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
OR
☒
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December
31, 2024
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
Trading
Symbol(s)
Name
of each exchange on which registered
Ordinary
shares, par value NIS 0.07 per share
MDWD
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, 2024, the registrant had 10,793,057
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.
Yes ☒
No ☐
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 ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth
company. See the definitions
of “large accelerated filer,” “accelerated filer,” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
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. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b) by the registered public
accounting firm that prepared or issued its audit report. ☒
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation
received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark which basis for accounting the registrant has used to prepare the financial 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.
☐
Item 17 ☐ Item 18
If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
No ☒
MEDIWOUND LTD.
FORM 20-F
ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER
31, 2024
TABLE OF CONTENTS
INTRODUCTION
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
i
PART I
1
Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
1
Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE
1
Item 3. KEY INFORMATION
1
Item 4. INFORMATION ON THE COMPANY
33
Item 4A. UNRESOLVED STAFF COMMENTS
67
Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
67
Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
79
Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
97
Item 8. FINANCIAL INFORMATION
102
Item 9. THE OFFER AND LISTING
103
Item 10. ADDITIONAL INFORMATION
103
Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
111
Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
111
PART II
112
Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
112
Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS
112
Item 15. CONTROLS AND PROCEDURES
112
Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT
112
Item 16B. CODE OF ETHICS
113
Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
113
Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
113
Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
113
Item 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
113
Item 16G. CORPORATE GOVERNANCE
113
Item 16H. MINE SAFETY DISCLOSURE
113
Item 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
113
Item 16J. INSIDER TRADING POLICIES
114
Item 16K. CYBERSECURITY
114
PART III
115
Item 17. FINANCIAL STATEMENTS
115
Item 18. FINANCIAL STATEMENTS
115
Item 19. EXHIBITS
115
SIGNATURES
120
INTRODUCTION
In this annual report, the terms “MediWound,” “we,” “us,”
“our”, “our company” 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 trade names 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 for the year ended December
31, 2022 and any prior fiscal periods 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:
•
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;
•
our ability to maintain adequate protection of our intellectual property;
•
our estimates regarding the market opportunity for NexoBrid, EscharEx and our other pipeline products;
i
•
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.
•
our expectations regarding the operational capacity of our factory; and
•
our expectations regarding future filing of registration statements
The preceding list is not intended to be an exhaustive list of
all our forward-looking statements. The forward-looking statements are based on our beliefs,
assumptions and expectations of future performance,
taking into consideration 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 primarily 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, development and
business
desicions could differ materially from those anticipated in these forward-looking statements due to various important factors, including
those 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.
ii
PART I
Item 1. IDENTITY OF DIRECTORS,
SENIOR MANAGEMENT AND ADVISERS
Not applicable.
Item 2. OFFER STATISTICS
AND EXPECTED TIMETABLE
Not applicable.
Item 3. KEY INFORMATION
A.
[Reserved]
B.
Capitalization and Indebtedness
Not applicable.
C.
Reasons for the Offer and Use of Proceeds
Not applicable.
D.
Risk Factors
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.
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 and
(ii) our other pipeline products in a 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:
•
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 by us,
any of which would result in significant
delays in our clinical testing process;
1
•
our third-party contractors, such as a research institute, may fail to comply with regulatory requirements or meet their contractual
obligations to us. For
example, due to a deviation associated with a third-party testing lab used during the manufacturing process, our
commercial partner in the U.S., Vericel
Corporation (“Vericel”), was unable to release NexoBrid into the commercial channel
until an agreement with the U.S. Food and Drug Administration
(the “FDA”) was reached on this matter, resulting in a delay
of a few months in the launch of NexoBrid in the U.S.;
•
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;
•
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 war in Gaza and 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, which 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 and our pipeline product
candidates requires successful completion of the regulatory approval process, which 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 (“EU”) 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 EU, 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 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 EU Clinical Trials Directive required a
separate
clinical trial application (“CTA”) to be submitted in each member state in which the clinical trial takes place, 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 for multi-center trials. 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 transition
period ended on January 31, 2025, and all clinical
trials (and related applications) are now fully subject to the provisions of the CTR.
Compliance with the CTR requirements may impact our development plans.
2
The United Kingdom (“UK”) regulatory framework in relation
to clinical trials is governed by the Medicines for Human Use (Clinical Trials) Regulations 2004,
as amended, which is derived from existing
EU legislation (as implemented into UK law, through secondary legislation). The extent to which the regulation of clinical
trials in the
UK will mirror the (EU) CTR in the long term is not yet certain, however, on December 12, 2024, the UK government introduced a legislative
proposal - the
Medicines for Human Use (Clinical Trials) Amendment Regulations 2024 - that, if implemented, will replace the current regulatory
framework for clinical trials in the
UK. The legislative proposal aims to provide a more flexible regime to make it easier to conduct
clinical trials in the UK, increase the transparency of clinical trials
conducted in the UK and make clinical trials more patient centered.
The UK government has provided the legislative proposal to the UK Parliament for its review and
approval. Once the legislative proposal
is approved (with or without amendment), it will be adopted into UK law which is expected in early 2026.
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 reducing the duration of regulatory data protection, revising the eligibility for expedited pathways, etc.) was published
on April 26, 2023.
The proposed revisions, remain to be agreed and adopted by the European Parliament and European Council and the proposals
may, however, therefore be substantially
revised before adoption, which is not anticipated before early 2026. The revisions 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 of 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 served 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.
3
Even though the FDA has approved NexoBrid for
eschar removal in patients with deep partial thickness and/or full thickness thermal burns, we are facing extensive
and ongoing regulatory
requirements and obligations and may be required for additional requirements for EscharEx and for any product candidates for which we
plan to 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.
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.
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 the 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, particularly in light of the new presidential administration, the 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 the 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 the FDA and
other agencies such as the EMA 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 the FDA, have had to furlough
critical FDA employees and stop
critical activities.
4
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, 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 or administrative delays. Regulatory authorities outside the United States have adopted 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 the FDA or other
regulatory authorities from conducting their regular inspections, reviews, or other regulatory
activities, it could significantly impact the ability of the FDA or, other
regulatory authorities 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:
•
restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market or voluntary or mandatory
product recalls;
•
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 EscharEx, NexoBrid, 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 EU and other international
markets is limited to the treatment of deep partial- and full-thickness burns. In the
United States, the marketing authorization for NexoBrid
is limited to eschar removal in patients 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.
5
Risks Related to Manufacturing
We may not be able to expand our production
or processing capabilities or satisfy future demand.
Our global demand for NexoBrid surpasses the current manufacturing
capabilities. 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. Construction of the new GMP-compliant state-of-the-art
manufacturing facility
in Yavne, Israel has been completed as of August 2024, with commissioning underway. The facility is expected to reach full operational
capacity
by the end of 2025, increasing manufacturing output sixfold. Commercial availability will depend on securing the necessary regulatory
approvals. However, 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 site in Yavne, Israel,
and we expect that all of our revenues in the near future will be derived from products
manufactured at this site. Additionally, all the
clinical batches supply for our Phase III study with EscharEx are being manufactured in this site. If this site 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, EscharEx
or our
pipeline product candidates. In addition, we currently a have limited inventory of NexoBrid that we can supply to our customers
if we are unable to further manufacture
NexoBrid.
We are subject to a number of other manufacturing
risks, any of which could substantially increase our costs and limit the 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.
6
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 Taiwan (i.e., 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. 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 with additional inventory stored exclusively for us at CBC’s
warehouse to continue full capacity operations for non-EU markets 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, we rely on CBC to successfully scale-up its CBC’s
manufacturing facilities in order to meet future demand of our products pipelines. If CBC will
not be able to obtain the requisite approvals,
including meeting regulatory and quality requirements or will not be able to scale-up its manufacturing facility in a timely
manner, then
we may not be able to satisfy demand for our future products.
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.
7
In addition, if CBC experiences any closures and labor shortages
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.
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, Russia, Ukraine, South Korea, Taiwan, United Arab Emirates, Japan and India for a single product,
NexoBrid for
eschar removal in patients 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 the U.S., 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, primarily in 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 Biologics License Application (“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 the commercializing of 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.
We are dependent on our contract with BARDA
and/or MTEC/DoD to fund our development activities for NexoBrid for field use in the United States. If these
contracts will be suspended
or terminated, it will adversely impact our future revenues.
In September 2015, we were awarded the first BARDA Contract for
treatment of thermal burn injuries. This contract was amended several times over the years
to extend its term until September 2025 and
its aggregate amount which was awarded to $165 million as of the end of 2022. In March 2023 BARDA expanded its
awarded contract by providing
supplemental funding of $10 million to support a $3 million replenishment of expired product previously procured for emergency
preparedness,
the pediatric indication sBLA submission to the FDA, and enrollment of an additional 50 patients in the expanded access treatment protocol
(NEXT)
(collectively the “First BARDA Contract”).
The First BARDA Contract provided funding and technical support
for the pivotal U.S. Phase 3 clinical study (DETECT), the randomized, controlled pivotal
clinical trial for use in the pediatric population
(CIDS), the marketing approval registration process for NexoBrid as well as its procurement and availability under the
expanded access
treatment protocol (NEXT) in the U.S.
The total amount of the First BARDA Contract is comprised of up
to $110 million to support research and development activities and up to $65 million to
procure NexoBrid for U.S. emergency preparedness.
As of December 31, 2024, the Company has recognized a cumulative
total of $94.6 million in revenues from development services, under the First BARDA
Contract, and an additional $16.5 million for procurement
of NexoBrid for U.S. emergency preparedness.
In February 2022, the Company entered into a contract with the
U.S. Department of Defense (the “DoD”) through the Medical Technology Enterprise
Consortium (MTEC) to advance the development
of a temperature-stable formulation of NexoBrid for field-care burn treatment for the U.S. Army. This contract was
subsequently amended
multiple times throughout 2023–2024 to expand funding, bringing the total contract value to $13.4 million.
8
Additionally, in October 2023, the Company was awarded $1.2 million
in direct funding from MTEC to further support the development of the temperature-
stable NexoBrid formulation.
As of December 31, 2024, the total funding received from the DoD
and MTEC amounts to $14.6 million.
BARDA and/or MTEC/DoD may terminate their respective contracts
at any time, at their convenience, without any further funding obligations. There can be
no assurances that BARDA and/or MTEC/DoD 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 NexoBrid for field use. Any reduction or delay in MTEC/DoD 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.
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:
•
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, nursing homes, physicians offices, wound clinics or any other sites of care to fund/purchase EscharEx or
the ability to obtain
sufficient third party coverage for EscharEx;
•
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
(“SOC”);
•
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.
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.
9
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:
•
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;
•
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:
•
an annual, non-deductible 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;
10
•
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;
•
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;
•
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.
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 eliminated the statutory Medicaid drug rebate cap for single source and innovator multiple
source drugs, beginning
January 1, 2024. The rebate was previously capped at 100% of a drug’s average manufacturer price, 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 (which began in 2025). CMS has published the negotiated prices
for the initial ten
drugs, which will first be effective in 2026, and has published the list of the subsequent 15 drugs that will be subject
to negotiation. 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. HHS has and will
continue to issue and update guidance as these programs
are implemented, although the drug price negotiation program is currently subject to legal challenges. 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. Some states have enacted legislation
creating so-called prescription drug affordability boards, which ultimately may attempt to
impose price limits on certain drugs in these
states.
11
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. 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. The Regulation
entered into force in January 2022 and has been
applicable since January 2025, with phased implementation based on the type of product, i.e. oncology and advanced
therapy medicinal products
as of 2025, orphan medicinal products as of 2028, and all other medicinal products by 2030. The Regulation intends to boost cooperation
among EU member states in assessing health technologies, including new medicinal products, and provide the basis for cooperation at the
EU level for joint clinical
assessments in these areas. It 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
highest 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
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, or from
a myriad of other devices that mechanically remove dead tissue from wounds. 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.
12
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. The global demand for NexoBrid surpasses our current manufacturing capabilities. We are currently seeking to expand our
manufacturing
capabilities in order to increase our capacity to manufacture NexoBrid and satisfy near term demand. Towards that end we
initiated a facility scale-up in 2022 to meet the
growing global demand for NexoBrid. Our new GMP-compliant state-of-the-art manufacturing
facility was completed as of August 2024. The facility is expected to
reach full operational capacity by the end of 2025, increasing manufacturing
output sixfold. Commercial availability will depend on securing the necessary regulatory
approvals. In addition, we anticipate the need
to expand manufacturing capabilities for EscharEx to meet market demands upon regulatory approval. Scaling up
production for EscharEx
will require substantial resources and be subject to regulatory clearance. Beyond manufacturing, 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 in the coming years, and we may never achieve or maintain
profitability.
We have incurred significant net losses, including a net loss of
$30.2 million for the year ended December 31, 2024 and $6.7 million for the year ended
December 31, 2023. As of December 31, 2024, we
had an accumulated deficit of $205.0 million. We expect to incur substantial net losses in the coming years. 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 in the coming years.
We anticipate that our expenses and future capital requirements
may increase if and as we:
•
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;
•
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 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;
•
make pre-commercialization activities for EscharEx;
13
•
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 maintain cash, cash equivalents and bank deposits at financial
institutions in Israel and Germany. Our funds at these institutions exceed insured limits and
some are not insured at all. Although we
spread our cash, cash equivalents and bank deposits among several financial institutions in order to reduce the risks associated
with
maintaining all of our balances at one financial institution, in the event of failure of any financial institution where we maintain our
cash and cash equivalents or
bank deposits, there can be no assurance that we would be able to access uninsured funds in such financial
institution in a timely manner or at all. Any inability to access
or delay in accessing these funds could prevent us from paying our operating
expenses and meeting our future capital requirements and thereby adversely affect our
business and financial position.
