were issued in
consideration to offering price of $14 per share. The gross proceeds, were $27,500, before deducting commissions and other offering
expenses.
On February 15, 2023, the Company granted to employees, officers, board members, CEO and some consultants 199,100 share
options for an exercise price of $13.32 per share and 20,150 RSUs. The share options vest over a period of 1-4 years. The total value
was estimated at $1,600. The grant to the directors and CEO is subject to the approval of the next shareholders annual meeting.
F - 50
______________________________________________________________________________
EXHIBIT 1.1
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
MEDIWOUND LTD.
A COMPANY LIMITED BY SHARES
UNDER THE COMPANIES LAW, 5759 – 1999
______________________________________________________________________________
1.
INTERPRETATION
1.1.
In these Articles, unless the context requires another meaning the words in the first column of the following table shall have the meanings
set opposite them in the second column:
“Alternate Nominee”
“Articles”
“Auditors”
“Board of Directors”
“Chief Executive Officer”
“Chairman of the Board of Directors”
“Companies Law”
“Company”
“Committee of Directors”
“Compensation Committee”
“Deed of Transfer”
“Derivative Transaction”
“Effective Time”
as defined in Article 77.1;
these Articles of Association, as amended from time to time by a Resolution (as defined
below);
the auditors of the Company;
all of the directors of the Company holding office pursuant to these Articles, including
alternates, substitutes or proxies;
chief executive officer of the Company;
as defined in Article 81;
the Israeli Companies Law, 5759-1999, as amended from time to time, including the
regulations promulgated thereunder, or any other law which may come in its stead, including
all amendments made thereto;
MediWound Ltd. or מ"עב דנווידמ;
as defined in Article 93;
as defined in the Companies Law;
as defined in Article 44;
as defined in Article 56;
the closing of the initial underwritten public offering of the Company’s Ordinary Shares, at
which time these Articles shall first become effective;
- 2 -
“Director(s)”
“External Directors”
“General Meetings”
“Incapacitated Person”
“NIS”
“Nominees”
“Ordinary Shares”
“Office”
“Office Holder”
“Person”
“Proposal Request”
“Proposing Shareholder”
“Register”
“Resolution”
“Rights”
“Shareholder(s)”
“Special Fund”
“Transferor”
“Transferee”
“U.S. Rules”
“writing”
a member or members of the Board of Directors elected to hold office as director(s);
as defined in the Companies Law;
all annual and extraordinary meetings of the Shareholders;
as defined under the Israeli Legal Capacity and Guardianship Law, 5722-1962, as amended
from time to time, including a minor who has not yet attained the age of 18 years, a person
unsound of mind and a bankrupt in respect of whom no rehabilitation has been granted;
New Israeli Shekels;
as defined in Article 77.1;
as defined in Article 6;
the registered office of the Company at that time;
as defined in the Companies Law;
includes an individual, corporation, company, cooperative society, partnership, trust of any
kind or any other body of persons, whether incorporated or otherwise;
as defined in Article 56;
as defined in Article 56;
the Register of Shareholders administered in accordance with the Companies Law;
a resolution of Shareholders. Except as required under the Companies Law or these Articles,
any Resolution shall be adopted by a majority of the voting power present and voting at the
applicable General Meeting, in person or by proxy;
as defined in Article 113.1;
shall mean the shareholder(s) of the Company, at any given time;
as defined in Article 113.1;
as defined in Article 44;
as defined in Article 44;
the applicable rules of the NASDAQ Stock Market and the U.S. securities rules and
regulations, as amended from time to time; and
handwriting, typewriting, photography, telex, email or any other legible form of writing.
- 3 -
1.2.
1.3.
1.4.
Subject to the provisions of this Article 1, in these Articles, unless the context necessitates another meaning, terms and expressions which
have been defined in the Companies Law shall have the meanings ascribed to them therein.
Words in the singular shall also include the plural, and vice versa. Words in the masculine shall include the feminine and vice versa, and
words which refer to persons shall also include corporations, and vice versa.
The captions to articles in these Articles are intended for the convenience of the reader only, and no use shall be made thereof in the
interpretation of these Articles.
LIMITED LIABILITY
The Company is a limited liability company and therefore each shareholder’s obligations for the Company’s obligations shall be limited to the
payment of the nominal value of the shares held by such shareholder, subject to the provisions of the Companies Law.
THE COMPANY’S OBJECTIVES
The Company’s objectives are to conduct all types of business as are permitted by law. The Company may donate a reasonable amount of money
for any purpose that the Board of Directors finds appropriate, even if the donation is not for business considerations or for the purpose of
achieving profits for the Company.
THE BUSINESS
Any branch or type of business that the Company is authorized to engage in, either expressly or implied, may be commenced or engaged in by the
Board of Directors at all or any time as it deems fit. The Board of Directors shall be entitled to cease the conduct of any such branch or type of
business, whether or not the actual conduct thereof has commenced at its own discretion.
2.
3.
4.
5.
The registered office shall be at such place as is decided from time to time by the Board of Directors.
REGISTERED OFFICE
SHARE CAPITAL
The share capital of the Company shall consist of NIS 900,000 divided into 12,857,143 Ordinary Shares, of a nominal value of NIS 0.07 each (the
“Ordinary Shares”).
RIGHTS ATTACHING TO THE ORDINARY SHARES
6.
7.
7.1.
The Ordinary Shares in respect of which all calls have been fully paid shall confer on the holders thereof the right to attend and to vote at
General Meetings of the Company, both ordinary as well as extraordinary meetings.
- 4 -
8.
9.
10.
11.
7.2.
The Ordinary Shares shall confer on a holder thereof the right to receive a dividend, to participate in a distribution of bonus shares and to
participate in the distribution of the assets of the Company upon its winding-up, pro rata to the nominal amount paid up on the shares or
credited as paid up in respect thereof, and without reference to any premium which may have been paid in respect thereof.
MODIFICATION OF CLASS RIGHTS
8.1.
8.2.
8.3.
Subject to applicable law, if at any time the share capital of the Company is divided into different classes of shares and unless the terms of
issue of such class of shares otherwise stipulate, the rights attaching to any class of shares (including rights prescribed in the terms of
issue of the shares) may be altered, modified or canceled, by a Resolution passed at a separate General Meeting of the Shareholders of
that class.
The provisions contained in these Articles with regard to General Meetings shall apply, mutatis mutandis as the case may be, to every
General Meeting of the holders of each such class of the Company’s shares.
Unless otherwise provided by these Articles, the increase of an authorized class of shares, or the issuance of additional shares thereof out
of the authorized and unissued share capital, shall not be deemed, for purposes of this Article 8.30, to modify or abrogate the rights
attached to previously issued shares of such class or of any other class.
UNISSUED SHARE CAPITAL
The unissued shares in the capital of the Company shall be under the control of the Board of Directors, which shall be entitled to allot or otherwise
grant the same to such Persons under such restrictions and conditions as it shall deem fit, whether for consideration or otherwise, and whether for
consideration in cash or for consideration which is not in cash, above their nominal value or at a discount, all on such conditions, in such manner
and at such times as the Board of Directors shall deem fit, subject to the provisions of the Companies Law. The Board of Directors shall be
entitled, inter alia, to differentiate between Shareholders with regard to the amounts of calls in respect of the allotment of shares (to the extent that
there are calls) and with regard to the time for payment thereof. The Board of Directors may also issue options or warrants for the purchase of
shares of the Company and prescribe the manner of the exercise of such options or warrants, including the time and price for such exercise and any
other provision which is relevant to the method for distributing the issued shares of the Company amongst the purchasers thereof.
The Board of Directors shall be entitled to prescribe the times for the issue of shares of the Company and the conditions therefore and any other
matter which may arise in connection with the issue thereof.
In every case of a rights offering the Board of Directors shall be entitled, in its discretion, to resolve any problems and difficulties arising or that
are likely to arise in regard to fractions of rights, and without prejudice to the generality of the foregoing, the Board of Directors shall be entitled to
specify that no shares shall be allotted in respect of fractions of rights, or that fractions of rights shall be sold and the (net) proceeds shall be paid to
the persons entitled to the fractions of rights, or, in accordance with a decision by the Board of Directors, to the benefit of the Company.
- 5 -
11A.
The Company may, subject to applicable law, issue redeemable shares and redeem the same. Shares issued by the Company may be redeemable
upon terms and conditions to be set forth in a written agreement between the Company and the holder of such shares.
INCREASE OF AND ALTERATIONS TO CAPITAL
12.
13.
14.
The Company may, from time to time, by a Resolution, increase its share capital by way of the creation of new shares, whether or not all the
existing shares have been issued up to the date of the resolution, whether or not it has been decided to issue same, and whether or not calls have
been made on all the issued shares.
The increase of share capital shall be in such amount and divided into shares of such nominal value, and with such restrictions and conditions and
with such rights and privileges as the Resolution dealing with the creation of the shares prescribes, and if no provisions are contained in the
Resolution, then as the Board of Directors shall prescribe.
Unless otherwise stated in the Resolution approving the increase of the share capital, the new shares shall be subject to those provisions in regard
to issue, allotment, alteration of rights, payment of calls, liens, forfeiture, transfer, transmission and other provisions which apply to the shares of
the Company.
15.
By Resolution, the Company may, subject to any applicable provisions of the Companies Law:
15.1.
consolidate its existing share capital, or any part thereof, into shares of a larger denomination than the existing shares;
15.2.
sub-divide its share capital, in whole or in part, into shares of a smaller denomination than the nominal value of the existing shares and
without prejudice to the foregoing, one or more of the shares so created may be granted any preferred or deferred rights or any special
rights with regard to dividends, participation in assets upon winding-up, voting and so forth, subject to the provisions of these Articles;
15.3.
reduce its share capital; or
15.4.
cancel any shares which on the date of passing of the Resolution have not been issued and to reduce its share capital by the amount of
such shares.
16.
In the event that the Company shall adopt any of the Resolutions described in Article 15 above, the Board of Directors shall be entitled to
prescribe arrangements necessary in order to resolve any difficulty arising or that are likely to arise in connection with such Resolutions, including,
in the event of a consolidation, it shall be entitled to (i) allot, in contemplation of or subsequent to such consolidation or other action, shares or
fractional shares sufficient to preclude or remove fractional share holdings; (ii) redeem, in the case of redeemable shares, and subject to applicable
law, such shares or fractional shares sufficient to preclude or remove fractional share holdings; (iii) round up, round down or round to the nearest
whole number, any fractional shares resulting from the consolidation or from any other action which may result in fractional shares; or (iv) cause
the transfer of fractional shares by certain Shareholders to other Shareholders thereof so as to most expediently preclude or remove any fractional
shareholdings, and, cause the transferees of such fractional shares to pay the transferors thereof the fair value thereof, and the Board of Directors is
hereby authorized to act in connection with such transfer, as agent for the transferors and transferees of any such fractional shares, with full power
of substitution, for the purposes of implementing the provisions of this Article 16
- 6 -
17.
18.
19.
20.
21.
22.
23.
24.
SHARE CERTIFICATES
To the extent shares are certificated, share certificates evidencing title to the shares of the Company shall be issued under the seal or rubber stamp
of the Company, and together with the signatures of two members of the Board of Directors, or one Director together with the Chief Executive
Officer, the Chief Financial Officer, the Secretary of the Company or any other person designated by the Board of Directors. The Board of
Directors shall be entitled to decide that the signatures be effected in any mechanical or electronic form, provided that the signature shall be
effected under the supervision of the Board of Directors in such manner as it prescribes.
Every Shareholder shall be entitled, free of charge, to one certificate in respect of all the shares of a single class registered in his name in the
Register.
The Board of Directors shall not refuse a request by a Shareholder to obtain several certificates in place of one certificate, unless such request is, in
the opinion of the Board of Directors, unreasonable. Where a Shareholder has sold or transferred some of his shares, he shall be entitled, free of
charge, to receive a certificate in respect of his remaining shares, provided that the previous certificate is delivered to the Company before the
issuance of a new certificate.
Every share certificate shall specify the number of the shares in respect of which such certificate is issued and also the amounts which have been
paid up in respect of each share.