We have needed in the past and may need in the future additional
capital, which has in the past and may in the future 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, private placements, 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 and private placements 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.
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 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:
•
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, short-term
and restricted bank deposits will be sufficient to fund our operations and capital expenditure
for at least twelve months from the date
of this report. 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.
14
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 0.4% in
2024, by 3.1% in 2023 and by 13.2% in 2022.
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 receive revenues from sales in certain countries,
such as 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.
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, (the “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 will fully 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.
15
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 products 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.
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.
16
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.
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.
17
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, as amended by the California Privacy Rights Act (collectively, the “CCPA”)
requires covered businesses that process the personal information of California residents to, among other things: (i) provide certain
disclosures to California residents
regarding the business’s collection, use, and disclosure of their personal information; (ii)
receive and respond to requests from California residents to access, delete, and
correct their personal information, or to opt out of
certain disclosures of their personal information; and (iii) enter into specific contractual provisions with service
providers that process
California resident personal information on the business’s behalf. Additional compliance investment and potential business process
changes may
be required. Similar laws have passed in other states and are continuing to be proposed at the state and 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.
Furthermore, the Federal Trade Commission (“FTC”) and
many state Attorneys General continue to enforce federal and state consumer protection laws against
companies for online collection, use,
dissemination and security practices that appear to be unfair or deceptive. For example, according to the FTC, failing to take
appropriate
steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation
of Section 5(a) of the
Federal Trade Commission Act. The FTC expects a company’s data security measures to be reasonable and appropriate
in light of the sensitivity and volume of consumer
information it holds, the size and complexity of its business, and the cost of available
tools to improve security and reduce vulnerabilities.
In the event that we are subject to or affected by HIPAA, the CCPA,
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.
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 of individuals located in the EEA or in the context of our
activities
within the EEA. In addition, some of the personal data we process in respect of clinical trial participants is special category or sensitive
personal data under the
GDPR, and subject to additional compliance obligations and to local law derogations. 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. In addition to fines, a breach of the GDPR
may result in regulatory investigations,
reputational damage, orders to cease/ change our data processing activities, enforcement notices, assessment notices (for a
compulsory
audit) and/ or civil claims (including class actions). 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,
and the efficacy and longevity of current transfer
mechanisms between the EEA and the United States remains uncertain. Case law from the
Court of Justice of the EU (“CJEU”) states that reliance on the standard
contractual clauses, or SCCs - a standard form of
contract approved by the European Commission as an adequate personal data transfer mechanism - alone may not
necessarily be sufficient
in all circumstances and that transfers must be assessed on a case-by-case basis. On July 10, 2023, the European Commission adopted its
Adequacy Decision in relation to the new EU-US Data Privacy Framework (“DPF”) rendering the DPF effective as a GDPR transfer
mechanism to U.S. entities self-
certified under the DPF. The DPF also introduced a new redress mechanism for EU citizens which addresses
a key concern in the previous CJEU judgments and may
mean transfers under SCCs are less likely to be challenged in future. We currently
rely on the EU standard contractual clauses. We expect the existing legal complexity
and uncertainty regarding international personal
data transfers to continue. In particular, we expect the DPF Adequacy Decision to be challenged and international
transfers to the United
States and to other jurisdictions more generally to continue to be subject to enhanced scrutiny by regulators.
18
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. On October
12, 2023, the
UK Extension to the DPF came into effect (as approved by the UK Government), as a UK GDPR data transfer mechanism to U.S. entities self-certified
under the UK Extension to the DPF. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional
laws and regulations that
may affect how we conduct business. In Israel, where we are incorporated and have significant operations,
including one of our corporate headquarters, we are subject to
the Israeli Privacy Protection Law, 5741-1981, as amended (“PPL”),
and its regulations, including the Israeli Privacy Protection Regulations (Data Security), 5777-2017
(the “Data Security Regulations”),
and the guidelines of the Israeli Privacy Protection Authority (“IPPA”). The PPL, the Data Security Regulations, and
the IPPA
guidelines impose obligations regarding how personal data is processed, maintained, transferred, disclosed, accessed, and secured.
Material changes to the PPL or the
Data Security Regulations may require us to adjust our data protection and data security practices.
For example, the Protection of Privacy (Amendment No. 13) Law,
5784-2024 (“Amendment 13”), passed by the Knesset in August
2024, takes effect on August 14, 2025. Amendment 13 expands the IPPA’s authority to investigate
suspected privacy violations and
impose significantly higher monetary sanctions than those currently available. Amendment 13 also introduces additional obligations
for
parties that process personal data, which may require us to modify our data practices and policies, appoint a data protection officer,
and incur substantial costs to adjust
our privacy and data protection practices in Israel. Additionally, the Privacy Protection
(Provisions Regarding Information Transferred to Israel from the European
Economic Area) Regulations, 5784-2023 (“EU Transfer Regulations”),
took effect in January 2025 and apply to personal data of Israeli individuals. As a result, we may
need to adjust our practices,
especially those related to data subjects’ rights.
Failure to comply with the PPL, its regulations, and guidelines
issued by the IPPA may expose us to administrative fines, civil claims (including class actions),
and in certain cases, criminal liability.
The IPPA may initiate administrative inspection proceedings from time to time. In addition, if an administrative inspection
procedure
initiated by the IPPA reveals irregularities with respect to our compliance with the PPL, we may need to take remedial actions to rectify
such irregularities,
which may increase our costs, in addition to our exposure to administrative fines, civil claims (including class
actions), and in certain cases, criminal liability. Upon
Amendment 13 entering into effect in August 2025, the sanctions for non-compliance
with the requirements of the PPL and its regulations (including the Data Security
Regulations and the EU Transfer Regulations) will be
significantly increased and, in certain cases, may reach substantial amounts in the millions of NIS.
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 assurances that our data protection
and security measures will be fully implemented or complied with, will not be breached or
will provide adequate protection for our confidential
information or information technology systems.
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, worms/trojans 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. Data
breaches, cyber-attacks and other similar incidents are increasing in frequency, levels of
persistence, sophistication and intensity and
are evolving in nature. Moreover, geopolitical tensions, particularly the Hamas-Israel and the Russia-Ukraine conflicts, have
contributed
to a surge in cyber-attacks targeting Israeli companies and products globally, posing a threat to critical infrastructure.
19
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 continue to work 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 our
confidential 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, and the costs
associated
with the investigation, remediation and potential notification of the breach to counter-parties and data subjects could be material. 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.
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:
•
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.
20
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.
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 in effect and 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.
Moreover, in 2015, the Organization for Economic Co-operation and Development (“OECD”)
released various reports under its Base Erosion and Profit Shifting
(“BEPS”) action plan to reform international tax systems
and prevent tax avoidance and aggressive tax planning. These actions aim to standardize and modernize global
corporate tax policy, including
cross-border taxes, transfer-pricing documentation rules and nexus-based tax incentive practices which in part are focused on challenges
arising from the digitalization of the economy. The reports have a very broad scope including, but not limited to, neutralizing the effects
of hybrid mismatch
arrangements, limiting base erosion involving interest deductions and other financial payments, countering harmful
tax practices, preventing the granting of treaty
benefits in inappropriate circumstances and imposing mandatory disclosure rules. It is
the responsibility of OECD members to consider how the BEPS recommendations
should be reflected in their national legislation. Many countries
are beginning to implement legislation and other guidance to align their international tax rules with the
OECD’s BEPS recommendations,
for example, by signing up to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (“MLI”)
which
currently has been signed by over 100 jurisdictions, including Israel, who deposited its instrument of ratification to implement
the MLI on September 13, 2018.
The MLI implements some of the measures that the BEPS initiative
proposes to be transposed into existing treaties of participating states. Such measures
include the inclusion in tax treaties of one,
or both, of a “limitation-on-benefit” (“LOB”) rule and a “principal purposes test” (“PPT”)
rule. The application of the LOB
rule or the PPT rule could deny the availability of tax treaty benefits (such as a reduced rate of withholding
tax) under tax treaties. In addition, the OECD has been
working on proposals, commonly referred to as “BEPS 2.0,” which would
make important changes to the international tax system, by allocating taxing rights in respect
of certain profits of multinational enterprises
above a fixed profit margin to the jurisdictions within which they carry on business (subject to threshold rules) and imposing
a minimum
effective tax rate on certain multinational enterprises. The rules for a global minimum tax have been implemented in a number of jurisdictions
with effect
from 2024. There have been and are likely to be significant changes in the tax legislation of various OECD jurisdictions during
the period of implementation of BEPS or
BEPS 2.0. While certain BEPS initiatives are in the final stages of approval and/or implementation,
we cannot comprehensively predict their outcome or what impact
they will have on our tax obligations and operations or our financial statements,
up to their final enactment in national and international legislation. Such legislative
initiatives may materially and adversely affect
our plans to expand internationally and may negatively impact our financial condition, tax liability or results of operations
and could
increase our administrative efforts. 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. Significant changes or developments in U.S. laws and policies, such as laws and policies
surrounding international trade, foreign affairs,
manufacturing and development and investment in the territories and countries where
we or our customers operate, can materially adversely affect our business, results of
operations, and financial condition. The U.S. government
has imposed (in certain cases, subject to deferral) significant tariffs on imports from certain jurisdictions and
indicated the likely
imposition of or significant increases in tariffs on goods imported into the United States from many other jurisdictions in the future,
which could lead
to corresponding punitive actions by the countries with which the U.S. trades. Further the U.S. administration has indicated
the intent to propose significant changes to
the U.S. tax system. Many aspects of these potential proposals are unclear or undeveloped
and we are unable to predict which, if any, changes to the U.S. tax system will
be enacted into law, and what effects any enacted legislation
might have on our tax liabilities. In addition, the U.S. administration has indicated that the United States
may impose retaliatory
measures with respect to jurisdictions that have, or are likely to, put in place tax rules that are extraterritorial or disproportionately
affect
American companies. The likelihood of these changes being enacted or implemented is unclear. We are currently unable to predict
whether such changes will occur and,
if so, the ultimate impact on business or our vendors, and or contracts with BARDA and the DoD.
21
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.
As of December 31, 2024, we had been granted a total of 88 patents,
of which 50 are in force, and have 17 pending patent applications. The family of patents
that covers NexoBrid specifically includes 13
granted patents that are in force worldwide. EscharEx is covered in 13 patents in force. 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 a 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.
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.
22
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.
Eleven of the currently issued NexoBrid patents are set to expire
in November 2025 . One of our two U.S. patents for NexoBrid is about to be granted a 5-year
patent term extension, and consequently, it
will expire in 2030. The other U.S. patent is set to expire in 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 were issued and are in force 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:
•
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;
•
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.
23
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.
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 our 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.
24
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.
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. If we cannot demonstrate that such interests will be harmed,
we may be unable to prevent our competitors from benefiting
from the expertise of our former Israeli employees or consultants and our ability to remain competitive may
be diminished. As to our U.S.
operations, on the U.S. federal level, there was movement in 2023 by federal agencies to make noncompete agreements unenforceable in
general.
The Federal Trade Commission proposed a new rule to ban employers nationwide from using non-compete agreements with their employees and
independent
contractors, and the General Counsel of the National Labor Relations Board issued a memo in March 2023 opining that many types
of non-compete and non-solicitation
restrictions unlawfully interfere with employees’ protected rights under Section 7 of the National
Labor Relations Act. If any of these proposed new U.S. federal
restrictions becomes effective, or if any state in which we have operations
continues to expand restrictions or bans the use of non-compete restrictions, that could
adversely impact our ability to protect our investment
in our key employees in our U.S. locations, and harm our competitive position.
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.
25
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 $7.10
per share through December 31, 2024. 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:
•
actual or anticipated variations in our and our competitors’ results of operations and financial condition;
•
market acceptance of our products;
•
general economic, market and geopolitical 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;
•
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.
26
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 22, 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.” Additionally, on June 3, 2022, the
SEC declared effective our shelf registration statement on Form F-3,
which registered our offering, from time to time, of various securities
in one or more series or issuances, as well as the resale by selling shareholders of 1,819,780 shares
and on September 9, 2024, the
SEC declared effective our shelf registration statement on Form F-3, which registered the resale of an additional 1,453,488 shares. We
furthermore anticipate filing a new shelf registration statement on Form F-3 to replace the registration statement from June 2022 in the
near future. 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, 2025, 1,428,691 ordinary shares were
subject to outstanding option and RSU awards granted to employees and office holders under
our share incentive plans, including 700,189
ordinary shares issuable under currently exercisable share options and RSUs. We have filed registration statement on Form
S-8 registering
the issuance of all such ordinary shares issuable under our share incentive plans. As of March 15, 2025, 10,325 shares are available for
future awards
under our 2024 Share Incentive Plan. Shares included in such registration statements on Form S-8 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.
Because the 2014 Plan expired in March 2024, we adopted a new share
incentive plan—the 2024 Share Incentive Plan (the “2024 Plan”) - and obtained our
shareholders’ approval for that
plan at an extraordinary general meeting of shareholders that took place in December 2024. Outstanding grants under the 2014 Plan will
remain subject to the 2014 Plan even after the expiration of that plan, but any ordinary shares available under the 2014 Plan as of the
adoption of the 2024 Plan, or that
subsequently become available under the 2014 Plan due to the expiration, cancellation, forfeiture or
other surrender of outstanding grants under the 2014 Plan (up to
1,158,641 ordinary shares in total), are (or will become) available for
new grants under the 2024 Plan.
Authorized Shares. Upon
its effectiveness, the 2024 Plan had a total of 280,375 ordinary shares reserved and initially available for issuance, consisting entirely
of 280,375 shares that were rolled over from the 2014 Plan. Out of that initial pool of shares, the number of ordinary shares that may
be issued upon the exercise of
incentive stock options (within the meaning of Section 422 of the Code is capped at 280,375.
In addition to the foregoing 280,375 ordinary shares initially
available under the 2024 Plan, up to 1,158,641 ordinary shares that underlie outstanding awards
under the 2014 Plan may become available
for issuance under the 2024 Plan. Similarly, ordinary shares from among the initial 280,375 shares reserved under the 2024
Plan that become
subject to an award and are ultimately not issued (for any reason) will become available once again under the 2024 Plan.
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) 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.”
27
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. Loss
of our foreign private
issuer status would be accompanied by a significant increase in compliance costs.
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.
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. Because we have become an accelerated filer (as would be the case if we were furthermore to qualify as or a large
accelerated filer), we are required
to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act.
28
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.
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.
Our business could be adversely impacted by
climate change.
The intensifying effects of climate change present physical, liability,
and transition risks with both macro and micro implications for companies and financial
markets. There is increasing concern that a gradual
increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases
in the atmosphere
are causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters
(such as floods,
droughts, wildfires and severe storms). Such events could, among other things, disrupt our operations, including by damaging
or destroying our facilities or those of our
suppliers, which may cause us to suffer losses and additional costs to maintain or resume
operations or as a result of supply chain-related delays or cancellations, which
could have an adverse impact on our business and results
of operations. In addition, implementing changes to mitigate risks associated with such events may result in
substantial short- and long-term
additional operational expenses, which may materially affect our profitability.
Expectations, regulations and scrutiny relating
to environmental, social and governance (ESG) matters may impose additional costs and expose us to new risks.
There is an increasing focus from certain investors, clients, regulators,
employees and other key stakeholders or third parties concerning environmental, social
and governance (“ESG”) factors, including
those relating to climate change, supply chain matters and human capital management. Such increased scrutiny may result in
increased costs,
increased risk of litigation or reputational damage relating to our ESG practices or performance, enhanced compliance or disclosure obligations,
or other
adverse impacts on our business, financial condition or results of operations. In addition, if we communicate certain initiatives
and goals regarding ESG matters, we
could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could
be criticized for the scope of such initiatives or goals. If we fail to satisfy
the expectations of investors and other key stakeholders
or our initiatives are not executed as planned, our reputation and financial results could be materially and
adversely affected. Additionally,
the emphasis on ESG matters has resulted and may result in the adoption of new laws and regulations, including new reporting
requirements
in various jurisdictions. Our failure to comply with any applicable rules or regulations could lead to penalties and adversely impact
our reputation, customer
attraction and retention, access to capital and employee retention. Such ESG matters may also impact our suppliers,
customers and business partners, which may augment
or cause additional impacts on our business, financial condition or results of operations
29
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, 2024. 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.
30
Risks Primarily Related to our Operations in Israel
Conditions in Israel could materially and adversely affect our business.
In October 2023, Hamas terrorists infiltrated Israel’s southern border from the
Gaza Strip and conducted a series of horrific terrorist attacks on civilian and
military targets. Following the attack, Israel’s
security cabinet declared war and commenced a military campaign in Gaza against Hamas. On January 19, 2025, a
temporary ceasefire
between Israel and Hamas went into effect, the result of which is uncertain. Since the commencement of these events, there have been additional
active hostilities, including: the Hezbollah Lebanese-based terrorist group’s ongoing missile attacks since October 2023 against
Israeli military and civilian targets
(mostly in northern Israel), which resulted in the Israeli army’s campaign which commenced
in October 2024 focused in southern Lebanon against Hezbollah; the
Yemen-based Houthi terrorist group’s missile attacks on southern
Israel, which resulted in an Israeli air campaign against Houthi positions in Yemen; massive Iranian
aerial attacks in April and October
2024 on Israeli population centers, which were successfully defended and led to Israeli responses via multiple airstrikes in Iran; and
the fall of the Assad regime in Syria in December 2024 led Israel to take offensive actions to secure its northeast border, including
the establishment of ground positions
in southern Syria. Israel and Hezbollah in Lebanon reached a 60-day ceasefire agreement on
November 27, 2024. On January 27, 2025, the ceasefire between Israel and
Hezbollah was extended to February 18, 2025. While the ceasefire agreements
with Hamas and Hezbollah have been reached, there is no guarantee that the parties will
continue to comply with the terms of the agreements
and, accordingly, it is possible that these hostilities will resume with little to no warning and that additional terrorist
organizations
and, possibly, countries will actively join the hostilities. Such clashes may escalate in the future into a greater regional conflict.
Our employees, including management members operate from our offices that are located
in Yavne, in central/southern Israel. In addition, our officers and one
director are residents of Israel. Accordingly, political, economic,
and military conditions in Israel and the surrounding region may directly affect our business and
operations. Although the current war
has not materially impacted our business or operations as of the date of this report, any escalation or expansion of the war could
have
a negative impact on both global and regional conditions and may adversely affect our business, financial condition, and results of operations.
Currently, the war has impacted the availability of a limited number of our workforce
in various ways--a limited number of our workforce in Israel have been
called to active duty (and were released after a period of time),
and others are supporting friends or family members engaged in the war. If the situation escalates, they
may be called up for additional
reserve duty sooner than expected, additional employees may be called for service, and such persons may be absent for an extended
period
of time. This may materially and adversely affect our business operations, including product development, and our ability to meet our
customers’ expectations,
and could cause our competitive position to be impacted and our sales to decrease.
While temporary ceasefire agreements were brokered with each of Hamas and Hezbollah,
the intensity and duration of Israel’s current war against Hamas, as
well as it campaign against Hezbollah, is difficult to predict,
as are the economic implications on our business and operations and on Israel’s economy in general. These
events may be intertwined
with wider macroeconomic indications of a deterioration of Israel’s economic standing. For example, in August 2024, Fitch downgraded
Israel’s Long-Term Foreign-Currency Issuer Default Rating to ‘A’ from ‘A+’ and in September 2024
Moody’s downgraded Israel’s credit rating to ‘Baa1’ from ‘A2’.
While we cannot directly point to negative
consequences of these downgrades, if further downgrades from ratings agencies were to follow, such downgrades may
negatively affect our
business or our ability to conduct our operations.
Moreover, the perception of Israel and Israeli companies by the global community (including,
for example, in light of the interim ruling rendered by the
International Court of Justice (ICJ) in a case filed by South Africa against
Israel in January 2024) may cause an increase in formal and informal sanctions against Israel,
Israeli companies and their products and
services. There have been increased efforts by countries, activists and organizations to cause companies and consumers to
boycott Israeli
goods and services. Additionally, in November of 2024, the International Criminal Court (ICC) issued arrest warrants for Israel’s
Prime Minister and then-
Defense Minister. Such efforts, particularly if they become widespread, as well as the ICJ and ICC rulings and
possible future rulings and orders of other tribunals against
Israel, and any related significant downturn in the economic or financial
condition of Israel, could materially and adversely impact our business operations.
The hostilities with Hamas, Hezbollah, Iran and other organizations and countries now
and in the past have included and may include terror, missile and drone
attacks. In the event that our facilities are damaged as a result
of an armed attack, our immediate ability to maintain business continuity may be impaired, and we would
likely suffer substantial direct
and indirect costs, that may not be recoverable from our commercial insurance. Although the Israeli government currently covers the
reinstatement
value of direct damages that are caused by terrorist attacks or acts of war, we cannot be assured that such government coverage will be
maintained or that it
will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse
effect on our business.
31
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 interest (or such other
interest rate that
the IIA may set in the future) and net of royalties actually paid as of December 31, 2024, totalled approximately $14.1
million and the amortized cost (using the interest
method) of the liability as of that date totalled approximately $8.3 million. As of
December 31, 2024, we had accrued and paid net royalties to the IIA in an amount of
$2.2 million. As of December 31, 2018, we determined
that we will no longer be supported by the IIA. As a result, since 2020 we did not submit applications for IIA
grants and we do not plan
to submit in 2025.
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.
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.
32
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. 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.
Item 4.
INFORMATION ON THE COMPANY
A.
History and Development of the Company
Our History
Our legal name is MediWound Ltd. and our commercial name is MediWound.
We are a company limited by shares organized under the laws of
the State of Israel. MediWound was founded 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.
33
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. 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.
Principal Capital Expenditures
For a description of our principal capital expenditures and divestitures,
see ITEM 5. “Operating and Financial Review and Prospects-Liquidity and Capital
Resources” and Note 15A(3) to our consolidated
financial statements included elsewhere in this annual report.
B.
Business Overview
We are a global leader in next-generation enzymatic therapeutics
focused on non-surgical tissue repair. Our solutions selectively remove non-viable hazardous
tissue while preserving healthy tissue, offering
a safer and more effective alternative to traditional methods. With robust in-house research, development, and
manufacturing capabilities,
the company produces and commercializes cutting-edge biologics for wound and burn care that exceed existing standards of care, improve
patient outcomes, and reduce healthcare costs by eliminating the need for surgical interventions.
Our flagship product, NexoBrid, is a topically administered biological
orphan drug that enzymatically removes eschar while preserving viable tissue in patients
with deep partial- and full-thickness thermal
burns. It is approved for use in more than 40 countries, including the United States, in the European Union, and Japan.
Building on our proprietary enzymatic technology, we are advancing EscharEx®,
a Phase III pipeline drug for the treatment of chronic wounds. EscharEx is a
bioactive, multimodal debridement therapy for the treatment
of chronic and other hard-to-heal wounds, currently in the advanced stages of clinical development. It is a
concentrate of proteolytic
enzymes, enriched with bromelain, designed for topical and easy-to-use daily applications. In three Phase II clinical trials, EscharEx
has
demonstrated a strong safety profile and efficacy in debridement, granulation tissue promotion, and the reduction of bioburden and
biofilm, effectively preparing wound
beds for healing. In February 2025 we announced the initiation of VALUE, a global, pivotal Phase
III trial evaluating EscharEx for the treatment of venous leg ulcers
(VLUs). In addition to the VALUE study, we plan to initiate a randomized,
head-to-head Phase II study in 2025, comparing EscharEx to collagenase in VLU patients.
Furthermore, we are advancing preparations for
an adaptive design Phase II/III clinical trial targeting diabetic foot ulcers (DFUs), which is expected to begin in 2026.
Our pipeline also includes MW005, a topical therapeutic for the treatment of basal cell
carcinoma that has demonstrated positive results in a Phase I/II study.
We manufacture NexoBrid and our product candidates in our cGMP
certified sterile manufacturing facility at our headquarters in Yavne, Israel.
Key Recent Developments
NexoBrid
During August 2024, we announced positive results from the NexoBrid
Expanded Access Protocol (NEXT) that were consistent with Phase III studies results in
efficacy.
During August 2024, the FDA expanded the approval of NexoBrid to
include eschar removal in pediatric patients aged newborn through 18 years old with deep
partial-thickness and/or full-thickness thermal
burns. NexoBrid is now authorized for use in the U.S. for all age groups, aligning with its indications in the EU and Japan.
During November 2024, NexoBrid received a Category III CPT code,
which has been posted on the American Medical Association (AMA) website on
December 30, 2024, and will go into effect on July 1, 2025.
34
Additionally, approximately 70 burn centers have completed submissions
to Pharmacy and Therapeutics committees, with approximately 50 centres already
obtaining approval, and nearly all of those placing initial
product orders.
EscharEx
In February 2024 we published a post-hoc head-to-head comparative
analysis of EscharEx vs SANTYL® using data from a Phase II randomized controlled
study, which demonstrated that EscharEx showed significant
superiority over SANTYL in multiple clinical outcome measures: incidence of complete debridement;
median time to achieve complete debridement;
incidence of achieving wound bed preparation (“WBP”); median time to achieve WBP; and time to wound closure. These
data were
presented at three prominent annual wound care conferences: the Wound Healing Society (WHS), the Symposium on Advanced Wound Care (SAWC),
and the
European Wound Management Association (EWMA).
In July 2024, we were selected to receive €16.25 million
in blended funding from the European Innovation Council through its accelerator program, which we
intend to use for the advancement of
the EscharEx development program for patients with DFU.
In July 2024, the results of EscharEx Phase II ChronEx study were
published in THE LANCET’s eClinicalMedicine journal. EscharEx outperformed non-
surgical standard of care in debridement and promotion
of healthy granulation tissue.
In February 2025 we announced the initiation of VALUE, a global,
pivotal Phase III trial evaluating EscharEx for the treatment of venous leg ulcers (VLUs). In
addition to the VALUE study, we plan to
initiate a randomized, head-to-head Phase II study in 2025, comparing EscharEx to collagenase in VLU patients. Furthermore,
the company
is advancing preparations for an adaptive design Phase II/III clinical trial targeting diabetic foot ulcers (DFUs), which is expected
to begin in 2026.
In March 2025 we announced the expansion of the strategic research collaborations with
leading wound care companies to optimize study execution and patient
outcomes. Coloplast will support the Phase II/III DFU trial, alongside
Solventum, Mölnlycke, and MIMEDX, who are contributing to the VLU trials. These industry
leaders will supply advanced wound care
products to ensure consistent management across all study sites.