No Person shall be recognized by the Company as having any right to a share unless such Person is the registered owner of the shares in the
Register. The Company shall not be bound by and shall not recognize any right or privilege pursuant to the laws of equity, or a fiduciary
relationship or a chose in action, future or partial, in any share, or a right or privilege to a fraction of a share, or (unless these Articles otherwise
direct) any other right in respect of a share, except the absolute right to the share as a whole, where same is vested in the owner registered in the
Register.
A share certificate registered in the names of two or more persons shall be delivered to one of the joint holders, and the Company shall not be
obliged to issue more than one certificate to all the joint holders of shares and the delivery of such certificate to one of the joint holders shall be
deemed to be delivery to all of them.
If a share certificate should be lost, destroyed or defaced, the Board of Directors shall be entitled to issue a new certificate in its place, provided
that the certificate is delivered to it and destroyed by it, or it is proved to the satisfaction of the Board of Directors that the certificate was lost or
destroyed and security has been received to its satisfaction in respect of any possible damages and after payment of such amount as the Board of
Directors shall prescribe.
CALLS ON SHARES
The Board of Directors may from time to time, in its discretion, make calls on Shareholders in respect of amounts which are still unpaid in respect
of the shares held by each of the Shareholders (including premiums), and the terms of issue which do not prescribe that same be paid at fixed
times, and every Shareholder shall be obliged to pay the amount of the call made on him, at such time and at such place as stipulated by the Board
of Directors.
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25.
26.
27.
28.
29.
30.
In respect of any such call, prior notice of at least fourteen (14) business days shall be given, stating to whom the amount called is to be paid, the
time for payment and the place thereof, provided that prior to the due date for payment of such call, the Board of Directors may, by written notice
to the Shareholders to which the call was made, cancel the call or extend the date of payment thereof.
If according to the terms of issue of any share, or otherwise, any amount is required to be paid at a fixed time or in installments at fixed times,
whether the payment is made on account of the share capital in respect of the share or in form of a premium, every such payment or every such
installment shall be paid as if it was a call duly made by the Board of Directors, in respect of which notice was duly given, and all the provisions
contained in these Articles in regard to calls shall apply to such amount or to such installment.
Joint holders of a share shall be jointly and severally liable for the payment of all installments and calls due in respect of such share.
In the event that a call or installment due on account of a share is not paid on or before the date fixed for payment thereof, the holder of the share,
or the Person to whom the share has been allotted, shall be obliged to pay linkage differentials and interest on the amount of the call or the
installment, at such rate as shall be determined by the Board of Directors, commencing from the date fixed for the payment thereof and until the
date of actual payment. The Board of Directors may, however, waive the payment of the linkage differentials or the interest or part thereof.
A Shareholder shall not be entitled (i) to receive a dividend and (ii) to exercise any right as a Shareholder, including but not limited to, the right to
attend and vote at a General Meeting of any type and to transfer the shares to another; unless he has paid all the calls payable from time to time
and which apply to any of his shares, whether he holds same alone or jointly with another, plus linkage differentials, interest and expenses, if any.
The Board of Directors may, if it deems fit, accept payment from a Shareholder wishing to advance the payment of all moneys which remain
unpaid on account of his shares, or part thereof which are over and above the amounts which have actually been called, and the Board of Directors
shall be entitled to pay such Shareholder linkage differentials and interest in respect of the amounts paid in advance, or that portion thereof which
exceeds the amount called for the time being on account of the shares in respect of which the advance payment is made, at such rate as is agreed
upon between the Board of Directors and the Shareholder, with this being in addition to dividends payable (if any) on the paid-up portion of the
share in respect of which the advance payment is made.
The Board of Directors may, at any time, repay the amount paid in advance as aforesaid, in whole or in part, in its sole
discretion, without premium or penalty. Nothing in this Article 30 shall derogate from the right of the Board of Directors
to make any call for payment before or after receipt by the Company of any such advance.
FORFEITURE AND LIEN
31.
If a Shareholder fails to make payment of any call or other installment on or before the date fixed for the payment thereof, the Board of Directors
may, at any time thereafter and for as long as the part of the call or installment remains unpaid, serve on such Shareholder a notice demanding that
he make payment thereof, together with the linkage differentials and interest at such rate as is specified by the Board of Directors and all the
expenses incurred by the Company in consequence of such non-payment.
- 8 -
32.
33.
34.
35.
36.
37.
38.
The notice shall specify a further date, which shall be at least fourteen (14) business days after the date of the delivery of the notice, and a place or
places at which such call or installment is to be paid, together with linkage differentials and interest and expenses as aforesaid. The notice shall
further state that, if the amount is not paid on or before the date specified, and at the place mentioned in such notice, the shares in respect of which
the call was made, or the installment is due, shall be liable to forfeiture.
If the demands contained in such notice are not complied with the Board of Directors may treat the shares in respect of which the notice referred to
in Articles 31 and 32 was given as forfeited. Such forfeiture shall include all dividends, bonus shares and other benefits which have been declared
in respect of the forfeited shares which have not actually been paid prior to the forfeiture.
Any share so forfeited or waived shall be deemed to be the property of the Company and the Board of Directors shall be entitled, subject to the
provisions of these Articles and the Companies Law, to sell, re-allot or otherwise dispose thereof, as it deems fit, whether the amount paid
previously in respect of that share is credited, in whole or in part.
The Board of Directors may, at any time before any share forfeited as aforesaid is sold or re-allotted or otherwise dispose of, cancel the forfeiture
on such conditions as it deems fit.
Any Person whose shares have been forfeited shall cease to be a Shareholder in respect of the forfeited shares, but shall, nonetheless remain liable
for the payment to the Company of all calls, installments, linkage differentials, interest and expenses due on account of or in respect of such shares
on the date of forfeiture, in respect of the forfeited shares, together with interest on such amounts reckoned from the date of forfeiture until the date
of payment, at such rate as the Board of Directors shall from time to time specify. However, such Person’s liability shall cease after the Company
has received all the amounts called in respect of the shares as well as any expenses incurred by the Company relating to collecting the amounts
called. The Board of Directors shall be entitled to collect the moneys which have been forfeited, or part thereof, as it shall deem fit, but it shall not
be obliged to do so.
The provisions of these Articles in regard to forfeiture shall also apply to cases of non-payment of any amount, which, according to the terms of
issue of the share, or which under the conditions of allotment the due date for payment of which fell on a fixed date, whether this be on account of
the nominal value of the share or in the form of a premium, as if such amount was payable pursuant to a call duly made and notified.
The Company shall have a first and paramount lien over all the shares which have not been fully paid up and which are registered in the name of
any Shareholder (whether individually or jointly with others) and also over the proceeds of the sale thereof, as security for the debts and
obligations of such Shareholder to the Company and his contractual engagements with it, either individually or together with others. This right of
lien shall apply whether or not the due date for payment of such debts or the fulfillment or performance of such obligations has arrived, and no
rights in equity shall be created in respect of any share, over which there is a lien as aforesaid. The aforesaid lien shall apply to all dividends or
benefits which may be declared, from time to time, on such shares, unless the Board of Directors shall decide otherwise.
- 9 -
39.
40.
41.
42.
43.
In order to foreclose on such lien, the Board of Directors may sell the shares under lien at such time and in such manner as, it shall deem fit, but no
share may be sold unless the period referred to below has elapsed and written notice has been given to the Shareholder, his trustee, liquidator,
receiver, the executors of his estate, or anyone who acquires a right to shares in consequence of the bankruptcy of a Shareholder, as the case may
be, stating that the Company intends to sell the shares, if he or they should fail to pay the aforesaid debts, or fail to discharge or fulfill the aforesaid
obligations within fourteen (14) business days from the date of the delivery of the notice.
The net proceeds of any such sale of shares, as contemplated by Article 39 above, after deduction of the expenses of the sale, shall serve for the
discharge of the debts of such shareholder or for performance of such Shareholder’s obligations (including debts, undertakings and contractual
engagements the due date for the payment or performance of which has arrived) and the surplus, if any, shall be paid to the Shareholder, his
trustee, liquidator, receiver, guardians, the executors of his estate, or to his successors-in-title.
In every case of a sale following forfeiture or waiver, or for purposes of executing a lien by exercising all of the powers conferred above, the
Board of Directors shall be entitled to appoint a person to sign an instrument of transfer of the shares sold, and to arrange for the registration of the
name of the buyer in the Register in respect of the shares sold.
An affidavit signed by the Chairman of the Board of Directors that a particular share of the Company was forfeited, waived or sold by the
Company by virtue of a lien, shall serve as conclusive evidence of the facts contained therein as against any person claiming a right in the share.
The purchaser of a share who relies on such affidavit shall not be obliged to investigate whether the sale, re-allotment or transfer, or the amount of
consideration and the manner of application of the proceeds of the sale, were lawfully effected, and after his name has been registered in the
Register he shall have a full right of title to the share and such right shall not be adversely affected by a defect or invalidity which occurred in the
forfeiture, waiver, sale, re-allotment or transfer of the share.
TRANSFER AND TRANSMISSION OF SHARES
No transfer of shares shall be registered unless a proper instrument of transfer is delivered to the Company or, in the case of shares registered with
a transfer agent, delivered to such transfer agent or to such other place specified for this purpose by the Board of Directors. Subject to the
provisions of these Articles, an instrument of transfer of a share in the Company shall be signed by the transferor and the transferee. The Board of
Directors may approve other methods of recognizing the transfer of shares in order to facilitate the trading of the Company’s shares on the Nasdaq
Global Market or on any other stock exchange. The transferor shall be deemed to remain the holder of the share up until the time the name of the
transferee is registered in the Register in respect of the transferred share.
44.
Insofar as the circumstances permit, the instrument of transfer of a share shall be substantially in the form set out below, or in any other form that
the Board of Directors may approve (the “Deed of Transfer”).
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I _______________, I.D. _______________ of _______________ (the “Transferor”), in consideration for an
amount of NIS _______________ (in words) paid to me by _______________ I.D. _______________ of
_______________ (hereinafter: the “Transferee”), hereby transfer to the Transferee _______________
______________ shares of nominal value NIS _______________ each, marked with the numbers _______________
to _______________ (inclusive) of a company known as MediWound Ltd., to be held by the Transferee, the acquires
of his rights and his successors-in title, under all the same conditions under which I held same prior to the signing of
this instrument, and I, the Transferee, hereby agree to accept the aforementioned share in accordance with the above
mentioned conditions.
In witness whereof we have hereunto signed this _____ day of _______ 20__.
Transferor _______________ Transferee _______________
Witnesses to Signature _______________
45.
46.
47.
48.
49.
The Company may close the transfer registers and the Register for such period of time as the Board of Directors shall deem fit.
Every instrument of transfer shall be submitted to the Office or to such other place as the Board of Directors shall prescribe, for purposes of
registration, together with the share certificates to be transferred, or if no such certificate was issued, together with a letter of allotment of the
shares to be transferred, and/or such other proof as the Board of Directors may demand in regard to the transferor’s right of title or his right to
transfer the shares. The Board of Directors shall have the right to refuse to recognize an assignment of shares until the appropriate securities under
the circumstances have been provided, as shall be determined by the Board of Directors in a specific case or from time to time in general.
Instruments of transfer which serve as the basis for transfers that are registered shall remain with the Company.
Every instrument of transfer shall relate to one class of shares only, unless the Board of Directors shall otherwise agree.
The executors of the will or administrator of a deceased Shareholder’s estate (such Shareholder not being one of a joint owners of a share) or, in
the absence of an administrator of the estate or executor of the will, the persons specified in Article 49 below, shall be entitled to demand that the
Company recognize them as owners of rights in the share. The provisions of Article 46 above shall apply, mutatis mutandis, also in regard to this
Article.
In the case of the death of one of the holders of a share registered in the names of two or more Persons, the Company shall recognize only the
surviving owners as Persons having rights in the share. However, the aforementioned shall not be construed as releasing the estate of a deceased
joint Shareholder from any and all undertakings in respect of the shares. Any Person who shall become an owner of shares following the death of a
Shareholder shall be entitled to be registered as owner of such shares after having presented to an officer of the Company to be designated by the
Chief Executive Officer an inheritance order or probation order or order of appointment of an administrator of estate and any other proof as
required - if these are sufficient in the opinion of such officer - testifying to such Person’s right to appear as shareholder in accordance with these
Articles, and which shall testify to his title to such shares. The provisions of Article 46 above shall apply, mutatis mutandis, also in regard to this
Article.