MW005
In July 2023, we announced positive results in our U.S. Phase I/II
study of MW005 for the treatment of basal cell carcinoma. Fifteen patients were treated with
MW005 and completed the study. Results showed
MW005 was well-tolerated, with a high level of patient compliance. Based on clinical assessments, eleven out of
fifteen patients achieved
complete clearance of their BCCs; the majority of these patients also had histologically confirmed complete clearance.
Operations
In July 2023, we signed a turnkey scale-up agreement (the “Scale-up
Agreement”) to establish, commission, and validate a cutting-edge, sterile, and GMP-
compliant manufacturing facility. Construction
of the new GMP-compliant state-of-the-art manufacturing facility was completed as of August 2024, with commissioning
underway. The facility
is expected to reach full operational capacity by the end of 2025, increasing manufacturing output sixfold. Commercial availability will
depend on
securing the necessary regulatory approvals.
Private
Placement and Collaboration Agreement
During July 2024, we entered into a Share Purchase Agreement (the
“SPA”) with Mölnlycke Health Care AB (“Mölnlycke), Yelin Lapidot and Teva for the offer
and sale of our ordinary
shares, in which $25 million of gross proceeds were raised. In connection with the entry into the SPA, we entered into a registration
rights
agreement with the purchasers, providing them customary registration rights, and fulfilled the terms of that agreement by filing
a resale registration statement of Form F-
3 that was declared effective by the SEC in September 2024, enabling the resale of those shares.
Additionally, we entered into a collaboration and rights agreement with
Mölnlycke (the “Collaboration Agreement”), in
which MediWound is able to benefit from Mölnlycke’s comprehensive global expertise in advanced wound care, and
Mölnlycke
is provided certain specific rights, including, meeting rights, evaluations rights related to EscharEx, right to provide a first offer
(under certain terms) in
process for an acquisition of MediWound, and customary preemptive rights.
Our Focus:
Burn Care
Burns are a significant global health concern, causing severe physical
and psychological harm while placing considerable burdens on patients and healthcare
systems. Immediate and effective removal of necrotic
tissue is crucial to reducing infection risk and ensuring optimal healing; however, traditional surgical methods can
be invasive and imprecise.
NexoBrid, our innovative enzymatic debridement therapy, addresses this unmet need by selectively removing non-viable tissue while
preserving
healthy skin. By offering a less invasive alternative to surgery, NexoBrid promotes faster healing, reduces complications, and improves
the overall quality of
burn care for patients around the world.
35
NexoBrid, a concentrate of proteolytic enzymes enriched in bromelain,
is a topically administered biological orphan drug that enzymatically removes eschar
while preserving viable tissue in patients with deep
partial- and full-thickness thermal burns. It is approved in more than 40 countries, including the United States,
European Union, and
Japan. NexoBrid has been investigated in hundreds of patients across more than 22 countries and four continents in ten completed Phase
II, Phase
III and post-marketing clinical studies. Over 14,000 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. 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 the support of burn specialists
and key opinion leaders. Awareness of NexoBrid continues to grow through our marketing efforts in countries where the drug 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.
○
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.
36
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.
○
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.
37
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 160,000 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, Asia-Pacific countries, and the
Middle East.
Beyond its commercial applications, we believe NexoBrid has the potential to play
a critical role in burn mass casualty incidents (“BMCI”), which occur when
emergency medical resources are overwhelmed by
the number and severity of casualties. BMCI events can arise from various emergencies, including terrorist attacks,
natural disasters,
fires, and explosions. A specific type of BMCI is a mass burn casualty disaster, which the American Burn Association defines as an event
where the
number of burn victims exceeds the capacity of local burn centers to provide optimal care. In such scenarios, patient backlogs
may delay treatment, exacerbating clinical
outcomes. Non-surgical eschar removal methods that are both rapid and selective—such
as NexoBrid—have the potential to alleviate the burden on healthcare systems
during BMCI events. By enabling eschar removal without
harming viable tissue, NexoBrid may reduce the time, labor, and resource constraints associated with
traditional surgical debridement,
allowing more patients to receive timely treatment. In the event of a BMCI, healthcare professionals can administer NexoBrid directly
at
the patient’s bedside, without requiring a surgical team or operating room facilities. Clinical studies have demonstrated that
NexoBrid effectively removes eschar in a
single four-hour application with statistical significance. Once the acute phase of treatment
is completed, wounds can be covered with available materials and further
managed once BMCI-related bottlenecks are alleviated. NexoBrid
has been recognized by the U.S. Biomedical Advanced Research and Development Authority
(“BARDA”) as a medical countermeasure
for burn treatment in BMCI scenarios. Additionally, The World Health Organization (WHO) has recently recognized
enzymatic debridement
as a validated treatment for burn injuries. This recognition, featured in the WHO’s Standards and Recommendations for BMCI guidelines
for
emergency medical teams, highlights NexoBrid’s critical role in emergency preparedness. It also bolsters efforts to implement
strategic stockpiling plans within the
European Union through the Health Emergency Preparedness and Response Authority (HERA).
Governmental Support
1.
BARDA
In September 2015, we were awarded the First BARDA Contract for
treatment of thermal burn injuries. This contract was amended several times over the years
to extend its term until September 2025 and
its total value, up to a total amount of $175 million comprised of up to $110 million to support research and development
activities and
up to $65 million to procure NexoBrid for U.S. emergency preparedness.
The First BARDA Contract provided funding and technical support
for the pivotal U.S. Phase III clinical study (DETECT), the randomized, controlled pivotal
clinical trial for use in the pediatric population
(CIDS), the marketing approval registration process for NexoBrid as well as its procurement and availability under the
expanded access
treatment protocol (NEXT) in the U.S.
As of December 31, 2024, the Company has recognized a cumulative
total of $94.6 million in revenues from development services, and an additional $16.5
million for procurement of NexoBrid for U.S. emergency
preparedness.
The First BARDA Contract can be terminated by BARDA at any time
at BARDA’s discretion.
DoD and MTEC contracts
In February 2022, the Company entered into a contract with the
DoD through the Medical Technology Enterprise Consortium (MTEC) to advance the
development of a temperature-stable formulation of NexoBrid
for field-care burn treatment for the U.S. Army. This contract was subsequently amended multiple times
throughout 2023–2024 to expand
funding, bringing the total contract value to $13.4 million.
38
Additionally, the Company was awarded $1.2 million in direct
funding from MTEC to further support the development of the temperature-stable NexoBrid
formulation.
As of December 31, 2024, the Company has recognized a cumulative
total of $9.5 million in revenues from development services the DOD and MTEC
contracts.
The MTEC contract may be terminated by MTEC at any time at MTEC’s
discretion.
NexoBrid Clinical History
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”). 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 ten 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.”
39
The following table sets forth information regarding the completed
clinical trials of NexoBrid:
Trial 1
Trial 2
Trial 3
Trial 4
Trial 5
Trial 6
Trial 7
Trial 8
Trial 9
Trial 10
Study
Type
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
Phase III
IND/FDA
Design
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
multicenter,
multinational,
randomized,
controlled,
open-label
study in
children
Main
Objectives
Safety and
efficacy
Comparison
of efficacy
and safety
Safety and
efficacy
Safety
Safety
Efficacy
Long-term
scar
assessment
Quality of
life
Safety and
pharmacokinetics
Efficacy
Effectiveness
of the risk
minimization
activities
Safety
Efficacy
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
Scar
formation
Deep partial/full
thickness thermal
burns
Burns which
were treated
with
NexoBrid in
the market
Deep
partial/ full
thickness
thermal
burns
Deep partial/
full thickness
thermal burns
Number
of
Patients
154
20
140
30
182
89
36
160
175
145
Study
Length
1985-2000
2002-2005
2003-2004
2006-2007
2006-2009
2011
2009-2015
2017-2019
2015-2020
2015-2023
Location
Israel
Israel
International
United
States
International
International
International
Europe
International
International
Completed clinical trial
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 was funded by BARDA. See “BARDA Contracts” above. NEXT was designed to be consistent with
current
real-life burn treatment practices in the U.S. and 29 burn centers across the U.S. participated. We had received FDA concurrence
that patients could be treated under the
NEXT protocol in a BMCI that is not a declared national emergency. In August 2024, we announced
positive results of the NEXT, with findings consistent with Phase III
studies results in efficacy.
Wound Care
Chronic wounds, such as DFUs and VLUs, pose significant challenges
to patients and healthcare providers, often leading to infections, reduced mobility, and
diminished quality of life. EscharEx, our enzymatic
debridement therapy in development, is designed to address this unmet need by selectively removing necrotic tissue
while preserving healthy
tissue, thereby facilitating faster and more effective wound healing. With its targeted action and gentle application, if successfully
developed,
EscharEx has the potential to offer a novel alternative to traditional debridement methods, ultimately improving outcomes and
reducing the burden of chronic wounds.
40
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 and/or other devitalized tissue is a frequent cause for “chronification”
of wounds and the removal of this non-viable material is the key step to commence
healing. The non-viable material 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 around 100 healthcare professionals in the U.S. and Europe, which
was presented by us on January 2025, by 2028 there will
be approximately 1.7 million VLUs. Approximately 68%, or 1.16 million, of those VLU wounds
will require debridement. 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.
•
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, which was
presented by us on January 2025 on EscharEx that involved around 100 healthcare
professionals in the U.S., by 2028 there will be 2.4 million
DFUs in the United States, of which approximately 1.82 million will undergo debridement.
•
Pressure ulcers. Pressure ulcers, also known as pressure sores, or bed sores, are injuries
to the skin or the tissue beneath the skin caused by pressure applied
to the skin and subsequent death of the tissue as a result of the
reduced blood supply. 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 heels, elbows, the sacral area, and back
of the head. Annually, 2.5
million pressure ulcers are treated in the United States.
•
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, many times 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 bone
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 a collagenase-based
enzymatic debriding ointment, hydrogels and other topical dressings, which require numerous application sessions over a long duration
(6-12 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
all care settings. 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 rapid wound debridement without the need for
surgery.
Based on market research conducted by Alira Health, EscharEx’s total addressable market (TAM) in the U.S. was assessed at $2.5 billion.
With a projected 22%
market share upon approval, peak U.S. sales are expected to reach approximately $725 million.
41
EscharEx Clinical History
EscharEx is a topical agent being developed for debridement of
chronic 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, EscharEx demonstrated even higher potency in lower doses, which could further contribute to EscharEx’s potential efficacy
and tolerability.
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 EscharEx can address the unmet medical need for a non-surgical
rapid and effective product, and has a potential to achieve substantial market share.
EscharEx is more differentiated from NexoBrid, which further limits
the chances for competition between the two products.
In February 2025 we announced the initiation of VALUE, a global,
pivotal Phase III trial evaluating EscharEx for the treatment of venous leg ulcers (VLUs).
Furthermore, the company is advancing preparations
for an adaptive design Phase II/III clinical trial targeting DFUs, which is expected to begin in 2026.
In March 2025 we announced the expansion of the strategic research collaborations with
leading wound care companies to optimize study execution and patient
outcomes. Coloplast will support the Phase II/III DFU trial, alongside
Solventum, Mölnlycke, and MIMEDX, who are contributing to the VLU trials. These industry
leaders will supply advanced wound care
products to ensure consistent management across all study sites.
In February 2024 we announced a head-to-head comparative post-hoc
analysis of EscharEx vs SANTYL®. Data from a Phase II randomized controlled study
demonstrated significant superiority of EscharEx
over SANTYL® in multiple clinical outcome measures: incidence of complete debridement; median time to achieve
complete debridement;
incidence of achieving wound bed preparation (WBP); median time to achieve WBP; and time to wound closure. In addition to the VALUE study,
we plan to initiate a randomized, head-to-head Phase II study in VLU patients in 2025, comparing EscharEx to collagenase SANTYL®
ointment, approved by the FDA
for debriding chronic dermal ulcers , and to Iruxol®, the version of collagenase approved
for use and marketed in certain countries in Europe.
Ongoing clinical trials
Phase III Pivotal Trial of EscharEx for Venous Leg Ulcers
In February 2025 we initiated the VALUE, a global, pivotal Phase
III trial evaluating EscharEx® for the treatment of venous leg ulcers (VLUs).
The VALUE study is a global, multicenter, prospective, randomized,
double-blind, placebo-controlled trial with an adaptive design, that will be conducted
across 40 sites in the U.S. and Europe. Its primary
objective is to evaluate the efficacy and safety of EscharEx in achieving effective debridement and preparing the
wound bed for healing
in VLUs. The study will enroll 216 patients, randomized 1:1 to receive either EscharEx or placebo. Patients will undergo up to eight daily
applications over two weeks, followed by ten weeks of standardized wound management. Patients achieving wound bed preparation—defined
as complete debridement
and full coverage with granulation tissue—will receive a cellular/tissue-based product (CTP) or an autograft.
Those achieving complete wound closure will be monitored
for an additional 12 weeks.
The study co-primary endpoints are the incidence of complete debridement
and the incidence of complete wound closure. Secondary endpoints include the
incidence of complete granulation tissue, time to debridement,
time to complete wound closure, and changes in wound area. Safety and tolerability of EscharEx will be
assessed throughout the trial.
An interim sample size assessment will occur after 65% of patients complete treatments, enabling adaptive adjustments as needed.
To support the trial, we have established strategic research collaborations
with Solventum, Mölnlycke, and MIMEDX. These industry leaders will provide
advanced products to ensure consistent wound management
across all study sites and optimize patient outcomes.
42
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 demonstrated positive efficacy results in debriding various chronic and other hard-to-heal wound
etiologies,
such as VLUs, DFUs, pressure sores and trauma on diseased skin.
Second Phase II study-Israel/EU - 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 significantly 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.
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 was there a difference in the incidence of debridement, as demonstrated 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).
43
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
data were comparable between the arms.
Second Phase II study-Israel/EU - 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
evaluate safety and tolerability over
extended periods of 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.
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 treated 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 results remained statistically significant
compared to
gel vehicle after adjusting for pre-specified covariates ascribed to patient baseline characteristics, wound size, wound age
and region.
44
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.
In addition, the study showed that EscharEx was well tolerated,
and the overall safety results were 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.
Post-hoc analyses from this study assessed the incidence and time
to wound bed completely covered with granulation tissue. The incidence of achieving
complete debridement and complete cover of the wound
bed with granulation tissue (i.e., wound bed preparation, WBP) during the daily treatment period was 50.0% for
EscharEx vs. 25% for the
Gel Vehicle (p-value= 0.01) and 10% for NSSOC (p-value< 0.0001). The estimated median time to achieve WBP was 11
days for EscharEx vs.
85 days for the Gel Vehicle (p-value= 0.002) and 63 days for the NSSOC (p-value= 0.0106). Furthermore,
it was shown that patients reaching WBP in the study are 4
times more likely to achieve wound closure (p=0004).
45
Post-hoc analyses from this study assessed the incidence and time
to complete debridement, complete granulation, and wound closure in patients treated with
EscharEx (n=46) compared to a sub-group of patients
who were treated with SANTYL® (n=8). Baseline characteristics (age, gender, wound age, wound size) were
comparable in both groups.
The incidence of complete debridement during the daily treatment period (the first two weeks of the study) was 63.0% (95% CI=47.5-76.8)
for EscharEx vs. 0% for SANTYL®; p=0.001. The estimated median time to achieve complete debridement during the study was 9 days (95%
CI=5-15 days) for
EscharEx vs. not achieved for SANTYL® (95% CI=22-Not Applicable); p=0.023. The incidence of achieving complete
debridement and complete cover of the wound
bed with granulation tissue (i.e., wound bed preparation, WBP) during the daily treatment
period was 50.0% (95% CI = 34.9%-65.1%) for EscharEx vs. 0% for
SANTYL®; p=0.015. The incidence of achieving WBP throughout the study
was 78.3% (95% CI = 63.6-89.1) for EscharEx vs. 37.5% for SANTYL® (95% CI=8.5-
75.5); p=0.03. The estimated median time to achieve
WBP was 11 days (95% CI =7-50 days) for EscharEx vs. not achieved for SANTYL® (95% CI=22-Not
Applicable); p=0.014. 15 of the 46 patients
(32.6%) treated with EscharEx completely closed their wounds during the study, compared to 2 out of 8 patients (25%)
treated with SANTYL®
(NSS). In those patients who achieved complete wound closure, the average time to wound closure was 48.4 days (SD=23.5) for EscharEx vs.
76.0 days (SD=2.8) for SANTYL®; p=0.05. Patient reported applicational pain was comparable in both groups. The safety results and
overall incidence of adverse
wound reactions were comparable between arms.
(1) Comparable incidence of adverse wound reactions identified
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 safety data showed that EscharEx was well-tolerated.
46
The development of EscharEx for the debridement of chronic and
other hard-to-heal wound indications is in Phase II 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
and our pipeline
product candidates requires successful completion of the regulatory approval process, which may suffer delays or fail.”
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.
In July 2023, we announced the final results of this study. Fifteen
patients were treated with MW005 and completed the study. Results showed MW005 was
well-tolerated, with a high level of patient compliance.
Based on clinical assessments, eleven out of fifteen patients achieved complete clearance of their BCCs; the
majority of these patients
also had histologically confirmed complete clearance.
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 and our pipeline product candidates requires successful completion of the regulatory approval process,
which
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 and 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. 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. 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. 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.
47
The global demand for NexoBrid surpasses our current manufacturing
capabilities. We are currently seeking to expand our manufacturing capabilities in order to
increase our capacity to manufacture NexoBrid
and satisfy near term demand. In July 2023, we signed a turnkey scale-up agreement (the “Scale-up Agreement”) to
establish,
commission, and validate a cutting-edge, sterile, and GMP-compliant manufacturing facility. Construction of the new GMP-compliant state-of-the-art
manufacturing facility was completed as of August 2024, with commissioning underway. The facility is expected to reach full operational
capacity by the end of 2025,
increasing manufacturing output sixfold. Commercial availability will depend on securing the necessary regulatory
approvals.
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, 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 sales and 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 have established additional distribution channels through local partners to extend outreach in
EU (France, Switzerland, Greece, Malta,
Bulgaria and Cyprus,), where NexoBrid is already approved for marketing as part of the European marketing authorization.
Additionally,
we expanded NexoBrid’s European market presence by establishing a collaboration with PolyMedics Innovations (PMI) for the promotion
of NexoBrid in
Germany, Austria, Belgium, the Netherlands and Luxembourg. In addition to receiving marketing authorization for NexoBrid
in the EU, 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.
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.
48
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.
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. In 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.
In September 2023, NexoBrid was launched in the U.S. by Vericel.
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 completed 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.
Under our exclusive license and supply agreements with Vericel,
we will receive a double-digit royalty on any additional future BARDA purchases of
NexoBrid. Please see “Vericel License and Supply
Agreements” above.
49
Other
International Markets
In other international markets, we sell NexoBrid through local
distributors with which we have distribution agreements, focusing on Asia Pacific, EMEA and
CEE. We have signed local distribution agreements
for distribution in India, Bangladesh, Sri Lanka, Japan, Australia, New-Zealand, Singapore Vietnam, Philippines,
Taiwan and United Arab
Emirates.
Our distributors in Russia, South Korea, Taiwan, Japan, India and
the United Arab Emirates 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 2025.
For a breakdown of our consolidated revenues by geographic
markets and by categories of operations for the years ended December 31, 2023 and 2024, 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, 2024, we had been granted a total of 88 patents, of which
50 are in force and have 17 pending patent applications.
The family of patents that covers NexoBrid specifically includes 13 granted patents
worldwide that are in force. EscharEx is covered by 13 patents in force worldwide.
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 set to expire in 2025 and in 2029 in
the United States. The NexoBrid patent in the United States that is set
to expire in 2025 is about to be granted a 5-year Patent Term Extension. The NexoBrid patents
issued in Europe and in other foreign jurisdictions
are nominally set to expire in 2025. The patents relating to EscharEx 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 EU and
Israel.
50
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.
As consideration under 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
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, 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. 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 ointment, approved
by the FDA for debriding
chronic dermal ulcers. SANTYL is currently the market-leading enzymatic debridement product, with more
than $370 million in estimated annual sales in the United
States.
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 or less effective non-surgical methods
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 non-viable material in chronic and other hard-to-heal wounds or in
tumor resection and may be comparable or perhaps better
than currently available treatments for connective tissue disorders.
51
NexoBrid received orphan drug status in the United States on August
20, 2003 for debridement of deep partial- and full-thickness burns in hospitalized patients.
In the United States, a sponsor that develops
an orphan drug has marketing exclusivity for seven years post-approval by the FDA, which was granted in 2023. 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.
Seasonality
Our results of operations historically have not been subject to seasonal variations.
Government Legislation and Regulation
Our business is subject to extensive government regulation. Regulation
by governmental authorities in the United States, the EU and other jurisdictions is a
significant factor in the development, manufacture
and marketing of NexoBrid and in ongoing research and development activities.
European Union
The approval process of medicinal products in the EU 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;
•
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 EU 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 OECD requirements.
52
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).
•
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 Council for
Harmonization of Technical Requirements for Pharmaceuticals
for Human Use (“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. 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 EU Clinical Trials Directive required a separate CTA
to be submitted in each member state in which the clinical trial takes place, 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 for multi-center trials. 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 transition period ended on January 31, 2025, and all clinical
trials (and related applications) are now fully 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”)
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.
53
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. 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 EU, including:
•
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 December 2023 we received European Commission approval for the
removal of eschar in deep partial- and full-thickness thermal burns for all ages.
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 EU. 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 EU,
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). 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:
•
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.
54
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 EU 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 EU
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.
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.
55
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 the establishment and maintenance of that
system, and oversees the safety profiles of medicinal products and any emerging safety concerns. 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 and
the Regulatory Framework in the United Kingdom
Following the end of the Brexit transition period on January
1, 2021, and the implementation of the Windsor Framework on January 1, 2025, the United
Kingdom (“UK”) is not generally subject
to EU laws in respect of medicines. The EU laws that have been transposed into UK law through secondary legislation remain
applicable
in the UK, however, new legislation such as the (EU) CTR is not applicable in Great Britain. Under the Medicines and Medical Devices
Act 2021, the
Secretary of State or an ‘appropriate authority’ has delegated powers 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. 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 applied in Northern
Ireland than in England, Wales,
and Scotland, together, Great Britain (“GB”); which continued to follow the EU regulatory
regime. However, on January 1, 2025, a new arrangement called the “Windsor
Framework” came into effect and reintegrated Northern
Ireland under the regulatory authority of the MHRA with respect to medicinal products. The Windsor Framework
removes EU licensing processes
and EU labelling and serialization requirements in relation to Northern Ireland and introduces a UK-wide licensing process for
medicines.
MAs in the UK are governed by the Human Medicines Regulations (SI
2012/1916), as amended. 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. Under the
terms of the Windsor Framework,
these MAs became valid for the whole of the UK from January 1, 2025. In order to use the centralized procedure to obtain an MA that
will
be valid throughout the EEA, companies must be established in the EEA. Therefore, since Brexit, companies established in the UK can no
longer use the EU
centralized procedure and instead an EEA entity must hold any centralized MAs. In order to obtain a UK MA to commercialize
products in the UK, an applicant must be
established in the UK and must follow one of the UK national authorization procedures or one
of the remaining post-Brexit international cooperation procedures.
Applications are governed by the Human Medicines Regulations (SI 2012/1916)
and are made electronically through the MHRA Submissions Portal. The MHRA has
introduced changes to national licensing procedures, including
procedures to prioritize access to new medicines that will benefit patients, a 150-day assessment (subject
to clock-stops) and a rolling
review procedure. In addition, since January 1, 2024, the MHRA may rely on the International Recognition Procedure (“IRP”)
when
reviewing certain types of MAAs. Pursuant to the IRP, the MHRA will take into account the expertise and decision-making of trusted
regulatory partners (e.g., the
regulators in Australia, Canada, Switzerland, Singapore, Japan, the U.S.A. and the EU). The MHRA will conduct
a targeted assessment of IRP applications but retain the
authority to reject applications if the evidence provided is considered insufficiently
robust. The IRP allows medicinal products approved by such trusted regulatory
partners that meet certain criteria to undergo a fast-tracked
MHRA review to obtain and/or update an MA in the UK or Great Britain. Applications should be decided
within a maximum of 60 days
if there are no major objections identified that cannot be resolved within such 60-day period and the approval from the trusted regulatory
partner selected has been granted within the previous 2 years or if there are such major objections identified or such approval hasn’t
been granted within the previous 2
years within 110 days. Applicants can submit initial MAAs to the IRP but the procedure can also be
used throughout the lifecycle of a product for post-authorization
procedures including line extensions, variations and renewals. In the
UK, the initial duration of an MA is five years and following renewal will be valid for an unlimited
period unless the MHRA decides on
justified grounds relating to pharmacovigilance, to proceed with only one additional five-year renewal. Any authorization which is
not
followed by the actual placing of the product on the market in the UK within three (3) years shall cease to be in force.
56
There is no pre-MA orphan designation in the UK. Instead, the MHRA
reviews 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.
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 GMP
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 has 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 EU, 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.
57
United States
Review and approval of biologics
In addition to EU regulations, NexoBrid is marketed as a biologic
product in the United States for eschar removal in patients 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:
•
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.
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.
58
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.
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.
59
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. 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. 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.
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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 disease or condition 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 a disease or condition 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.
61
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.
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. 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.
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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.
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 EU 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:
•
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.
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 eliminated the statutory Medicaid drug rebate cap, which was previously 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 (which began in 2025). CMS has published the negotiated prices
for the initial ten
drugs, which will first be effective in 2026, and has published the list of the subsequent 15 drugs that will be subject
to negotiation. 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. HHS has and will
continue to issue and update guidance as these programs are
implemented, although the Medicare drug price negotiation program is currently subject to legal challenges.
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.
Some states have enacted legislation creating so-called prescription drug affordability boards, which ultimately may attempt to impose
price limits on certain
drugs in these states.
64
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 Regulation entered into force in January
2022 and has been applicable since January 2025, with phased
implementation based on the type of product, i.e. oncology and advanced therapy medicinal products as of
2025, orphan medicinal products
as of 2028, and all other medicinal products by 2030. The HTA Regulation intends to boost cooperation among EU member states in
assessing
health technologies, including new medicinal products, and provide the basis for cooperation at EU level for joint clinical assessments
in these areas.
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.
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:
•
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. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge
of the statute or specific intent to
violate it in order to have committed a violation;
65
•
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.
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 have leased these facilities from a third party. The lease agreement
will expire in 2035, with an option for
a further three year extension until 2038. The facilities consist of approximately 32,300 square feet of space, and the yearly lease
fee
is approximately $648,000. These facilities house our administrative headquarters, our research and development laboratories and our manufacturing
plant for our
products.