- 11 -
50.
51.
52.
53.
54.
55.
56.
The receiver or liquidator of a Shareholder who is a company or the trustee in bankruptcy or the official receiver of a Shareholder who is bankrupt,
upon presenting appropriate proof to the satisfaction of an officer of the Company to be designated by the Chief Executive Officer that such
Shareholder has the right to appear in this capacity and which testifies to such Shareholder’s title, may, with the consent of the Board of Directors
(the Board of Directors shall not be obligated to give such consent) be registered as the owner of such shares. Furthermore, such Shareholder may
assign such shares in accordance with the rules prescribed in these Articles. The provisions of Article 46 above shall apply, mutatis mutandis, also
in regard to this Article.
A Person entitled to be registered as a Shareholder following assignment pursuant to these Articles shall be entitled, if approved by the Board of
Directors and to the extent and under the conditions prescribed by the Board of Directors, to dividends and any other monies paid in respect of the
shares, and shall be entitled to give the Company confirmation of the payments; however, he shall not be entitled to be present or to vote at any
General Meeting of the Company or, subject to the provisions of these Articles, to make use of any rights of Shareholders, until he has been
registered as owner of such shares in the Register.
GENERAL MEETING
A General Meeting shall be held at least once in every year, not later than 15 (fifteen) months after the last General Meeting, at such time and at
such place as the Board of Directors shall determine. Such General Meeting shall be called an annual meeting, and all other meetings of the
Shareholders shall be called extraordinary meetings.
The Board of Directors may call an extraordinary meeting whenever it sees fit to do so.
The Board of Directors shall be obliged to call an extraordinary meeting upon a requisition in writing in accordance with the Companies Law.
The Company shall provide prior notice in regard to the holding of an annual meeting or an extraordinary meeting in accordance with the
requirements of these Articles, the Companies Law and the regulations promulgated thereunder. Subject to the provisions of the Companies Law
and the regulations promulgated thereunder, in counting the number of days of prior notice given, the day of publication of notice shall not be
counted, but the day of the meeting shall be counted. The notice shall specify those items and contain such information as shall be required by the
Companies Law, the regulations promulgated thereunder and any other applicable law and regulations.
Any Shareholder (a “Proposing Shareholder”)requesting to add an item to the agenda of a General Meeting may submit such a request (a
“Proposal Request”) in accordance with the Companies Law. Subject to any requirements under the Law, to be considered timely and thereby be
added to such agenda, a Proposal Request must be delivered, either in person or by certified mail, postage prepaid, and received at the Office, (i) in
the case of a General Meeting that is 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 to be timely must be so received not earlier than the close of business one-hundred twenty (120) days prior to
such annual meeting and not 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 General Meeting that is an
extraordinary meeting, no earlier than one-hundred twenty (120) days prior to such extraordinary meeting and no later than 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.
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In no event shall the public announcement of an adjournment or postponement of a General Meeting commence a new
time period (or extend any time period) for the giving of a Shareholder’s notice as described above. Subject to any
requirements under the Companies Law, nominations of persons for election to the Board of Directors may only be made
at an extraordinary meeting if directors are to be elected at such meeting (a) by or at the direction of the Board of
Directors, or (b) by any shareholder who is entitled to vote at the meeting and who complies with the notice procedures
set forth in this Article. Such request shall also set forth: (i) the name and address of the Proposing Shareholder making
the request; (ii) a representation that the Proposing Shareholder is a holder of record of shares of the Company entitled to
vote at such meeting and intends to appear in person or by proxy at the meeting; (iii) a description of all arrangements or
understandings between the Proposing Shareholder and any other Person or Persons (naming such Person or Persons) in
connection with the subject which is requested to be included in the agenda; (iv) a description of all Derivative
Transactions (as defined below) by the Proposing Shareholder during the previous twelve (12) month period, including
the date of the transactions and the class, series and number of securities involved in, and the material economic terms of,
such Derivative Transactions; and (v) a declaration that all the information that is required under the Companies Law and
any other applicable law to be provided to the Company in connection with such subject, if any, has been provided.
Furthermore, the Board of Directors, may, in its discretion, to the extent it deems necessary, request that the Proposing
Shareholder(s) provide additional information necessary so as to include a subject in the agenda of a General Meeting, as
the Board of Directors may reasonably require.
A “Derivative Transaction” means any agreement, arrangement, interest or understanding entered into by, or on behalf
or for the benefit of, any Proposing Shareholder or any of its affiliates or associates, whether of record or beneficial: (a)
the value of which is derived in whole or in part from the value of any class or series of shares or other securities of the
Company, (b) which otherwise provides any direct or indirect opportunity to gain or share in any gain derived from a
change in the value of securities of the Company, (c) the effect or intent of which is to mitigate loss, manage risk or
benefit of security value or price changes, or (d) which provides the right to vote or increase or decrease the voting power
of such Proposing Shareholder, or any of its affiliates or associates, with respect to any shares or other securities of the
Company, which agreement, arrangement, interest or understanding may include, without limitation, any option, warrant,
debt position, note, bond, convertible security, swap, stock appreciation right, short position, profit interest, hedge, right to
dividends, voting agreement, performance-related fee or arrangement to borrow or lend shares (whether or not subject to
payment, settlement, exercise or conversion in any such class or series), and any proportionate interest of such Proposing
Shareholder in the shares or other securities of the Company held by any general or limited partnership, or any limited
liability company, of which such Proposing Shareholder is, directly or indirectly, a general partner or managing member.
The information required pursuant to this Article 56 shall be updated as of the record date of the General Meeting, five (5)
business days before the General Meeting, and any adjournment or postponement thereof.
- 13 -
57.
58.
59.
60.
61.
62.
Subject to Article 65 below, in the event that the Company has established that an adjourned meeting shall be held on such date which is later than
the date provided for in Section 78(b) of the Companies Law, such later date shall be included in the notice. The Company may add additional
places for Shareholders to review the full text of the proposed resolutions, including an internet site. The notice shall be provided in the manner
prescribed below under the heading “Notices” in Articles 128 to 131 below.
PROCEEDINGS AT GENERAL MEETING
No business shall be conducted at a General Meeting unless a quorum is present, and no resolution shall be passed unless a quorum is present at
the time the resolution is voted on. Except in cases where it is otherwise stipulated, a quorum shall be constituted when there are personally
present, or represented by proxy, at least two (2) Shareholders who hold, in the aggregate, at least 25% of the voting rights in the Company. A
proxy may be deemed to be two (2) or more Shareholders pursuant to the number of Shareholders he represents.
If within half an hour from the time appointed for the meeting, a quorum is not present, without there being an obligation to notify the
Shareholders to that effect, the meeting shall be adjourned to the same day, in the following week, at the same hour and at the same place or to a
later time and date if so specified in the notice of the meeting, unless such day shall fall on a statutory holiday (either in Israel or in the United
States), in which case the meeting will be adjourned to the first business day afterwards which is not a statutory holiday.
If the original meeting was convened upon requisition under Section 63 of the Companies Law, one or more Shareholders,
present in person or by proxy, and holding the number of shares required for making such requisition, shall constitute a
quorum at the adjourned meeting, but in any other case any two (2) Shareholders present in person or by proxy, shall
constitute a quorum at the adjourned meeting.
The Chairman of the Board of Directors, or any other Person appointed for this purpose by the Board of Directors, shall preside at every General
Meeting. If within fifteen (15) minutes from the time appointed for the meeting, the designated chairman for the meeting shall not be present, the
Shareholders present at the meeting shall elect one of their number to serve as chairman of the meeting.
Resolutions at the General Meeting shall be passed in accordance with the definition of “Resolution” set forth in Article 1.1 above, unless
otherwise required by Companies Law or these Articles. Every vote at a General Meeting shall be conducted according to the number of votes to
which each Shareholder is entitled on the basis of the number of Ordinary Shares held by such Shareholder (in accordance with the provisions of
Article 7.1 above).
Where a poll has been demanded, the chairman of the meeting shall be entitled - but not obliged - to accede to the demand. Where the chairman of
the meeting has decided to hold a poll, such poll shall be held in such manner, at such time and at such place as the chairman of the meeting
directs, either immediately or after an interval or postponement, or in any other way, and the results of the vote shall be deemed to be the
Resolution at the meeting at which the poll was demanded. A person demanding a poll may withdraw his demand prior to the poll being held.
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63.
64.
65.
66.
67.
68.
69.
A demand for the holding of a poll shall not prevent the continued business of the meeting on all other questions apart of the question in respect of
which a poll was demanded.
The announcement by the chairman of the meeting that a Resolution has been passed unanimously or by a particular majority, or has been rejected,
and a note recorded to that effect in the Company’s minute book, shall serve as prima facie proof of such fact, and there shall be no necessity for
proving the number of votes or the proportion of votes given for or against the Resolution, unless otherwise required under applicable law and
regulation.
The Chairman of a General Meeting at which a quorum is present may, with the consent of holders of a majority of the voting power represented
in person and by proxy and voting on the question of adjournment, adjourn the meeting from time to time and from place to place, but no business
shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting as originally called.
Subject to these Articles, it shall not be necessary to give any notice of an adjournment unless the meeting is adjourned for more than twenty-one
(21) days, in which case notice thereof shall be given in the manner required for the meeting as originally called. Where a General Meeting has
been adjourned without changing its agenda, to a date which is not more than twenty-one (21) days, notices shall be given for the new date, as
early as possible, and by no later than seventy-two (72) hours before the General Meeting.
VOTES OF SHAREHOLDERS
The voting rights of every shareholder entitled to vote at a General Meeting shall be as set forth in Article 7.1 of these Articles.
In the case of joint Shareholders, the vote of the senior joint holder, given personally or by proxy, shall be accepted, to the exclusion of the vote of
the remaining joint Shareholders, and for these purposes the senior of the joint Shareholders shall be the Person amongst the joint holders whose
name appears first in the Register.
A Shareholder who is an Incapacitated Person may vote solely through his guardian or other person who fulfills the function of such guardian and
who was appointed by a court, and any guardian or other person as aforesaid shall be entitled to vote by way of a proxy, or in such manner as the
court directs.
Any corporation which is a Shareholder of the Company shall be entitled, by way of resolution of its board of directors or another organ which
manages said corporation, to appoint such person which it deems fit, whether or not such person is a Shareholder of the Company, to act as its
representative at any General Meeting of the Company or at a meeting of a class of shares in the Company which such corporation is entitled to
attend and to vote thereat, and the appointed as aforesaid shall be entitled, on behalf of the corporation whom he represents, to exercise all of the
same powers and authorities which the corporation itself could have exercised had it been a natural person holding shares of the Company.
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70.
Every Shareholder who is entitled to attend and vote at a General Meeting of the Company, shall be entitled to appoint a proxy. A proxy can be
appointed by more than one Shareholder, and vote in different ways on behalf of each principal.
The instrument appointing a proxy shall be in writing signed by the Person making the appointment or by his authorized
representative, and if the Person making the appointment is a corporation, the power of attorney shall be signed in the
manner in which the corporation signs on documents which bind it, and a certificate of an attorney with regard to the
authority of the signatories to bind the corporation shall be attached thereto. The proxy need not be a shareholder of the
Company.
71.
The instrument appointing a proxy, or a copy thereof certified by an attorney, shall be lodged at the Office, or at such other place as the Board of
Directors shall specify, not less than forty-eight (48) hours prior to the meeting at which the proxy intends to vote based on such instrument of
proxy. Notwithstanding the above, the chairman of the meeting shall have the right to waive the time requirement provided above with respect to
all instruments of proxies and to accept any and all instruments of proxy until the beginning of a General Meeting. A document appointing a proxy
shall be valid for every adjourned meeting of the meeting to which the document relates.
72.
Every instrument appointing a proxy, whether for a meeting specifically indicated, or otherwise, shall, as far as circumstances permit, be
substantially in the following form, or in any other form approved by the Board of Directors:
I ______________ of ______________ being a shareholder holding voting shares in MediWound Ltd., hereby
appoint Mr. ______________ of ______________ or failing him, Mr. ______________ of ______________, or
failing him, Mr. ______________ of ______________, to vote in my name, place and stead at the
(ordinary/extraordinary) General Meeting of the Company to be held on the ____ of ______ 20__, and at any
adjourned meeting thereof.