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In July 2023, we entered into a turnkey scale-up agreement with
Biopharmax Group Ltd. to bolster our manufacturing infrastructure and support our long-term
growth trajectory. The objective of this agreement
was to establish, commission, and validate a cutting-edge, sterile, and GMP-compliant manufacturing facility. The
venture aimed to increase
our production capacity significantly, projected to expand to six times the current capacity, aligning with our strategic plan to meet
the
escalating global demand for NexoBrid. The new facility, located in Yavne, Israel, equipped with fully operational clean rooms, is
exclusively designed for NexoBrid
production. It complies with stringent regulations from the GMP, FDA, EMA, Israeli Ministry of Health,
and relevant Israeli regulatory bodies. An estimated $12.9
million is invested in the project., During 2024 we completed the construction
of new manufacturing facility with commissioning underway. The facility is expected to
reach full operational capacity by the end of 2025.
Commercial availability will depend on securing the necessary regulatory approvals.
We have furthermore leased additional office space in Yavne, Israel,
consisting of approximately 4,000 square feet, for a term of 2 years, that commenced on
January 1, 2024, with an option for a further
three year extension until 2028. The yearly lease fee is approximately $120,000. For the initial two years of the lease term,
the majority
of our lease payments are being covered by the DOD.
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, and the following
subsidiaries: (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., a wholly-owned subsidiary, 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”.
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, 2024 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, biotherapeutic, 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 Commission and other international markets
for removal of dead or damaged tissue, known as eschar, in patients 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 EU, UK 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.
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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.
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 use in any care 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. 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. 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.
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. In July 2023, we again announced positive results
in our U.S. Phase I/II study of MW005 for the treatment of basal
cell carcinoma. Fifteen patients were treated with MW005 and completed the study. Results showed
MW005 to be safe and well-tolerated,
with a high level of patient compliance. Based on clinical assessments, eleven out of fifteen patients achieved complete clearance
of
their BCCs; the majority of these patients also had histologically confirmed complete clearance.
We manufacture NexoBrid and our product candidates in our cGMP
certified sterile manufacturing facility at our headquarters in Yavne, Israel.
As of December 31, 2024, we had cash and cash equivalents and short
term and restricted bank deposits of $43.6 million. Our revenues were $20.2 million and
$18.7 million in 2024 and 2023, respectively.
Our net operating loss was $19.4 million and $15.3 million in 2024 and 2023, respectively. We had an accumulated deficit
of $205.0 million
as of December 31, 2024. We expect to incur significant expenses and operating losses in the coming years, 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 EscharEx planned clinical trials, as well as the clinical
development and trials of 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 USA, 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 have generated
revenues from
BARDA procurement of NexoBrid for emergency stockpile pursuant to BARDA contract.
We generate revenues from development services provided to BARDA,
and to DoD/MTEC.
68
Our ability to generate additional, more significant revenues will
depend on the successful commercialization of NexoBrid and our ability to scale up the
production.
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.
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. 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 EU, 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.
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, 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 and other temporarily
differences from R&D expenses totalling approximately
$188 million as of December 31, 2024. 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.
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 provide data for each of the years ended December 31, 2024 and 2023. The below discussion of our results of
operations omits
a comparison of our results for the years ended December 31, 2023 and 2022. 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, 2023 Compared to
Year Ended
December 31, 2022” in our Annual Report on Form 20-F for the year ended December 31, 2023, which we filed with the SEC
on March 21, 2024.
69
Years Ended December 31,
2024
2023
(in thousands)
Condensed statements of operations data:
Revenues
$
20,222 $
18,686
Cost of revenues
17,588
15,108
Gross profit
2,634
3,578
Operating expenses:
Research and development
8,878
7,467
Selling and marketing
4,936
4,844
General and administrative
8,202
6,768
Other (income) expenses
18
(211)
Operating loss
(19,400)
(15,290)
Financial income (expenses), net
(10,763)
8,759
Loss before taxes on income
(30,163)
(6,531)
Taxes on income
(61)
(185)
Net loss
$
(30,224) $
(6,716)
Year Ended December 31, 2024 Compared
to Year Ended December 31, 2023
Revenues
Years Ended December 31,
2024
2023
(in thousands)
Revenues from sale of products
$
6,832 $
6,261
Revenues from development services
13,135
12,265
Revenues from license agreements and royalties
255
160
20,222
18,686
We generated total revenues of approximately $20.2 million for
the year ended December 31, 2024 compared to approximately $18.7 million for the year ended
December 31, 2023. The change is primarily
driven by increased revenue from Vericel and new contracts with the U.S. DoD.
70
Revenues from sale of products
Revenues from sales of products in 2024 were $6.8 million, an 8%
increase compared to $6.3 million in 2023 mainly driven by increased revenues from Vericel.
Revenues from development services
Revenues from development services in 2024 were $13.1 million,
a 7% increase compared to $12.3 million in 2023. The increase mainly driven by new
contracts with the U.S. DoD.
Revenues from license agreements and royalties
In 2024, revenues from license agreements and royalties were $0.3
million compared to $0.2 million in 2023, the increase mainly driven by increased royalties
from Vericel.
Our revenues, as reported in our consolidated financial statements,
are based on the location of the customers, as shown in the below table:
Years Ended December 31,
2024
2023
(in thousands)
International (excluding U.S.)
$
4,759 $
5,608
U.S.
15,463
13,078
20,222
18,686
BARDA contributed 31% and 56% of the Company’s total revenues
in 2024 and 2023 respectively. Vericel contributed 12% and 4% of the Company’s total
revenues in 2024 and 2023 respectively. DoD/MTEC
contributed 34% and 10% of the Company’s total revenues in 2024 and 2023 respectively.
Costs and Expenses
Cost of revenues
Years Ended December 31,
2024
2023
(in thousands)
Cost of revenues from sales of products
$
6,440 $
4,927
Cost of revenues from development services
11,128
10,177
Cost of revenues from license agreements and royalties
20
4
17,588
15,108
Cost of revenues as a percentage of total revenues increased from
81% for 2023 to 87% for 2024.
Cost of revenues from sales of products as a percentage of revenues
from sales of products increased to approximately 94% for the year ended December 31,
2024, from approximately 79% in the year ended December
31, 2023. The increase is mainly due to changes in the revenue mix and higher fixed costs associated with
scaling production.
Cost of revenues from development services as a percentage of revenues
from development services was approximately 85% in the year ended December 31,
2024, compared to approximately 83% in the year ended December
31, 2023. The change is largely due to CAPEX expenses associated with DoD contracts which derive
lower margin.
Cost of revenues from license agreements and royalties as a percentage
of revenues from license agreements was 8% in the year ended December 31, 2024
compared to approximately 3% in the year ended December
31,2023. The increase is primarily attributable to shifts in the revenue mix between license agreements and
royalties, which each contribute
different margin.
71
Research and development expenses,
Research and development expenses increased by 19% from approximately
$7.5 million in the year ended December 31, 2023 to approximately $8.9 million in
the year ended December 31, 2024, primarily due to costs
related to the VALUE Phase 3 clinical trial EscharEx.
Selling and marketing expenses
Selling and marketing expenses increased by 2% in 2024 compared
to 2023, from approximately $4.8 million in the year ended December 31, 2023 to
approximately $4.9 million in the year ended December
31, 2024. The increase is mainly due to higher Marketing Authorization Holder costs.
General and administrative expenses
General and administrative expenses increased by 21% in 2024 compared
to 2023 from approximately $6.8 million in the year ended December 31, 2023 to
approximately $8.2 million in the year ended December 31,
2024, mainly reflecting higher share-based compensation costs.
Other (income) expenses
Other one-time incomes for the year ended December 31, 2023 were
$(0.2) million associated with non-cash income resulted with termination of sub-lease
agreement with Clal Biotechnology Industries.
Financial income, net
Years Ended December 31,
2024
2023
(in thousands)
Financial income
$
2,048 $
10,651
Financial expenses
(12,811)
(1,892)
(10,763)
8,759
Financial income
Financial income decreased from approximately $10.7 million in
the year ended December 31, 2023 to approximately $2.0 million in the year ended December
31, 2024. The decrease was primarily driven
by an $8.3 million adjustment resulting from the revaluation of warrants.
Financial expense
Financial expenses increased from approximately $1.9 million in
the year ended December 31, 2023 to approximately $12.8 million in the year ended December
31, 2024. The increase in financial expenses
mainly from the revaluation of warrants following a 75% rise in the Company’s share price in 2024.
B. Liquidity
and Capital Resources
Our primary uses of cash are to fund working capital requirements,
manufacturing costs, research and development activities related to EscharEx and other
products candidates, capital expenditure requirements,
as well as sales and marketing activities associated with the commercialization of NexoBrid in Europe.
Primary Cash Sources
In recent years, we have funded our operations from a combination
of sources, including:
(i)
revenues from sales of NexoBrid to burn centers and hospitals burn units in USA, 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.
(ii)
revenues from BARDA procurement of NexoBrid for emergency stockpiles pursuant to our contract with BARDA;
(iii)
revenues from development services provided to BARDA, and to DoD/MTEC;
(iv)
government grants; and
(v)
public and private offerings of our securities.
72
Recent Public and Private Securities Offerings
On March 7, 2022, we 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 $8.7 million,
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 an additional $1.0 million form that exercise.
On September 26, 2022, we completed a registered direct offering
(the “RD Offering”) in an aggregate amount of $13.3 million representing a combined
purchase price of $12.25 per ordinary
share and warrant for issuance of 1,082,223 ordinary shares and 1,082,223. The warrants became exercisable on November 28,
2022, at an
exercise price of $13.475 per ordinary share and will expire four years following issuance. The net proceeds from this offering in the
amount of $11.7 million
were received on September 28, 2022.
On October 6, 2022 we entered the PIPE Securities Purchase Agreement
with the several purchasers listed on the signature pages thereto (the “PIPE
Purchasers”), under which we offered and sold
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 became 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,
2024, all Pre-Funded Warrants
have been exercised and 91,029 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) 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 years after November 28, 2022, but no more than five
years following the commencement of the sales pursuant to the RD Offering.
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 2023 Offering were approximately $27.5 million.
On July 15, 2024, we entered into a share purchase agreement (the
“2024 Share Purchase Agreement”) with the purchasers listed on the signature pages thereto
(the “2024 Purchasers”),
for the offer and sale of 1,453,488 ordinary shares at a purchase price per share of $17.20 (the “2024 Offering”). The gross
proceeds from the
2024 Offering were $25 million.
Along with our entry into the 2024 Share Purchase Agreement, we
entered into a registration rights agreement with the 2024 Purchasers (the “2024 Registration
Rights Agreement”), providing
the 2024 Purchasers customary registration rights with respect to the ordinary shares to be issued to them pursuant to the 2024 Offering
and any additional Registrable Securities, as defined therein.
Recent Government Grant
On July 16, 2024, we were selected to receive €16.25 million
in blended funding from the European Innovation Council (EIC) through its accelerator program.
The funding package includes a €2.5
million grant and an investment.
Overall Outlook
We believe that our existing cash and cash equivalents, short-term
and restricted bank deposits of $43.6 million as of December 31, 2024, will be sufficient to
fund its operations and capital expenditure
for at least twelve months from the date of issuance of our consolidated financial statements included in this annual report.
73
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.
The accompanying consolidated financial statements have been prepared
on a basis which assumes that the Company will continue as a going concern. From
inception to December 31, 2024, the Company has incurred
cash outflows from operations, losses from operations, and has an accumulated deficit of $205.0 million.
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, 2024. In order to view that discussion, please see “ITEM 5. Operating and Financial Review and Prospects Liquidity
and Capital
Resources” in our Annual Report on Form 20-F for the year ended December 31, 2023, which we filed with the SEC on March 21, 2024:
Year Ended December 31,
2024
2023
Net cash provided by (used in):
Operating activities
$
(13,624) $
(10,465)
Investing activities
(8,397)
(34,321)
Financing activities
19,394
22,917
Net cash used in operating activities
Net cash used in all periods resulted primarily from our net loss
adjusted for non-cash items and changes in components of working capital. Adjustments of non-
cash items include depreciation and amortization,
share-based compensation, revaluation of warrants and changes in assets and liabilities items.
Net cash used in operating activities increased to approximately
$13.6 million in the year ended December 31, 2024 compared to net cash used in operating
activities of approximately $10.5 million in
the year ended December 31, 2023, primarily as a result of our operational net loss, partially offset by adjustment of non-cash
items,
share-based compensation, revaluation of warrants and contingent liabilities.
Net cash used in investing activities
Net cash used in investing activities primarily derives from investment
in short term banks deposits and from purchases of property and equipment mainly
related to scaling up our production facility, offset
by interest received from short term bank deposit. Net cash used in investing activities was $8.4 million in the year
ended December 31,
2024, compared to $34.3 million provided during the year ended December 31, 2023, primarily result of investment in short- term bank deposits
and
investments in property and equipment.
Net cash provided by financing activities
Net cash provided by financing activities consists of proceeds
from the issuance of shares and the exercise of options, offset primarily by the repayment of
liabilities in respect of Teva. For the
year ended December 31, 2024, net cash provided by financing activities was $19.4 million, compared to $22.9 million for the year
ended
December 31, 2023. The decrease is primarily due to a reduction in proceeds from the issuance of shares and an increase in the repayment
of liabilities in respect
of Teva.
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.
74
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 (the “Ordinance”).
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;
•
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 year 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.
75
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.
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.
76
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. 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
on or after January 1, 2017 for at least NIS 200 million, and the sale receives prior approval from the Israeli
Innovation Authority (the
“IIA”).
The 2017 Amendment further provides that a technology company satisfying
certain conditions will qualify as a “Special Preferred Technology Enterprise” and
will thereby enjoy a reduced corporate
tax rate of 6% on “Preferred Technology Income” regardless of the company’s geographic location within Israel. In addition,
a
Special Preferred Technology Enterprise will enjoy a reduced corporate tax rate of 6% on capital gain derived from the sale of certain
“Benefitted Intangible Assets” to a
related foreign company if the Benefitted Intangible Assets were either developed by Special
Preferred Technology Enterprise or acquired from a foreign company on or
after January 1, 2017, and the sale received prior approval from
IIA. A Special Preferred Technology Enterprise that acquires Benefitted Intangible Assets from a foreign
company for more than NIS 500
million will be eligible for these benefits for at least ten years, subject to certain approvals as specified in the Investment Law. Dividends
distributed by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise, to Israeli shareholders paid out of Preferred
Technology Income, are
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).
77
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 31 employees as of
December 31, 2024
and is supported by highly experienced consultants in various research and development disciplines.
We have received government grants (which are subject to repayment
in manner of royalties from future sales) 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 interest and net of royalties
actually paid,
totaled approximately $13.9 million as of December 31, 2024 and the amortized cost (using the interest method) of the liability totaled
approximately $8.3
million and $7.8 million as of December 31, 2024 and 2023, 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, 2024, we had accrued and paid royalties to the IIA totaling $2.2
million.
We received funds from BARDA in accordance with the terms of our
BARDA contracts. As of December 31, 2024 the Company has recognized a cumulative
total of $99.0 million in revenues from development services
from BARDA for its participation in NexoBrid’s research and development programs.
We received funds from DoD and MTEC in accordance with the terms
of our DoD and MTEC contracts. As of December 31, 2024 the Company has recognized
a cumulative total of $9.5 million in revenues from
development services from DOD and MTEC for its participation in the program to develop NexoBrid as a non-
surgical solution for field-care
burn treatment for the U.S. Army. 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. 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:
•
potential reluctancy of central banks in Europe and the U.S. to reduce interest rates for fear of an uptick in inflation, which lack
of action would leave
interest rates at their current relatively high levels and thereby maintain current unfavorable 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 the maintenance of relatively
high interest rates and a
decrease in consumer demand;
•
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; and
•
the increase and potential future increase in tariffs imposed by the U.S. government on foreign countries, or by foreign countries
on the U.S., which could
broadly adversely impact the country-specific or regional economies into which our products are sold, thereby
decreasing our customers’ demand for our
products and resulting in a decrease in our revenues.
We cannot provide any assurances as to the extent of our resilience
to the adverse impact of these specific developments in future periods.
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, 2024 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.
78
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 Note 2 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 19, 2025:
Name
Age
Position
Executive Officers
Ofer Gonen
52
Chief Executive Officer
Shmulik Hess
52
Chief Operating Officer & Chief Commercial Officer
Ety Klinger
63
Chief Research and Development Officer
Hani Luxenburg
52
Chief Financial Officer
Yaron Meyer
46
Executive Vice President, General Counsel and Corporate Secretary
Robert J. Snyder
75
Chief Medical Officer
Directors
Nachum (Homi) Shamir (2)(3)(5)
70
Chairman of the Board of Directors
Vickie R. Driver (1)(4)(5)
71
Director
David Fox (2)(3)(5)
67
Director
Shmuel (Milky) Rubinstein (1)(4)(5)
85
Director
Stephen T. Wills (1)(2)(4)(5)
68
Director
(1)
Member of our audit committee.
(2)
Member of our compensation committee.
(3)
Member of our nominating and governance committee.
(4)
Member of our research and development committee.
(5)
Independent director under the listing rules of the Nasdaq Stock Market.
79
Executive Officers
Ofer Gonen has served
as Chief Executive Officer of MediWound (Nasdaq: MDWD) since 2022, bringing more than 20 years of executive management and
corporate development
experience in the biopharmaceutical industry. Prior to MediWound, Mr. Gonen was the CEO of Clal Biotechnology Industries (TASE: CBI) and
a
managing partner at the Anatomy Medical Technology Fund. He is also the co-founder of Cactus Acquisition Corp. 1 (Nasdaq: CCTS) and
ARTE Venture Group. Mr.
Gonen served as our Board member from September 2003 until July 2022. Mr. Gonen has held board positions at leading
life sciences companies, including Gamida Cell
(Nasdaq: GMDA), Anchiano Therapeutics (Nasdaq: ANCN), Elicio Therapeutics (Nasdaq: ELTX),
and MediWound. He also served on the boards of Colbar and Cadent,
both of which were successfully acquired by Johnson & Johnson and
Novartis, respectively. Mr. Gonen 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. He is an alumnus of the prestigious Talpiot program of the Israeli
Defense Forces.
Shmulik Hess has served
as our Chief Operating Officer since December 2023. Dr. Hess has over two decades of extensive expertise in drug development and
commercial
operations in healthcare. Prior to joining MediWound, he served as Chief Executive Officer at Tabby Therapeutics, Enlivex Therapeutics
(Nasdaq: ENLV),
and Valin Technologies. Formerly, Dr. Hess served as a global operations executive at SciGen Ltd (acquired by VBI Vaccines).
Dr. Hess is the inventor of multiple
patents and author of numerous publications in peer reviewed scientific journals. He received his
Ph.D. in Pharmaceutical Science from the Hebrew University, Israel and
was a research fellow at Harvard-MIT Health Sciences and Technology
(HST).
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.
Hani Luxenburg has
served as our Chief Financial Officer since May 2023. Ms. Luxenberg has over two decades of progressive leadership experience managing
financial and accounting operations. Prior joining MediWound, Ms. Luxenburg served as Chief Financial Officer at BIRD Aerosystems. Prior
to that, she held senior
finance roles at AstraZeneca, Alvarion Technologies Ltd., and Ernst & Young. Ms. Luxenburg is a certified
public accountant and holds a Bachelor of Arts in Economics
and Accounting from the University of Haifa, along with a Bachelor of Law
from IDC Herzliya. In addition, she is a member of the Israel Bar Association.
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.
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. He holds an MSc in Wound Healing and Tissue
Repair from Cardiff University, Wales College of Medicine. 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.
80
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 Stereotaxis (NYSE: STXS) and SSI
Diagnostica, a private-equity owned diagnostics company. Mr. Shamir
holds a Bachelor of Science degree from the Hebrew University of Jerusalem and a Master of
Public Administration from Harvard University.
Vickie R. Driver has
served as a member of our Board since May 2017. Dr. Driver 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 Rhode Island. Her career as a podiatric physician and
surgeon has included a special
emphasis on limb preservation and wound healing in her medical practice, as well as, research and education.
Dr. Driver has been a Professor of Surgery in the
Department of Orthopedics at Brown University (Clinical) since 2014. She has served
for 9 years on the Board of Directors for the Association for the Advancement of
Wound Care (“AAWC”), and recently completed
her tenure as President for this international organization. Dr. Driver is also the chair of Wound Care Experts and U.S.
Food and Drug
Administration (“FDA”) Clinical Endpoints Project. She has just been named to serve as member at large to the Board of Directors
of the Wound Healing
Society (“WHS”) and Board Member to the Critical Limb Ischemia (“CLI”) Global Society. In
addition, she serves on multiple national and international clinical
committees that focus on preventing limb loss and improving wound
healing in the high risk population. She has served as an 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 and has authored over 120 publications and abstracts. 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. Since 2015, she has served as Director, Translational Medicine, Wound Healing at
the Novartis Institute for Biomedical Research. From 2011 to 2014, she was
Program Director, Inaugural Educational Committee at the American
College of Wound Healing and Tissue Repair at University of Illinois School of Medicine. From
2011 to 2015, she was also Scientific Director,
Colorado Prevention Center, Wound Care Laboratory at the University of Colorado. From 2012 to 2015, Dr. Driver held a
number of positions
at the Providence Veterans Administration Medical Center in Rhode Island, including Chief, Section of Podiatric Surgery and Director,
Clinical
Research, Limb Preservation and Wound Healing. Prior thereto, she held various positions at multiple major multidisciplinary
Limb Preservation - Wound Healing
Centers of Excellence. Dr. Driver received a Doctorate of Podiatric Medicine and Surgery from the California
College of Podiatric Medicine and Surgery and a Masters
in Medical Education from Samuel Merritt University.
Mr. David Fox has served
as a member of our board of directors since April 2020, bringing decades of deal and corporate governance expertise. 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 a partner at Skadden, Arps, Slate, Meagher & Flom LLP, where he was a member of its governing
committee. Mr. Fox is a member of the executive committee and
board of directors of the Park Avenue Armory, which enables artists
to create and audiences to experience epic, adventurous work while also offering arts education
programs at no cost to public school students,
and is chairman of the advisory board of New Alternatives for Children, an organization that provides support to families
caring for medically
fragile children. Mr. Fox is the principal of David Fox & Co. LLC an advisory business and CEO of Bald Productions LLC, a movie
and television
development and production company. He is also an advisor to Longacre Square Partners, a communications and special
situations advisory firm and to Nardello & Co,
a global investigations firm. In addition, Mr. Fox serves on the executive committee
and the board of governors, and is an honorary fellow, of the Hebrew University,
Jerusalem. He holds an LL.B. degree from Jerusalem
University, Israel.
Shmuel “Milky” Rubinstein has
served as a member of our board since August 2023. Mr. Rubinstein brings a distinguished record of leadership in the
pharmaceutical and
biotechnology sectors to our board. Currently serving as Chairman of Trima Pharma, Milky’s expertise extends across various prominent
board roles,
including Strata Skin Sciences (SSKN), Medison Biotech, and Keystone Dental. Notably, he held the esteemed position of CEO
at Taro Pharmaceuticals (TARO),
overseeing its successful acquisition by SUN Pharma. Milky’s extensive board engagements also encompass
Kamada (KMDA), Exalenz (Acquired by VIVO), and Clal
Biotechnology Industries (CBI). With a proven track record, Milky Rubinstein’s
insights are poised to contribute significantly to our company’s strategic direction and
growth.
81
Stephen T. Wills has
served as a member of our Board since May 2017, as Chairman of our Board since October 2017 and as 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. Mr.
Wills has served on the board of directors of Enzon Pharmaceuticals (OTC: ENZN), positioned
as a public company acquisition vehicle, since January 2025. Mr. Wills
serves on the boards of Gamida Cell Ltd. (Nasdaq: GMDA), a leading
cellular and immune therapeutics company from March 2019 through June 2024 (chairman of
audit committee and member of the compensation
and finance committee) , when Gamida was acquired 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 until April 2023, when Amryt was acquired
by Chiesi Farmaceutici. 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 until his retirement in June 2023. 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
Corporation. 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.
There are no family relationships among any of our executive officers
or directors.
There are no arrangements or understandings with major shareholders,
customers, suppliers or others, pursuant to which any person referred to above was
selected as a director or member of senior management.
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, 2024. All
amounts reported in the table reflect the
cost to the company, as recognized in our financial statements for the year ended December 31, 2024.
Name and Position
Salary &
Social
Benefits(1)
Bonus
Share-Based
Payment(2)
Other
Compensation
(3)
Total
(thousand U.S. dollars)(4)
Ofer Gonen, Chief Executive Officer
606
185
986
59
1,836
Shmulik Hess, Chief Operations Officer & Chief Commercial
Officer
315
74
265
41
695
Hani Luxenburg, Chief Financial Officer
287
68
163
40
558
Ety Klinger, Chief Research & Development Officer
298
69
159
17
543
Yaron Meyer, Executive Vice President, General Counsel &
Corporate
Secretary
253
54
131
11
449
(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.
82
(2) Represents the equity-based compensation expenses recorded in the company’s consolidated financial statements for the year
ended December 31, 2024 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 3.7 = 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, 2024 as reported by the Bank of Israel in the year ended December 31, 2024.
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,
2024 was $5.3 million. As of December 31, 2024, options to purchase 303,276 ordinary shares, exercisable at a weighted
average exercise
price of $17.1 per share, and restricted share units (“RSUs”) that may be settled for 45,965 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 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.
Share Incentive Plans
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, which shares will be rolled over to a new share incentive
plan— the 2024 Share Incentive Plan—
that we have adopted.
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 granted 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.
83
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.
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.
2024 Share Incentive Plan
Because the 2014 Plan expired in March 2024, we adopted a new share
incentive plan—the 2024 Share Incentive Plan (the “2024 Plan”) - and obtained our
shareholders’ approval for that
plan at an extraordinary general meeting of shareholders that took place in December 2024. Outstanding grants under the 2014 Plan will
remain subject to the 2014 Plan even after the expiration of that plan, but any ordinary shares available under the 2014 Plan as of the
adoption of the 2024 Plan, or that
subsequently become available under the 2014 Plan due to the expiration, cancellation, forfeiture or
other surrender of outstanding grants under the 2014 Plan (up to
1,158,641 ordinary shares in total), are (or will become) available for
new grants under the 2024 Plan.
Authorized Shares. Upon
its effectiveness, the 2024 Plan had a total of 280,375 ordinary shares reserved and initially available for issuance, consisting entirely
of 280,375 shares that were rolled over from the 2014 Plan. Out of that initial pool of shares, the number of ordinary shares that may
be issued upon the exercise of
incentive stock options (within the meaning of Section 422 of the Code is capped at 280,375.