In witness whereof I have hereto set my hand on the _____ day of _____.
73.
74.
75.
No Shareholder shall be entitled to vote at a General Meeting unless he has paid all of the calls and all of the amounts due from him, for the time
being, in respect of his shares.
A vote given in accordance with the instructions contained in an instrument appointing a proxy shall be valid notwithstanding the death or
bankruptcy of the appointer, or the revocation of the proxy, or the transfer of the share in respect of which the vote was given as aforesaid, unless
notice in writing of the death, revocation or transfer is received at the Office, or by the chairman of the meeting, prior to such vote.
Subject to the Companies Law, an instrument appointing a proxy shall be deemed revoked (i) upon receipt by the Company or the chairman of the
meeting, subsequent to receipt by the Company of such instrument, of written notice signed by the person signing such instrument or by the
Shareholder appointing such proxy canceling the appointment thereunder (or the authority pursuant to which such instrument was signed) or of an
instrument appointing a different proxy, provided such notice of cancellation or instrument appointing a different proxy were so received at the
place and within the time for delivery of the instrument revoked thereby as referred to in Article 71 hereof, or (ii) if the appointing shareholder is
present in person at the meeting for which such instrument of proxy was delivered, upon receipt by the chairman of such meeting of written notice
from such shareholder of the revocation of such appointment, or if and when such Shareholder votes at such meeting. A vote cast in accordance
with an instrument appointing a proxy shall be valid notwithstanding the revocation or purported cancellation of the appointment, or the presence
in person or vote of the appointing Shareholder at a meeting for which it was rendered, unless such instrument of appointment was deemed
revoked in accordance with the foregoing provisions of this Article 75 at or prior to the time such vote was cast.
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THE BOARD OF DIRECTORS
Unless otherwise resolved by a Resolution, the prescribed number of Directors of the Company shall be between five (5) and nine (9) (including
the External Directors), as may be fixed, from time to time, by the Board of Directors. At any time the minimum number of Directors (other than
the External Directors) shall not fall below three (3). Any Director shall be eligible for re-election upon termination of his term of office, subject to
applicable law.
76.
77.
77.1.
77.2.
77.3.
Prior to every annual General Meeting of the Company, the Board of Directors of the Company (or a Committee of Directors) shall
select, via a resolution adopted by a majority of the Board of Directors (or such committee), a number of persons to be proposed to the
Shareholders for election as directors of the Company at such annual General Meeting for service until the annual General Meeting to be
held in the next year following the year of their election (the “Nominees”). Any shareholder entitled under applicable law to nominate
one or more persons for election as directors at a General Meeting (each such person, an “Alternate Nominee”) may make such
nomination only if a written notice of such shareholder’s intent to make such nomination or nominations has been given to the Secretary
of the Company (or, if there is no such Secretary, the Chief Executive Officer). Each such notice shall set forth: (a) the name and address
of the shareholder who intends to make the nomination and of the Alternate Nominees; (b) a representation that the shareholder is a
holder of record of shares of the Company entitled to vote at such meeting (including the number of shares held of record by the
shareholder) and intends to appear in person or by proxy at the meeting to nominate the Alternate Nominees; (c) a description of all
arrangements or understandings between the shareholder and each Alternate Nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; and (d) the consent of each
Alternate Nominee to serve as a director of the Company if so elected and a declaration signed by each Alternate Nominee declaring that
there is no limitation under the Companies Law for the appointment of such a nominee and that all of the information that is required
under the Companies Law to be provided to the Company in connection with such an appointment has been provided. The Board of
Directors may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.
The Nominees or Alternate Nominees shall be elected by a Resolution at the annual General Meeting at which they are subject to
election.
Every director shall hold office until the end of the next annual General Meeting following the annual General Meeting at which he was
elected, unless his office is vacated in accordance with Article 79 or Article 82 below. If, at an annual General Meeting, no Nominees or
Alternate Nominees are elected, the directors then in office shall continue to hold office until the convening of a General Meeting at
which Nominees or Alternate Nominees shall be elected.
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77.4.
If the office(s) of members(s) of the Board of Directors shall be vacated, the remaining members of the Board of Directors shall be
entitled to appoint additional director(s) in place of the director(s) whose office(s) have been vacated, for a term of office equal to the
remaining period of the term of office of the director(s) whose office(s) have been vacated.
The Directors in their capacity as such shall be entitled to receive remuneration as shall be determined in compliance with the Companies Law and
the regulations promulgated thereunder. The conditions (including remuneration) of the terms of office of members of the Board of Directors shall
be decided by the Board of Directors and/or any committee thereof, but the same shall be valid only if ratified in the manner required under the
Companies Law. The remuneration of Directors may be fixed as an overall payment or other consideration and/or as a payment or other
consideration in respect of attendance at meetings of the Board of Directors. In addition to his remuneration, each Director shall be entitled to be
reimbursed, retroactively or in advance, in respect of his reasonable expenses connected with performing his functions and services as a Director.
Such entitlement shall be determined in accordance with, and shall be subject to, a specific resolution or policy adopted by the Board of Directors
regarding such matter and in accordance with the requirements of applicable law.
78.
79.
79.1.
Subject to the provisions of the Companies Law with regard to External Directors and subject to Article 77 above and Article 82 below,
the office of a member of the Board of Directors shall be vacated in any one of the following events:
79.1.1.
if he resigns his office by way of a letter signed by him, lodged at the Office;
79.1.2.
if he is declared bankrupt;
79.1.3.
if he becomes insane or unsound of mind;
79.1.4.
upon his death;
79.1.5.
if he is prevented by applicable law from serving as a Director of the Company;
79.1.6.
if the Board terminates his office according to Section 231 of the Companies Law;
79.1.7.
if a court order is given in accordance with Section 233 of the Companies Law;
79.1.8.
if he is removed from office by a Resolution at a General Meeting of the Company adopted by a majority of the voting power in
the Company; or
79.1.9.
if his period of office has terminated in accordance with the provisions of these Articles.
79.2.
If the office of a member of the Board of Directors should be vacated, the remaining members of the Board of Directors shall be entitled
to act for all purposes, for as long as their number does not fall below the minimum, for the time being, specified for the Directors, as
prescribed in Article 76 above. Should their number fall below the aforesaid minimum, the Directors shall not be entitled to act, except
for the appointment of additional directors, or for the purpose of calling a General Meeting for the appointment of additional directors, or
for the purpose of calling a General Meeting for the appointment of a new Board of Directors.
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79.3.
The office of an External Director shall be vacated only in accordance with the provisions for the vacation of office and the removal of
External Directors under the Companies Law.
OTHER PROVISIONS REGARDING DIRECTORS
80.
80.1
Subject to any mandatory provisions of applicable law, a Director shall not be disqualified by virtue of his office from holding another
office in the Company or in any other company in which the Company is a shareholder or in which it has any other form of interest, or of
entering into a contract with the Company, either as seller or buyer or otherwise. Likewise, no contract made by the Company or on its
behalf in which a Director has any form of interest may be nullified and a Director shall not be obliged to account to the Company for any
profit deriving from such office, or resulting from such contract, merely by virtue of the fact that he serves as a Director or by reason of
the fiduciary relationship thereby created, but such Director shall be obliged to disclose to the Board of Directors the nature of any such
interest at the first opportunity.
A general notice to the effect that a Director is a shareholder or has any other form of interest in a particular firm or a particular company
and that he must be deemed to have an interest in any business with such firm or company shall be deemed to be adequate disclosure for
purposes of this Article in relation to such Director, and after such general notice has been given, such Director shall not be obliged to
give special notice in relation to any particular business with such firm or such company.
80.2
Subject to the provisions of the Companies Law and these Articles, the Company shall be entitled to enter into a transaction in which an
Office Holder of the Company has a personal interest, directly or indirectly, and may enter into any contract or otherwise transact any
business with any third party in which contract or business an Office Holder has a personal interest, directly or indirectly.
81.
82.
The Board of Directors shall elect one (1) or more of its members to serve as the Chairman of the Board of Directors (the “Chairman of the
Board of Directors”), provided that, subject to the provisions of Section 121(c) of the Companies Law, the Chief Executive Officer of the
Company shall not serve as Chairman of the Board of Directors. The office of Chairman of the Board of Directors shall be vacated in each of the
cases mentioned in Articles 79.1 above and 82 below. The Board of Directors may also elect one or more members to serve as Vice Chairman,
who shall have such duties and authorities as the Board of Directors may assign to him or her.
Subject to the relevant provisions of the Companies Law, the Company may, in a General Meeting, by a Resolution adopted by a majority of the
voting power in the Company, dismiss any Director, prior to the end of his term of office and the Board of Directors shall be entitled, by regular
majority, with the exception of the External Directors who shall be appointed and removed in accordance with the Companies Law, to appoint
another individual in his place as a Director. The individual so appointed shall hold such office only for that period of time during which the
director whom he replaces would have held office.
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83.
A Director shall not be obliged to hold any share in the Company.
CHIEF EXECUTIVE OFFICER
84.
85.
84.1.
The Board of Directors shall, from time to time, appoint a Chief Executive Officer and subject to the provisions of the Companies Law
delineate his powers and authorities and his remuneration. Subject to any contract between the Chief Executive Officer and the Company,
the Board of Directors may dismiss him or replace him at any time it deems fit.
84.2.
A Chief Executive Officer need not be a Director or Shareholder.
Subject to the provisions of any contract between the Chief Executive Officer and the Company, if the Chief Executive Officer is also a
Director, all of the same provisions with regard to appointment, resignation and removal from office shall apply to the Chief Executive
Officer in his capacity as a Director, as apply to the Company's other Directors.
84.3.
84.4.
The Board of Directors shall be entitled from time to time to delegate to the Chief Executive Officer for the time being such of the powers
it has pursuant to these Articles as they deem appropriate, and the Board of Directors shall be entitled to grant such powers for such
period and for such purposes and on such conditions and with such restrictions as it deem appropriate, and it shall be entitled to grant
such powers without renouncing the powers and authorities of the Board of Directors in such regard, and it may, from time to time,
revoke, annul and alter such delegated powers and authorities, in whole or in part.
Subject to the provisions of any applicable law, the remuneration of the Chief Executive Officer shall be fixed from time to time by the
Board of Directors (and, so long as required by the Companies Law, shall be approved by the Compensation Committee and by the
Shareholders unless exempted from Shareholders approval) and such remuneration may be in the form of a fixed salary or commissions
or a participation in profits, or in any other manner which may be decided by the Board of Directors (and approved according to this
Article 84.4).
PROCEEDINGS OF THE BOARD OF DIRECTORS
85.1.
The Board of Directors shall convene for a meeting at least once every fiscal quarter.
85.2.
The Board of Directors may meet in order to exercise its powers pursuant to Section 92 of the Companies Law, including without
limitation to supervise the Company’s affairs, and it may, subject to the provisions of the Companies Law, adjourn its meetings and
regulate its proceedings and operations as it deems fit. It may also prescribe the quorum required for the conduct of business. Until
otherwise decided a quorum shall be constituted if a majority of the Directors holding office for the time being are present.
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85.3.
Should a Director or Directors be barred from being present and voting at a meeting of the Board of Directors pursuant to Section 278 of
the Companies Law, the quorum shall be a majority of the Directors entitled to be present and to vote at the meeting of the Board of
Directors.
Any Director, the Chief Executive Officer or the auditor of the Company in the event stipulated in Section 169 of the Companies Law, may, at any
time, demand the convening of a meeting of the Board of Directors. The Chairman of the Board shall be obliged, on such demand, to call such
meeting on the date requested by the Director, the Chief Executive Officer or the auditor of the Company soliciting such a meeting, provided that
proper notice pursuant to Article 87 is given.
Every Director shall be entitled to receive notice of meetings of the Board of Directors, and such notice may be in writing or by facsimile, or
electronic mail, sent to the last address (whether physical or electronic) or facsimile number given by the Director for purposes of receiving
notices, provided that the notice shall be given at least a reasonable amount of time prior to the meeting and in no event less than 48 (forty eight)
hours prior notice, unless the urgency of the matter(s) to be discussed at the meeting reasonably require(s) a shorter notice period.
Every meeting of the Board of Directors at which a quorum is present shall have all the powers and authorities vested for the time being in the
Board of Directors.
Questions which arise at meetings of the Board of Directors shall be decided by a simple majority of the members of the Board of Directors
attending such meeting and voting on such matter. In the case of an equality of votes of the Board of Directors, the Chairman of the Board of
Directors shall not have a second or casting vote, and the proposal shall be deemed to be defeated.
If the Chairman of the Board of Directors is not present within 30 (thirty) minutes after the time appointed for the
meeting, the Directors present shall elect one of their members to preside at such meeting.
The Board of Directors may adopt resolutions, without actually convening a meeting of the Board of Directors, provided that all the Directors
entitled to participate in the meeting and to vote on the subject brought for decision agree thereto. If resolutions are made as stated in this Article
90, the Chairman of the Board of Directors shall record minutes of the decisions stating the manner of voting of each Director on the subjects
brought for decision, as well as the fact that all the Directors agreed to take the decision without actually convening.
The Board of Directors may hold meetings by use of any means of communication, on condition that all participating Directors can hear each
other at the same time. In the case of a resolution passed by way of a telephone call or any such other means of communication, a copy of the text
of the resolution shall be sent, as soon as possible thereafter, to the Directors.
GENERAL POWERS OF THE BOARD OF DIRECTORS
The supervision of the Company’s affairs shall be in the hands of the Board of Directors, which shall be entitled to exercise all of the powers and
authorities to perform any act and deed which the Company is entitled to exercise and to perform in accordance with these Articles or according to
the Companies Law, and in respect of which there is no provision or requirement in these Articles, or in the Companies Law or/and in the U.S.
Rules, that such powers and authorities may be exercised or done by the Shareholders in a General Meeting or by a Committee of Directors.
86.
87.
88.
89.
90.
91.
92.
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93.
94.
95.
96.
97.
98.
The Board of Directors may, as it deems fit and subject to any applicable law, delegate to a committee (a “Committee of Directors”) certain of its
powers and authorities, in whole or in part (as appropriate). The curtailment or revocation of the powers and authorities of a Committee of
Directors by the Board of Directors shall not invalidate a prior act of such Committee of Directors or an act taken in accordance with its
instructions, which would have been valid had the powers and authorities of the Committee of Directors not been altered or revoked by the Board
of Directors. Subject to applicable law, a Committee of Directors may be comprised of one (1) Director or of several Directors, and in the case of a
Committee of Directors that is appointed to advise the Board of Directors only, persons who are not Directors may be appointed to it.
The meetings and proceedings of every such Committee of Directors which is comprised of 2 (two) or more members shall be conducted in
accordance with the provisions contained in these Articles in regard to the conduct of meetings and proceedings of the Board of Directors to the
extent that the same are suitable for such committee, and so long as no provisions have been adopted in replacement thereof by the Board of
Directors.
RATIFICATION OF ACTIONS
Subject to the Companies Law, all acts taken in good faith by the Board of Directors and/or a Committee of Directors or by an individual acting as
a member thereof shall be valid even if it is subsequently discovered that there was a defect in the appointment of the Board of Directors, the
Committee of Directors or the member, as the case may be, or that the members, or one of them, was/were disqualified from being appointed as a
Director/s or to a Committee of Directors.
96.1.
96.2.
The Board of Directors or any Committee of Directors may ratify any act the performance of which at the time of the ratification was
within the scope of the authority of the Board of Directors or the relevant Committee of Directors.
The General Meeting shall be entitled to ratify any act taken by the Board of Directors and/or any Committee of Directors without
authority or which was tainted by some other defect.
96.3.
From the time of the ratification, every act ratified as aforesaid, shall be treated as though lawfully performed from the outset.
The Board of Directors may, from time to time, in its absolute discretion, borrow or secure any amounts of money required by the Company for
the conduct of its business.
The Board of Directors shall be entitled to raise or secure the repayment of an amount obtained by them, in such way and on such conditions and
times as they deem fit. The Board of Directors shall be entitled to issue documents of undertaking, such as options, debentures or debenture stock,
whether linked or redeemable, convertible debentures or debentures convertible into other securities, or debentures which carry a right to purchase
shares or to purchase other securities, or any mortgage, pledge, collateral or other charge over the property of the Company and its undertaking, in
whole or in part, whether present or future, including the uncalled share capital or the share capital which has been called but not yet paid.
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The deeds of undertaking, debentures of various types or other forms of collateral security may be issued at a discount, at
a premium or otherwise and with such preferential or deferred or other rights, as the Board of Directors shall, from time to
time, decide.
SIGNING POWERS
99.
Subject to any other resolution on the subject passed by the Board of Directors, the Company shall be bound only pursuant to a document in
writing bearing its seal or its rubber stamp or its printed name, and the signature of whomever may be authorized by the Board of Directors, which
shall be entitled to empower any person, either alone or jointly with another, even if he is not a Shareholder or a Director, to sign and act in the
name and on behalf of the Company.
100.
The Board of Directors shall be entitled to prescribe separate signing power in regard to different businesses of the Company and in respect of the
limit of the amounts in respect of which various persons shall be authorized to sign.
SECRETARY, OFFICE-HOLDERS, CLERKS AND REPRESENTATIVES
101.
102.
The Board of Directors shall be entitled, from time to time, to appoint, or to delegate to the Chief Executive Officer, either alone or together with
other persons designated by the Board of Directors, the ability to appoint Office Holders (other than Directors), a Secretary for the Company,
employees and agents to such permanent, temporary or special positions, and to specify and change their titles, authorities and duties, and may set,
or delegate to the Chief Executive Officer, either alone or together with other persons designated by the Board of Directors, the ability to set
salaries, bonuses and other compensation of any employee or agent who is not an Office Holder. Salaries, bonuses and compensation of Office
Holders who are not Directors shall be determined and approved by the Chief Executive Officer, and/or in such other manner as may be required
from time to time under the Companies Law. The Board of Directors, or the Chief Executive Officer, either alone or together with other persons
designated by the Board of Directors, (in the case of any Office Holder, employee or agent appointed thereby), shall be entitled at any time, in its,
his or their (as applicable) sole and absolute discretion, to terminate the services of one of more of the foregoing persons (in the case of a Director,
however, subject to compliance with Article 79 above), subject to any other requirements under applicable law.
The Board of Directors and the Chief Executive Officer may from time to time and at any time, subject to their powers under these Articles and
the Companies Law, empower any person to serve as representative of the Company for such purposes and with such powers and authorities,
instructions and discretions for such period and subject to such conditions as the Board of Directors (or the Chief Executive Officer, as the case
may be) shall deem appropriate. Consistent with the preceding sentence, the Board of Directors (or the Chief Executive Officer, as the case may
be) may grant such person, inter alia, the power to transfer the authority, powers and discretions vested in him, in whole or in part. The Board of
Directors may (or the Chief Executive Officer, as the case may be), from time to time, revoke, annul, vary or change any such power or authority,
or all such powers or authorities collectively.
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DIVIDENDS, BONUS SHARES, FUNDS AND CAPITALIZATION OF FUNDS AND PROFITS
103.
Unless otherwise permitted by the Companies Law, no dividends shall be paid other than out of the Company’s profits available for distribution as
set forth in the Companies Law.
104.
The Board of Directors may decide on the payment of a dividend or on the distribution of bonus shares.
105.
106.
A dividend in cash or bonus shares shall be paid or distributed, as the case may be, equally to the holders of the Ordinary Shares registered in the
Register, pro rata to the nominal amount of capital paid up or credited as paid up on par value of the shares, without reference to any premium
which may have been paid thereon. However, whenever the rights attached to any shares or the terms of issue of the shares do not provide
otherwise, an amount paid on account of a share prior to the payment thereof having been called, or prior to the due date for payment thereof, and
on which the Company is paying interest, shall not be taken into account for purposes of this Article as an amount paid-up on account of the share.
Unless other instructions are given, it shall be permissible to pay any dividend by way of a check or payment order to be sent by post to the
registered address of the Shareholder or the Person entitled thereto, or in the case of joint Shareholders being registered, to the Shareholder whose
name appears first in the Register in relation to the joint shareholding. Every such check shall be made in favor of the Person to whom it is sent. A
receipt by the Person whose name, on the date of declaration of the dividend, was registered in the Register as the owner of the shares, or in the
case of joint holders, by one of the joint holders, shall serve as a discharge with regard to all the payments made in connection with such share.
The Board of Directors shall be entitled to invest any dividend which has not been claimed for a period of one (1) year
after having been declared, or to make use thereof in any other way for the benefit of the Company until such time as it is
claimed. The Company shall not be obliged to pay interest or linkage in respect of an unclaimed dividend. The payment
by the Board of Directors of any unclaimed dividend into a separate account shall not constitute the Company a trustee in
respect thereof, and any dividend unclaimed after a period of seven (7) years from the date of declaration of such
dividend, shall be forfeited and shall revert to the Company, provided, however, that the Board of Directors may, at its
discretion, cause the Company to pay any such dividend, or any part thereof, to a person who would have been entitled
thereto had the same not reverted to the Company.
107.
Unless otherwise specified in the terms of issue of shares or securities convertible into, or which grant a right to purchase, shares, any shares that
are fully paid-up or credited as paid-up shall at any time confer on their holders the right to participate in the full dividends and in any other
distribution for which the determining date for the right to receive the same is the date at which the aforesaid shares were fully paid-up or credited
as fully paid-up, as the case may be, or subsequent to such date.
108.
A dividend or other beneficial rights in respect of shares shall not bear interest.
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The Board of Directors shall be entitled to deduct from any dividend or other beneficial rights, all amounts of money which the holder of the share
in respect of which the dividend is payable or in respect of which the other beneficial rights were given, may owe to the Company in respect of
such share, whether or not the due date for payment thereof has arrived.
The Board of Directors shall be entitled to retain any dividend or bonus shares or other beneficial rights in respect of a share in relation to which
the Company has a lien, and to utilize any such amount or the proceeds received from the sale of any bonus shares or other beneficial rights, for
the discharge of the debts or liabilities in respect of which the Company has a lien.
The Board of Directors may decide that a dividend is to be paid, in whole or in part, by way of a distribution of assets of the Company in kind,
including by way of debentures or debenture stock of the Company, or shares or debentures or debenture stock of any other company, or in any
other way.
109.
110.
111.
112.
112.1. The Board of Directors may, at any time and from time to time, decide that any portion of the amounts standing for the time being to the
credit of any capital fund (including a fund created as a result of a revaluation of the assets of the Company), or which are held by the
Company as profits available for distribution, shall be capitalized for distribution subject to and in accordance with the provisions of the
Companies Law and of these Articles, amongst those Shareholders who are entitled thereto and pro rata to their entitlement under these
Articles, provided that the same shall not be paid in cash but shall serve for the payment up in full either at par or with a premium as
prescribed by the Company, of shares which have not yet been issued or of debentures of the Company which shall be allotted and
distributed amongst the Shareholders in the aforesaid ratio as fully paid-up shares or debentures.
112.2. The Board of Directors shall be entitled to distribute bonus shares and to decide that the bonus shares shall be of the same class which
confers on the Shareholders or the Persons entitled thereto the right to participate in the distribution of bonus shares, or may decide that
the bonus shares shall be of a uniform class to be distributed to each of the Shareholders or Persons entitled to shares as aforesaid, without
reference to the class of shares conferring the right to participate in the distribution on the holders of the shares or the Persons entitled
thereto as aforesaid.
113.
113.1.
In every case that the Company issues bonus shares by way of a capitalization of profits or funds at a time at which securities issued by
the Company are in circulation and confer on the holders thereof rights to convert the same into shares in the share capital of the
Company, or options to purchase shares in the share capital of the Company (such rights of conversion or options shall henceforth be
referred to as the “Rights”), the Board of Directors shall be entitled (in a case that the Rights or part thereof shall not be otherwise
adjusted in accordance with the terms of their issue) to transfer to a special fund designated for the distribution of bonus shares in the
future (to be called by any name that the Board of Directors may decide on and which shall henceforth be referred to as the “Special
Fund”) an amount equivalent to the nominal amount of the share capital to which some or all of the Rights holders would have been
entitled as a result of the issue of bonus shares, had they exercised their Rights prior to the determining date for the right to receive bonus
shares, including rights to fractions of bonus shares, and in the case of a second or additional distribution of bonus shares in respect of
which the Company acts pursuant to this Article, including entitlement stemming from a previous distribution of bonus shares.
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113.2.
In the case of the allotment of shares by the Company as a consequence of the exercise of entitlement by the owners of shares in those
cases in which the Board of Directors has made a transfer to the Special Fund in respect of the Rights pursuant to Article 113.1 above, the
Board of Directors shall allot to each such shareholder, in addition to the shares to which he is entitled by virtue of having exercised his
rights, such number of fully paid-up shares the nominal value of which is equivalent to the amount transferred to the Special Fund in
respect of his rights, by way of a capitalization to be effected by the Board of Directors of an appropriate amount out of the Special Fund.
The Board of Directors shall be entitled to decide on the manner of dealing with rights to fractions of shares in its sole discretion.
113.3.
If after any transfer to the Special Fund has been made the Rights should lapse, or the period should end for the exercise of Rights in
respect of which the transfer was effected without such Rights being exercised, then any amount which was transferred to the Special
Fund in respect of the aforesaid unexercised Rights shall be released from the Special Fund, and the Company may deal with the amount
so released in any manner it would have been entitled to deal therewith had such amount not been transferred to the Special Fund.
114.
For the implementation of any resolution regarding a distribution of shares or debentures by way of a capitalization of profits as aforesaid, the
Board of Directors may:
114.1. Resolve any difficulty which arises or may arise in regard to the distribution in such manner as it deems fit and may take all of the steps
that it deems appropriate in order to overcome such difficulty.
114.2.
Issue certificates in respect of fractions of shares, or decide that fractions of less than an amount to be decided by the Board of Directors
shall not be taken into account for purposes of adjusting the rights of the Shareholders or may sell the fractions of shares and pay the
proceeds (net) to the Persons entitled thereto.
114.3. Sign, or appoint a Person to sign, on behalf of the Shareholders on any contract or other document which may be required for purposes of
giving effect to the distribution, and, in particular, shall be entitled to sign or appoint a Person who shall be entitled to appoint and submit
a contract as referred to in Section 291 of the Companies Law.
114.4. Make any arrangement or other scheme which is required in the opinion of the Board of Directors in order to facilitate the distribution.
115.
The Board of Directors shall be entitled, as it deems appropriate and expedient, to appoint trustees or nominees for those registered Shareholders
who have failed to notify the Company of a change of their address and who have not applied to the Company in order to receive dividends, shares
or debentures out of capital, or other benefits during the aforesaid period. Such trustees or nominees shall be appointed for the use, collection or
receipt of dividends, shares or debentures out of capital and rights to subscribe for shares which have not yet been issued and which are offered to
the Shareholders but they shall not be entitled to transfer the shares in respect of which they were appointed, or to vote on the basis of holding such
shares. In all of the terms and conditions governing such trusts and the appointment of such nominees it shall be stipulated by the Company that
upon the first demand by a beneficial holder of a share being held by the trustee or nominee, such trustee or nominee shall be obliged to return to
such shareholder the share in question and/or all of those rights held by it on the Shareholder’s behalf (all as the case may be). Any act or
arrangement effected by any such nominees or trustee and any agreement between the Board of Directors and a nominee or trustee shall be valid
and binding in all respects.
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116.
The Board of Directors may from time to time prescribe the manner for payment of dividends or the distribution of bonus shares and the
arrangement connected therewith. Without derogating from the generality of the foregoing, the Board of Directors shall be entitled to pay any
dividends or moneys in respect of shares by sending a check via the mails to the address of the holder of registered shares according to the address
registered in the register of Shareholders. Any dispatch of a check as aforesaid shall be done at the risk of the shareholder.
In those cases in which the Board of Directors specifies the payment of a dividend, distribution of shares or debentures
out of capital, or the grant of a right to subscribe for shares which have not yet been issued and which are offered to the
Shareholders against the delivery of an appropriate coupon attached to any share certificate, such payment, distribution or
grant of right to subscribe against a suitable coupon to the holder of such coupon, shall constitute a discharge of the
Company’s debt in respect of such operation as against any person claiming a right to such payment, distribution or grant
of right to subscribe, as the case may be.
117.
If two (2) or more Persons are registered as joint holders of a share, each of them shall be entitled to give a valid receipt in respect of any dividend,
share or debenture out of capital, or other moneys, or benefits, paid or granted in respect of such share.
BOOKS OF THE COMPANY
118.
119.
120.
The Board of Directors shall comply with all the provisions of the Companies Law in regard to the recording of charges and the keeping and
maintaining of a register of directors, register of Shareholders and register of charges.
Any book, register and record that the Company is obliged to keep in accordance with the Companies Law or pursuant to these Articles shall be
recorded in a regular book, or by digital, electronic or other means, as the Board of Directors shall decide.
Subject to and in accordance with the provisions of Sections 138 and 139 of the Companies Law, the Company may cause supplementary registers
to be kept in any place outside Israel as the Board of Directors may deem fit, and, subject to all applicable requirements of the Companies Law, the
Board of Directors may from time to time adopt such rules and procedures as it may deem fit in connection with the keeping of such
supplementary registers.
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BOOKS OF ACCOUNT
121.
The Board of Directors shall keep proper books of account in accordance with the provisions of the Companies Law. The books of account shall
be kept at the Office, or at such other place or places as the Board of Directors shall deem appropriate, and shall at all times be open to the
inspection of members of the Board of Directors. A Shareholder of the Company who is not a member of the Board of Directors shall not have the
right to inspect any books or accounts or documents of the Company, unless such right has been expressly granted to him by the Companies Law,
or if he has been permitted to do so by the Board of Directors or by the Shareholders based on a Resolution adopted at a General Meeting.
122.
[RESERVED]
At least once each year the accounts of the Company and the correctness of the statement of income and the balance sheet shall be audited and
confirmed by an independent auditor or auditors.
The Company shall, in an annual General Meeting, appoint an independent auditor or auditors who shall hold such position until the next annual
General Meeting, and their appointment, remuneration and rights and duties shall be subject to the provisions of the Companies Law, provided,
however, that in exercising its authority to fix the remuneration of the auditor(s), the Shareholders in an annual General Meeting may, by a
Resolution, act (and in the absence of any action in connection therewith shall be deemed to have so acted) to authorize the Board of Directors to
fix such remuneration subject to such criteria or standards, if any, as may be provided in such Resolution, and if no such criteria or standards are so
provided, such remuneration shall be fixed in an amount commensurate with both the volume and nature of the services rendered by the
auditor(s). By an act appointing such auditors, the Company may appoint the auditor(s) to serve for a period of up to the end of completion of the
audit of the yearly financial statements for the three (3) year period then ended.
The auditors shall be entitled to receive notices of every General Meeting of the Company and to attend such meetings and to express their
opinions on all matters pertaining to their function as the auditors of the Company.
Subject to the provisions of the Companies Law and the U.S. Rules, any act carried out by the auditors of the Company shall be valid as against
any person doing business in good faith with the Company, notwithstanding any defect in the appointment or qualification of the auditors.
For as long as the Company is a Public Company, as defined in the Companies Law, it shall appoint an internal auditor possessing the authorities
set forth in the Companies Law. The internal auditor of the Company shall present all of its proposed work plans to the Audit Committee of the
Board of Directors, which shall have the authority to approve them, subject to any modifications in its discretion.
NOTICES
123.
124.
125.
126.
127.
128.
128.1. The Company may serve any written notice or other document on a Shareholder by way of delivery by hand, by facsimile transmission or
by dispatch by prepaid registered mail to his address as recorded in the Register, or if there is no such recorded address, to the address
given by him to the Company for the sending of notices to him. Notwithstanding the foregoing or any other provision to the contrary
contained herein, notices or any other information or documents required to be delivered to a Shareholder shall be deemed to have been
duly delivered if submitted, published, filed or lodged in any manner prescribed by applicable law. With respect to the manner of
providing such notices or other disclosures, the Company may distinguish between the Shareholders listed on its regular Registry and
those listed in any “additional registry”, as defined in Section 138(a) of the Companies Law, administered by a transfer agent or stock
exchange registration company.
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128.2. Any Shareholder may serve any written notice or other document on the Company by way of delivery by hand at the Office, by facsimile
or email transmission to the Company or by dispatch by prepaid registered mail to the Company at the Office.
128.3. Any notice or document which is delivered or sent to a Shareholder in accordance with these Articles shall be deemed to have been duly
delivered and sent in respect of the shares held by him (whether in respect of shares held by him alone or jointly with others),
notwithstanding the fact that such Shareholder has died or been declared bankrupt at such time (whether or not the Company knew of his
death or bankruptcy), and shall be deemed to be sufficient delivery or dispatch to heirs, trustees, administrators or transferees and any
other persons (if any) who have a right in the shares.
128.4. Any such notice or other document shall be deemed to have been served:
128.4.1.
in the case of mailing, 48 hours after it has been posted, or when actually received by the addressee if sooner than 48 hours after
it has been posted;
128.4.2.
in the case of overnight air courier, on the next day following the day sent, with receipt confirmed by the courier, or when
actually received by the addressee if sooner;
128.4.3.
in the case of personal delivery, when actually tendered in person to such Shareholder;
128.4.4.
in the case of facsimile or other electronic transmission (including email), the next day following the date on which the sender
receives automatic electronic confirmation by the recipient’s facsimile machine or computer or other device that such notice was
received by the addressee; or
128.4.5.
in the case a notice is, in fact, received by the addressee, when received, notwithstanding that it was defectively addressed or
failed, in some other respect, to comply with the provisions of this Article 128.
129.
Any Shareholder whose address is not described in the Register, and who shall not have designated in writing an address for the receipt of notices,
shall not be entitled to receive any notice from the Company. In the case of joint holders of a share, the Company shall be entitled to deliver a
notice by dispatch to the joint holder whose name stands first in the Register in respect of such share.
130. Whenever it is necessary to give notice of a particular number of days or a notice for another period, the day of delivery shall be counted in the
number of calendar days or the period, unless otherwise specified.
131.
Notwithstanding anything to the contrary contained herein, notice by the Company of a General Meeting, containing the information required to
be set forth in such notice under these Articles, which is published, within the time otherwise required for giving notice of such meeting, in:
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131.1.
at least two daily newspapers in the State of Israel shall be deemed to be notice of such meeting duly given, for the purposes of these
Articles, to any Shareholder whose address as registered in the Register (or as designated in writing for the receipt of notices and other
documents) is located in the State of Israel; and
131.2.
one daily newspaper in New York, NY, United States, and in one international wire service shall be deemed to be notice of such meeting
duly given, for the purposes of these Articles, to any shareholder whose address as registered in the Register (or as designated in writing
for the receipt of notices and other documents) is located outside the State of Israel.
INSURANCE, INDEMNITY AND EXCULPATION
132.
Subject to the provisions of the Companies Law, the Company shall be entitled to enter into a contract to insure all or part of the liability of an
Office Holder of the Company, imposed on him in consequence of an act which he has performed by virtue of being an Office Holder, in respect of
any of the following:
132.1. The breach of a duty of care to the Company or to any other Person;
132.2. The breach of a fiduciary duty to the Company, provided that the Office Holder acted in good faith and had reasonable grounds for
believing that the action would not adversely affect the best interests of the Company;
132.3. A pecuniary liability imposed on him in favor of any other person in respect of an act done in his capacity as an Office Holder.
132.4. Any other circumstances arising under the law with respect to which the Company may, or will be able to, insure an Office Holder.
133.
Subject to the provisions of the Companies Law, the Company shall be entitled to indemnify an Office Holder of the Company, to the fullest extent
permitted by applicable law. Subject to the provisions of the Companies Law, including the receipt of all approvals as required therein or under
any applicable law, the Company may resolve retroactively to indemnify an Office Holder with respect to the following liabilities and expenses,
provided, in each of the below cases, that such liabilities or expenses were incurred by such Office Holder in such Office Holder’s capacity as an
Office Holder of the Company:
133.1.
a monetary liability imposed on him in favor of a third party in any judgment, including any settlement confirmed as judgment and an
arbitrator’s award which has been confirmed by the court, in respect of an act performed by the Office Holder by virtue of the Office
Holder being an Office Holder of the Company; provided, however, that: (a) any indemnification undertaking with respect to the
foregoing shall be limited (i) to events which, in the opinion of the Board of Directors, are foreseeable in light of the Company’s actual
operations at the time of the granting of the indemnification undertaking, and (ii) to an amount or by criteria determined by the Board of
Directors to be reasonable in the given circumstances; and (b) the events that in the opinion of the Board of Directors are foreseeable in
light of the Company’s actual operations at the time of the granting of the indemnification undertaking are listed in the indemnification
undertaking together with the amount or criteria determined by the Board of Directors to be reasonable in the given circumstances;
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133.2.
reasonable litigation expenses, including legal fees, paid for by the Office Holder, in an investigation or proceeding conducted against
such Office Holder by an agency authorized to conduct such investigation or proceeding, and which investigation or proceeding: (i)
concluded without the filing of an indictment (as defined in the Companies Law) against such Office Holder and without there having
been a monetary liability imposed against such Office Holder in lieu of a criminal proceeding (as defined in the Companies Law); (ii)
concluded without the filing of an indictment against such Office Holder but with there having been a monetary liability imposed against
such Office Holder in lieu of a criminal proceeding for an offense that does not require proof of criminal intent; or (iii) involves financial
sanction;
133.3.
reasonable litigation expenses, including legal fees, paid for by the Office Holder, or which the Office Holder is obligated to pay under a
court order, in a proceeding brought against the Office Holder by the Company, or on its behalf, or by a third party, or in a criminal
proceeding in which the Office Holder is found innocent, or in a criminal proceeding in which the Office Holder was convicted of an
offense that does not require proof of criminal intent; and
133.4.
any other event, occurrence or circumstances in respect of which the Company may lawfully indemnify an Office Holder of the Company
(including, without limitation, indemnification with respect to the matters referred to under Section 56h(b)(1) of the Israeli Securities Law
5728-1968, as amended.
133.5. The Company may undertake to indemnify an Office Holder as aforesaid: (i) prospectively, provided that the undertaking is limited to
categories of events which in the opinion of the Board of Directors can be foreseen when the undertaking to indemnify is given, and to an
amount set by the Board of Directors as reasonable under the circumstances, and (ii) retroactively.
Subject to the provisions of the Companies Law including the receipt of all approvals as required therein or under any applicable law, the
Company may, to the maximum extent permitted by the Companies Law, exempt and release, in advance, any Office Holder from any liability for
damages arising out of a breach of a duty of care towards the Company.
134.
135.
135.1. Any amendment to the Companies Law adversely affecting the right of any Office Holder to be indemnified or insured pursuant to
Articles 132, 133 and 134 and any amendments to Articles 132, 133 and 134 shall be prospective in effect, and shall not affect the
Company’s obligation or ability to indemnify or insure an Office Holder for any act or omission occurring prior to such amendment,
unless otherwise provided by applicable law.
135.2. The provisions of Articles 132, 133 and 134 are not intended, and shall not be interpreted so as to restrict the Company, in any manner, in
respect of the procurement of insurance and/or in respect of indemnification and/or exculpation, in favor of any person who is not an
Office Holder, including, without limitation, any employee, agent, consultant or contractor of the Company who is not an Office Holder;
and/or any Office Holder to the extent that such insurance and/or indemnification is not specifically prohibited under law.
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WINDING-UP AND REORGANIZATION
136.
137.
138.
Should the Company be wound up and the assets of the Company made available for distribution among Shareholders be insufficient to repay all
of the Company’s paid-up capital, such assets shall be divided in a manner whereby the losses shall, as far as possible, be borne by the
Shareholders pro rata to the nominal value of the paid-up capital on the shares held by each of them, and, if at the time of the winding-up, the
property of the Company available for distribution among the Shareholders should exceed the amount sufficient for the repayment of the full
nominal value of the paid-up capital at the time of commencement of the winding-up, the surplus shall be distributed to the Shareholders pro rata
to the paid-up capital held by each of them.
Upon the sale of the Company’s assets, the Board of Directors may, or in the case of a liquidation, the liquidators may, if authorized to do so by a
Resolution of the Company, accept fully or partly paid-up shares, or securities of another company, Israeli or non-Israeli, whether in existence at
such time or about to be formed, in order to purchase the property of the Company, or part thereof, and to the extent permitted under the
Companies Law, the Board of Directors may (or in the case of a liquidation, the liquidators may) distribute the aforesaid shares or securities or any
other property of the Company among the Shareholders without realizing the same, or may deposit the same in the hands of trustees for the
Shareholders, and the General Meeting by a Resolution may decide, subject to the provisions of the Companies Law, on the distribution or
allotment of cash, shares or other securities, or the property of the Company and on the valuation of the aforesaid securities or property at such
price and in such manner as the Shareholders at such General Meeting shall decide, and all of the Shareholders shall be obliged to accept any
valuation or distribution determined as aforesaid and to waive their rights in this regard, except, in a case in which the Company is about to be
wound-up and is in the process of liquidation, for those legal rights (if any) which, according to the provisions of the Companies Law, may not be
changed or modified.
FORUM FOR ADJUDICATION OF DISPUTES
(a) Unless the Company consents in writing to the selection of an alternative forum, with respect to any causes of action arising under the
Securities Act of 1933 as amended, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any
complaint asserting a cause of action arising under the Securities Act of 1933, as amended, against any person or entity, including such claims
brought against the Company, its directors, officers, employees, advisors, attorneys, accountants, or underwriters; and (b) unless the Company
consents in writing to the selection of an alternative forum, the Tel Aviv District Court shall be the exclusive forum for (i) any derivative action or
proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other
employee of the Company to the Company or the Company’s shareholders, or (iii) any action asserting a claim arising pursuant to any provision of
the Israeli Companies Law 5759-1999 or the Israeli Securities Law 5728-1968. Any person or entity purchasing or otherwise acquiring or
holding any interest in shares of the Company shall be deemed to have notice of and consented to these provisions.
* * *
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DESCRIPTION OF SECURITIES
EXHIBIT 2.1
Our authorized share capital consists of 50,000,000 ordinary shares, par value NIS 0.07 per share, of which 12,857,143
shares are issued and outstanding as of March 15, 2023.
All of our outstanding ordinary shares are validly issued, fully paid and non-assessable. Our ordinary shares are not
redeemable and do not have any preemptive rights. All ordinary shares have identical voting and other rights in all respects.
Transfer of shares
Our fully paid ordinary shares are issued in registered form and may be freely transferred under our articles of association,
unless the transfer is restricted or prohibited by another instrument, applicable law or the rules of a stock exchange on which the
shares are listed for trade. The ownership or voting of our ordinary shares by non-residents of Israel is not restricted in any way
by our articles of association or the laws of the State of Israel, except for ownership by nationals of some countries that are, or
have been, in a state of war with Israel.
Dividend and liquidation rights
We may declare a dividend to be paid to the holders of our ordinary shares in proportion to their respective shareholdings.
Under the Israeli Companies Law, dividend distributions are determined by the board of directors and do not require the approval
of the shareholders of a company unless the company’s articles of association provide otherwise. Our articles of association do
not require shareholder approval of a dividend distribution and provide that dividend distributions may be determined by our
board of directors.
Pursuant to the Israeli Companies Law, the distribution amount is limited to the greater of retained earnings or earnings
generated over the previous two years, according to our then last reviewed or audited financial statements, provided that the end
of the period to which the financial statements relate is not more than six months prior to the date of the distribution. If we do not
meet such criteria, then we may distribute dividends only with court approval. In each case, we are only permitted to distribute a
dividend if our board of directors and the court, if applicable, determines that there is no reasonable concern that payment of the
dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.
In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of
our ordinary shares in proportion to their shareholdings. That right, as well as the right to receive dividends, may be affected by
the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be
authorized in the future.
Shareholder meetings
Under Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year that
must be held no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual
general meeting of shareholders are referred to in our articles of association as extraordinary general meetings. Our board of
directors may call extraordinary general meetings whenever it sees fit, at such time and place, within or outside of Israel, as it
may determine. In addition, the Israeli Companies Law provides that our board of directors is required to convene an
extraordinary general meeting upon the written request of (i) any two or more of our directors or one-quarter or more of the
members of our board of directors or (ii) one or more shareholders holding, in the aggregate, either (a) 5% or more of our
outstanding issued shares and 1% of our outstanding voting power or (b) 5% or more of our outstanding voting power.
Subject to the provisions of the Israeli Companies Law and the regulations promulgated thereunder, shareholders entitled
to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which
may be for a company such as ours whose ordinary shares are traded publicly in the U.S., between four and 40 days prior to the
date of the meeting. Furthermore, the Israeli Companies Law requires that resolutions regarding the following matters must be
adopted at a general meeting of our shareholders:
•
•
amendments to our articles of association;
appointment or termination of our auditors;
•
•
•
•
•
appointment of external directors;
approval of certain related party transactions;
increases or reductions of our authorized share capital;
a merger; and
the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise
of any of its powers is required for our proper management.
The Israeli Companies Law requires that a notice of any annual general meeting or extraordinary general meeting be
provided to shareholders at least 21 days prior to the meeting, and if the agenda of the meeting includes the appointment or
removal of directors, the approval of transactions with office holders or interested or related parties, or an approval of a merger,
notice must be provided at least 35 days prior to the meeting.
Under the Israeli Companies Law and our articles of association, shareholders are not permitted to take action by way of
written consent in lieu of a meeting.
Voting Rights
Quorum requirements
Pursuant to our articles of association, holders of our ordinary shares are entitled to one vote for each ordinary share held
on all matters submitted to a vote before the shareholders at a general meeting. As provided under our articles of association and
as permitted under the NASDAQ Listing Rules due to our status as a foreign private issuer, the quorum required for our general
meetings of shareholders consists of at least two shareholders present in person, by proxy or written ballot who hold or represent
between them at least 25% of the total outstanding voting rights. A meeting adjourned for lack of a quorum is generally
adjourned to the same day in the following week at the same time and place or to a later time or date if so specified in the notice
of the meeting. At the reconvened meeting, any two or more shareholders present in person or by proxy (regardless of the number
of ordinary shares held by them) shall constitute a lawful quorum.
Vote requirements
Our articles of association provide that all resolutions of our shareholders require a simple majority vote to be adopted,
unless otherwise required by the Israeli Companies Law or by our articles of association. Under the Israeli Companies Law, each
of (i) the approval of an extraordinary transaction with a controlling shareholder, (ii) the terms of employment or other
engagement of the controlling shareholder of the company or such controlling shareholder’s relative (even if such terms are not
extraordinary), (iii) the terms of employment of the chief executive officer, (iv) the election of external directors and (v) the
approval of the service by one individual as chairman of the board and chief executive officer simultaneously, for a maximum
period of three years at a time, requires special majority approval under Israeli law. Under our articles of association, the
alteration of the rights, privileges, preferences or obligations of any class of our shares requires a simple majority of the class so
affected (or such other percentage of the relevant class that may be set forth in the governing documents relevant to such class),
voting together at a shareholder meeting of that class.
Further exceptions to the simple majority vote requirement are a resolution for the voluntary winding up, or an approval
of a scheme of arrangement or reorganization, of the company pursuant to Section 350 of the Israeli Companies Law, which
requires the approval of holders of 75% of the voting rights represented at the meeting and voting on the resolution.
Access to corporate records
Under the Israeli Companies Law, shareholders are provided access to: minutes of our general meetings; our shareholders
register and principal shareholders register, articles of association and annual audited financial statements; and any document that
we are required by law to file publicly with the Israeli Companies Registrar or the Israel Securities Authority. In addition,
shareholders may request any document related to an action or transaction requiring shareholder approval under the related party
transaction provisions of the Israeli Companies Law. We may deny this request if we believe it has not been made in good faith or
if such denial is necessary to protect our interest or protect a trade secret or patent.
Modification of class rights
Under the Israeli Companies Law and our articles of association, the rights attached to any class of share, such as voting,
liquidation and dividend rights, may be amended by adoption of a resolution by the holders of a majority of the shares of that
class present at a separate class meeting, or otherwise in accordance with the rights attached to such class of shares, as set forth in
our articles of association.
Registration rights
2021 Registration Rights Agreement
We are party to an amended and restated registration rights agreement, dated April 6, 2021, with certain of our
shareholders (the “2021 Registration Rights Agreement”). The 2021 Registration Rights Agreement, which was approved by our
shareholders at our 2021 annual general meeting of shareholders, replaced the registration rights agreement, dated March 3, 2014
(the “Original Registration Rights Agreement”), that we had entered into in connection with our initial public offering with
certain of our pre-IPO shareholders, which expired by its own terms on its seven-year anniversary. The ordinary shares held by
most of our pre-IPO shareholders who were party to the Original Registration Rights Agreement were no longer entitled to
registration rights under that agreement as of the time that it expired, given their ability to freely sell their shares in the open
market under Rule 144 of the Securities Act. However, each of CBI and Professor Lior Rosenberg, and their affiliated entities
that hold ordinary shares (consisting of Clal Life Sciences LP and L.R. Research & Development Ltd., respectively) remained
entitled to registration rights as of the time of the expiration of the Original Registration Rights Agreement, and we therefore
entered into the 2021 Registration Rights Agreement with them as a means of extending those rights. The 2021 Registration
Rights Agreement provides to the holders of our ordinary shares that are party to the agreement the right to demand that we file a
registration statement or request that their ordinary shares be covered by a registration statement that we are otherwise filing. In
March 2019, we filed, and the SEC declared effective, on April 22, 2019, a shelf registration statement on Form F-3 that
registered the resale of the 11,240,827 shares that were then entitled to registration rights under the Original Registration Rights
Agreement. That registration statement remains in effect as of the date of this Annual Report.
Demand registration rights
At any time, the holders of a majority of the registrable securities (as defined in the 2021 Registration Rights Agreement)
then outstanding may request that we file a registration statement with respect to a majority of the registrable securities then
outstanding (or a lesser percentage if the anticipated aggregate offering price, net of selling expenses, exceeds $5.0 million).
Upon receipt of such registration request, we are obligated to file a registration statement. Currently, as we are eligible under
applicable securities laws to file a registration statement on Form F-3, we may be required to effect up to two such registrations
within any 12-month period.
We will not be obligated to file a registration statement at such time if in the good faith judgment of our board of
directors, such registration would be materially detrimental to the company and its shareholders because such action would (i)
materially interfere with a significant acquisition, corporate reorganization or other similar transaction involving us, (ii) require
premature disclosure of material information that we have a bona fide business purpose for preserving as confidential or (iii)
render us unable to comply with requirements under the Securities Act or Exchange Act. In addition, we have the right not to
effect or take any action to effect a registration statement during the period that is 60 days (or 30 days in the case of a registration
statement on Form F-3) before the date of filing our registration statement (as estimated by us in good faith), and ending on a date
that is 180 days (or 90 days in the case of a registration statement on Form F-3) after the date of such filing.
Piggyback registration rights
In addition, if we register any of our ordinary shares in connection with the public offering of such securities solely for
cash, the holders of all registrable securities are entitled to at least 10 days’ notice of the registration and to include all or a
portion of their ordinary shares in the registration. If the public offering that we are effecting is underwritten, the right of any
shareholder to include shares in the registration related thereto is conditioned upon the shareholder accepting the terms of the
underwriting as agreed between us and the underwriters and then only in such quantity as the underwriters in their sole discretion
determine will not jeopardize the success of our offering.
Other provisions
We will pay all registration expenses (other than underwriting discounts and selling commissions) and the reasonable fees
and expenses of a single counsel for the selling shareholders, related to any demand or piggyback registration. The demand and
piggyback registration rights described above will expire on March 24, 2021, five years after our initial public offering.
2022 PIPE Registration Rights Agreement
In connection with a private placement of ordinary shares and warrants of our company for which we entered into
definitive agreements in September 2022 and closed in October 2022 (the “PIPE”), we entered into a registration rights
agreement with the institutional investors participating in the PIPE (the “2022 PIPE Registration Rights Agreement”). Pursuant to
the 2022 PIPE Registration Rights Agreement, within 45 calendar days of the date of the closing of the PIPE, we were required to
file, and we filed, on November 10, 2022, a registration statement to register for resale (i) the ordinary shares issuable upon
exercise of the ordinary warrants sold in the PIPE, and (ii) the ordinary shares issuable upon exercise of certain privately placed
pre-funded warrants sold to the investors in connection with a concurrent registered direct offering (collectively, the “2022
Registrable Securities”). Pursuant to the 2022 PIPE Registration Rights Agreement, we agreed to cause the subject registration
statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no
later 75 days, or in the event of a full review by the SEC, 110 days, after the closing date of the PIPE, and use our best efforts to
keep such registration statement continuously effective under the Securities Act until the date that all Registrable Securities
covered by such registration statement have been sold or are otherwise may be sold pursuant to Rule 144 under the Securities
Act. The subject registration statement was declared effective by the SEC on November 25, 2022.
Acquisitions Under Israeli Law
Full tender offer
A person wishing to acquire shares of an Israeli public company and who would as a result hold over 90% of the target
company’s issued and outstanding share capital is required by the Israeli Companies Law to make a tender offer to all of the
company’s shareholders for the purchase of all of the issued and outstanding shares of the company. A person wishing to acquire
shares of a public Israeli company and who would as a result hold over 90% of the issued and outstanding share capital of a
certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the relevant class for the
purchase of all of the issued and outstanding shares of that class. If the shareholders who do not accept the offer hold less than
5% of the issued and outstanding share capital of the company or of the applicable class, and more than half of the shareholders
who do not have a personal interest in the offer accept the offer, all of the shares that the acquirer offered to purchase will be
transferred to the acquirer by operation of law. However, a tender offer will also be accepted if the shareholders who do not
accept the offer hold less than 2% of the issued and outstanding share capital of the company or of the applicable class of shares.
Upon a successful completion of such a full tender offer, any shareholder that was an offeree in such tender offer, whether
such shareholder accepted the tender offer or not, may, within six months from the date of acceptance of the tender offer, petition
an Israeli court to determine whether the tender offer was for less than fair value and that the fair value should be paid as
determined by the court. However, under certain conditions, the offeror may include in the terms of the tender offer that an
offeree who accepted the offer will not be entitled to petition the Israeli court as described above.
If a tender offer is not accepted in accordance with the requirements set forth above, the acquirer may not acquire shares
from shareholders who accepted the tender offer that will increase its holdings to more than 90% of the company’s issued and
outstanding share capital or of the applicable class.
Special tender offer
The Israeli Companies Law provides that an acquisition of shares of an Israeli public company must be made by means of
a special tender offer if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights in
the company. This requirement does not apply if there is already another holder of at least 25% of the voting rights in the
company. Similarly, the Israeli Companies Law provides that an acquisition of shares in a public company must be made by
means of a special tender offer if as a result of the acquisition the purchaser would become a holder of more than 45% of the
voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the
company, subject to certain exceptions. A special tender offer must be extended to all shareholders of a company but the offeror
is not required to purchase shares representing more than 5% of the voting power attached to the company’s outstanding shares,
regardless of how many shares are tendered by shareholders. A special tender offer may be consummated only if (i) the offeror
acquired shares representing at least 5% of the voting power in the company and (ii) the number of shares tendered by
shareholders who accept the offer exceeds the number of shares held by shareholders who object to the offer (excluding the
purchaser, controlling shareholders, holders of 25% or more of the voting rights in the company or any person having a personal
interest in the acceptance of the tender offer). If a special tender offer is accepted, the purchaser or any person or entity
controlling it or under common control with the purchaser or such controlling person or entity may not make a subsequent tender
offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of
one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the
initial special tender offer.
Merger
The Israeli Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain
requirements described under the Israeli Companies Law are met, by a majority vote of each party’s shareholders. In the case of
the target company, approval of the merger further requires a majority vote of each class of its shares.
For purposes of the shareholder vote, unless a court rules otherwise, the merger requires the approval by a majority of the
votes of shares represented at the meeting of shareholders, after excluding shares held by the other party to the merger and any
person (or group of persons acting in concert) who holds (or hold, as the case may be) 25% or more of the voting rights or the
right to appoint 25% or more of the directors of the other party to the merger. If, however, the merger involves a merger with a
company’s own controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is
instead subject to the same Special Majority approval that governs all extraordinary transactions with controlling shareholders.
If the transaction would have been approved by the shareholders of a merging company but for the separate approval of
each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the
petition of holders of at least 25% of the voting rights of a company. For such petition to be granted, the court must find that the
merger is fair and reasonable, taking into account the respective values assigned to each of the parties to the merger and the
consideration offered to the shareholders of the target company. Upon the request of a creditor of either party to the proposed
merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the
merger, the surviving company will be unable to satisfy the obligations of the merging entities, and may further give instructions
to secure the rights of creditors.
A merger may not be consummated unless at least 50 days have passed from the date on which a proposal for approval of
the merger is filed with the Israeli Registrar of Companies and at least 30 days have passed from the date on which the merger
was approved by the shareholders of each party.
Anti-takeover measures under Israeli law
The Israeli Companies Law allows us to create and issue shares having rights different from those attached to our ordinary
shares, including shares providing certain preferred rights with respect to voting, distributions or other matters and shares having
preemptive rights. As of February 15, 2019, no preferred shares are authorized under our articles of association. In the future, if
we do authorize, create and issue a specific class of preferred shares, such class of shares, depending on the specific rights that
may be attached to it, may have the ability to frustrate or prevent a takeover or otherwise prevent our shareholders from realizing
a potential premium over the market value of their ordinary shares. The authorization and designation of a class of preferred
shares will require an amendment to our articles of association, which requires the prior approval of the holders of a majority of
the voting power attaching to our issued and outstanding shares at a general meeting. The convening of the meeting, the
shareholders entitled to participate and the majority vote required to be obtained at such a meeting will be subject to the
requirements set forth in the Israeli Companies Law as described above in “—Voting Rights.”
EXHIBIT 12.1
CERTIFICATIONS
I, Ofer Gonen, certify that:
1. I have reviewed this annual report on Form 20-F of MediWound 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 company as of, and for, the periods
presented in this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by
the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial
reporting; and
5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal
control over financial reporting.
/s/Ofer Gonen
Ofer Gonen
Chief Executive Officer
Date: March 16, 2023
EXHIBIT 12.2
CERTIFICATIONS
I, Boaz Gur-Lavie, certify that:
1. I have reviewed this annual report on Form 20-F of MediWound 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 company as of, and for, the periods
presented in this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by
the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial
reporting; and
5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal
control over financial reporting.
/s/ Boaz Gur-Lavie
Boaz Gur-Lavie
Chief Financial Officer
Date: March 16, 2023
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 13.1
In connection with the Annual Report of MediWound Ltd. (the “Company”) on Form 20-F for the fiscal year ended
December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ofer Gonen, do
certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my
knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/Ofer Gonen
Ofer Gonen
Chief Executive Officer
Date: March 16, 2023
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 13.2
In connection with the Annual Report of MediWound Ltd. (the “Company”) on Form 20-F for the fiscal year ended
December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Boaz Gur-Lavie,
do certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my
knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ Boaz Gur-Lavie
Boaz Gur-Lavie
Chief Financial Officer
Date: March 16, 2023
Consent of Independent Registered Public Accounting Firm
EXHIBIT 15.1
We consent to the incorporation by reference in the registration statement (No.’s 333-223767, 333-195517, 333-210375, 333-
230487, 333-236635 and 333-266697) on Form S-8, in the registration statement (No. 333-265203) on Form F-3 and in the
registration statement (No. 333-268297) on form F-1, of our report dated March 17, 2022, with respect to the consolidated
financial statements of MediWound Ltd. and its subsidiaries.
/s/ Somekh Chaikin
Somekh Chaikin
Member Firm of KPMG International
Haifa, Israel
March 16, 2022
Consent of Independent Registered Public Accounting Firm
EXHIBIT 15.2
We consent to the incorporation by reference in the registration statement (No.’s 333-223767, 333-195517, 333-210375, 333-
230487, 333-236635, 333-255784, and 333-266697) on Form S-8, in the registration statement (No. 333-265203) on Form F-3
and in the registration statement (No. 333-268297) on form F-1, of our report dated March 25, 2021, with respect to the
consolidated financial statements of MediWound Ltd. and its subsidiaries.
/s/ KOST FORER GABBAY & KASIERER
KOST FORER GABBAY & KASIERER
Member Firm of Ernst & Young Global
Tel Aviv, Israel
March 16, 2023