In addition to the foregoing 280,375 ordinary shares initially
available under the 2024 Plan, up to 1,158,641 ordinary shares that underlie outstanding awards
under the 2014 Plan may become available
for issuance under the 2024 Plan. Similarly, ordinary shares from among the initial 280,375 shares reserved under the 2024
Plan that become
subject to an award and are ultimately not issued (for any reason) will become available once again under the 2024 Plan.
In keeping with the recommendation of institutional shareholder
and proxy advisory groups, the 2024 Plan does not contain an “evergreen” provision that
provides for an automatic annual
increase in the number of ordinary shares available under the plan. Instead, we will request shareholder approval for any increase in
the
pool of shares available under the 2024 Plan.
Administration. A
duly authorized committee of our board of directors (which, based on prior authorization by our board, is our compensation committee),
or,
in the absence of any such committee, the board itself, will administer the 2024 Plan. Under the 2024 Plan, the administrator has
the authority, subject to applicable law,
to interpret the terms of the 2024 Plan and any award agreements or awards granted thereunder,
designate recipients of awards, determine and amend the terms of awards
and take all actions and make all other determinations necessary
for the administration of the 2024 Plan.
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Eligibility. The
2024 Plan provides for granting awards under various tax regimes, including, without limitation, in compliance with Section 102 of
the
Ordinance and Section 3(i) of the Ordinance, and, for awards granted to our United States
employees or service providers, including those who are deemed to be
residents of the United States for tax purposes, Section 422
of the Code and Section 409A of the Code.
Awards. The
2024 Plan provides for the grant of share options (including incentive stock options and nonqualified stock options), ordinary shares,
restricted
shares, restricted share units and other share-based awards to employees, directors, officers, consultants, advisors
and any other persons or entities who provides services
to the company or any parent, subsidiary or affiliate thereof, subject to the
terms and conditions of the 2024 Plan. Options granted under the 2024 Plan to our employees
who are U.S. residents may qualify as
incentive stock options or may be non-qualified stock options.
Grant and Exercise. All
awards granted pursuant to the 2024 Plan will be evidenced by an award agreement in a form approved, from time to time, by the
administrator
in its sole discretion. Unless otherwise determined by the administrator and stated in the award agreement, and subject to the conditions
of the 2024 Plan,
awards vest and become exercisable under the following schedule: 25% of the shares covered by the award, on the first
anniversary of the vesting commencement date
determined by the administrator (and in the absence of such determination, the date on which
such award was granted), and 6.25% of the shares covered by the award at
the end of each subsequent three-month period thereafter
over the course of the following three years; provided that the grantee remains continuously as an employee or
provides services
to the company throughout such vesting dates. The exercise period of an award will be ten years from the date of grant of the award,
unless otherwise
determined by the administrator and stated in the award agreement.
Termination of Employment. In
the event of termination of a grantee’s employment or service with the company or any of its affiliates (including by reason of
death, disability or retirement), different rules apply as to the length of time during which all vested and exercisable awards held
by such grantee as of the date of
termination may be exercised after such date of termination. In the case of termination due to death
during employment or service for the company or any of its affiliates,
or within the three month period (or such longer period of time
as determined by the board, in its discretion) after the date of termination, any outstanding awards shall
automatically vest (to the
extent not yet vested).
Any awards which are unvested as of the date of such termination
(other than in the case of death, as described above) or which are vested but not then exercised
within the applicable period following
such date, will terminate and the shares covered by such awards shall again be available for issuance under the 2024 Plan.
Notwithstanding any of the foregoing, if a grantee’s employment
or services with us or any of our affiliates is terminated for “cause” (as defined in the 2024
Plan), all outstanding awards
held by such grantee (whether vested or unvested) will terminate on the date of such termination and the shares covered by such awards
shall again be available for issuance under the 2024 Plan. In the case of termination for cause, any shares issued upon exercise or (if
applicable) vesting of awards, shall
be deemed to be irrevocably offered for sale to us.
Adjustments due to Transactions. The
2024 Plan provides for appropriate adjustments to be made to the plan and to outstanding awards under the plan in the
event of a share
split, reverse share split, share dividend, distribution, recapitalization, combination, reclassification of our shares, or any similar
recapitalization events.
In the event of any type of merger, consolidation, similar transaction
with or into another corporation, exchange of shares, a business combination, a
reorganization, a spin-off or other corporate divestiture
or division, or other similar occurrences, any adjustments as determined by the compensation committee may be
made without the need for
a consent of any holder of an award.
With respect to the distribution of a cash dividend to all holders
of ordinary shares, the compensation committee shall have the authority to determine, without
award holder consent, that the exercise
price of any award that is outstanding and unexercised on the record date of such distribution, shall be reduced by an amount
equal to
the per share gross dividend amount distributed by us. The compensation committee may determine that the exercise price following such
reduction shall be not
less than the par value of a share. The approval of our shareholders will need to be obtained for that reduction
in exercise price.
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In the event of a sale of all, or substantially all, of our
ordinary shares or assets, a merger, consolidation amalgamation, or similar transaction, or certain changes
in the composition of the
board of directors, or liquidation or dissolution, or such other transaction or circumstances that the Board determines to be a relevant
transaction, then the compensation committee shall make determinations with respect to the treatment of awards in accordance with certain
pre-set criteria, which depend
upon whether the consideration in such transaction consists of shares, other securities and/or cash.
Amendment and Termination. The
board may suspend, terminate, modify or amend the 2024 Plan at any time; provided that no termination or amendment of
the 2024 Plan shall
affect any then outstanding award unless expressly provided by the board. Shareholder approval of any amendment to the 2024 Plan will
be obtained
to the extent necessary to comply with applicable law. The administrator at any time and from time to time may modify
or amend any award theretofore granted under the
2024 Plan, including any award agreement, whether retroactively or prospectively.
Limitation on Option/Other
Award Repricing. The 2024 Plan generally allows us to reprice options that we grant under the plan only
if we obtain shareholder
approval. However, the exercise price per share of an existing award
may be reduced by the compensation committee by the amount of a dividend that we declare on our
ordinary shares while the award is outstanding.
That would enable a grantee to benefit from a dividend that we declare and that all of our shareholders receive.
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, 2025:
Name
Number of
Options
Number of
RSUs
Grant Date
Exercise
Price - $
Vested
Options/RSU’s
Expiration Date
Ofer Gonen
85,714
07/06/2022
14.42
58,928
06/06/2032
35,714
07/06/2022
0
15,625
86,000
31/05/2023
11.89
37,625
30/05/2033
94,273
26/02/2024
12.73
23,568
25/02/2034
11,784
26/02/2024
0
2,946
68,000
11/02/2025
18.54
0
10/02/3035
8,500
11/02/2025
0
0
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C. Board
Practices
Board of Directors
Authorities
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.
Composition
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 all current
directors are independent under the Nasdaq Stock Market listing rules
such that we comply with the Nasdaq majority independence rule.
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.
Nominations and Election
In accordance with the Nasdaq listing rules, we have appointed
a committee of the board of directors that is authorized to recommend to our board, for
nomination for election by our shareholders,
director nominees. Please see “Committees of the Board of Directors— Nominating and Governance Committee” below for
more information.
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).
87
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.
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.
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. was 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. Our Board
has confirmed subsequently in an ongoing manner that we continue to fulfill those conditions for exemption
from the Israeli Companies
Law requirements related to (i) the appointment of external directors, and (ii) the composition of the audit committee and compensation
committees of the Board.
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
• 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.
88
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.
Committees 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.
Our audit committee consists of Stephen T. Wills (chairperson), Vickie
R. Driver and Shmuel (Milky) Rubinstein, 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 Stephen T. Wills is an “audit committee financial expert,” as defined in the SEC regulations, and possesses
accounting and financial expertise, as defined under the
Israeli Companies Law.
Audit committee role
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.
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, but not limited to, the
following:
•
overseeing 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;
•
recommending the engagement or termination of the person filling the office of our internal auditor;
•
pre-approving all audit, audit-related and all permitted non-audit services, and related fees and terms, to be provided to the Company
by the independent
auditor under applicable law and regulations;
•
Establishing policies for hiring employees or former employees of the independent auditor in accordance with applicable law and regulations;
•
reviewing periodically with management, the internal auditor and the independent auditor, the adequacy and effectiveness of the Company’s
system of
internal control over financial reporting;
•
evaluating whether management is effectively communicating to employees and other persons retained by MediWound the importance of
internal
accounting and financial control effectiveness;
•
reviewing with management and the independent auditor the annual and quarterly financial statements of MediWound prior to filing
(or submission, as the
case may be) with the SEC;
•
discussing with management, and review prior to submission, any responses to SEC comments regarding the Company’s financial
statements or financial
reporting;
89
•
discussing with management and MediWound’s independent auditors generally the types of financial information (including earnings
guidance) to be
disclosed in earnings press releases and earnings calls, as well as to analysts and rating agencies;
•
reviewing and discussing with management and MediWound independent auditors MediWound’s earnings press releases, including
the use of any pro
forma, adjusted or other non-GAAP (or non-IFRS compliant) financial information, before their release to the public;
•
reviewing with the MediWound’s general counsel and/or external counsel legal and regulatory matters that could have a material
impact on the financial
statements;
•
establishing procedures for (i) the receipt, retention, and treatment of complaints received by MediWound regarding accounting, internal
accounting
controls or auditing matters; and (ii) the confidential, anonymous submission by employees of MediWound of concerns regarding
questionable accounting
or auditing matters, and review any complaints or concerns received pursuant to such procedures;
•
reviewing with management and the independent auditor risks of material misstatements due to fraud, and the process and controls
implemented by
MediWound to manage the risks;
•
recommending to the Board the retention and termination of the internal auditor, and the internal auditor’s engagement fees
and terms, in accordance with
the Companies Law, approve the internal auditor’s work plan, and review and discuss the internal auditor’s
work on a quarterly basis;
•
reviewing and monitoring, as appropriate, (i) litigation or other legal matters that could have a material impact on MediWound’s
financial results; and (ii)
significant findings of any examination by regulatory authorities or agencies, in the areas of securities,
accounting or tax;
•
receiving reports of suspected business irregularities and legal compliance issues through periodic and, when appropriate, immediate
reporting by members
of MediWound’s management, legal counsel, the independent or internal auditor or pursuant to any “whistleblower
policy” adopted by the Committee.
•
establishing procedures for handling complaints by MediWound’s employees with respect to deficiencies in its business operations,
including the protection
to be granted to such complaining employees;
•
overseeing MediWound’s policies and procedures regarding compliance with applicable financial and accounting related standards,
rules and regulations;
•
reviewing and considering the approval of related party transactions, including transactions between MediWound and a controlling
shareholder (as defined
under the Israeli Companies Law) or a transaction with another person in which a controlling shareholder has a
personal interest, and transactions involving
an office holder (as defined in the Israeli Companies Law) of MediWound that may present
a conflict of interest between the duties of such office holder to
MediWound and his or her personal interests, in each case in accordance
with Nasdaq listing rules, the Israeli Companies Law or as referred by the Board;
•
confirming that MediWound’s independent auditors are informed of the audit committee’s understanding of MediWound’s
related party transactions that are
significant to MediWound; and reviewing and discussing with MediWound’s independent auditors
the auditors’ evaluation of MediWound’s identification
of, accounting for, and disclosure of, its related party transactions,
including any significant matters arising from the audit regarding MediWound’s related
party transactions;
•
discussing MediWound’s policies with respect to risk assessment and risk management, and reviewing contingent liabilities and
risks that may be material
to MediWound and relevant major legislative and regulatory developments that could materially impact MediWound’s
contingent liabilities and risks;
•
reviewing periodically MediWound’s major financial risk exposures and MediWound’s policies for managing such risks;
•
conducting or authorizing investigations into any matters within the audit committee’s scope of responsibilities; and
•
reviewing and approving any material change or waiver in MediWound’s Code of Conduct regarding directors or executive officers,
and disclosures made
in MediWound’s annual report.
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, to the extent
we then
have external directors serving on the Board).
Compensation Committee
Israeli Companies Law 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 compensation 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.
90
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;
•
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
91
•
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 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 Nachum Shamir (chairperson),
David Fox 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.
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, but are
not limited to:
•
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 and Governance Committee
Under Nasdaq corporate governance rules, director nominees must
either be selected, or recommended for the Board’s selection, either by independent directors
constituting a majority of the Board’s
independent directors in a vote in which only independent directors participate, or a nominations committee comprised solely of
independent
directors. If we choose to exempt ourselves from that requirement in accordance with our home country practices, we must disclose that
fact in this annual
report. Each of the members of the nominating committee is required to be independent under the Nasdaq rules.
92
Our Board has established a nominating and governance committee,
whose members consist of David Fox (chairperson) and Nachum Shamir and, each of
whom has been determined by our Board to meet the
Nasdaq independence requirement, with Mr. Fox serving as chair. Our board of directors has adopted a nominating
and governance committee
charter setting forth the responsibilities of the committee, which include, but are not limited to:
•
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
Our Board has established a research and development committee,
which is composed of Vickie R. Driver (chairperson), Stephen T. Wills and Shmuel (Milky)
Rubinstein, with Dr. Driver serving as chairperson.
The primary functions of the research and development committee include, but are not limited to:
•
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.
93
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. 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.
94
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;
•
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.
95
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.
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.
96
D.
Employees
As of December 31, 2024, we had 111 employees, 101 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: 15 employees in the administrative department, 31 employees in the research and
development department, 55 employees in
the manufacturing department and 10 employees in the sales and marketing department. As of December 31, 2024, 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.”
F.
Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
None.
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, 2025 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 11,251,766 ordinary shares issued and outstanding
as of March 15, 2025.
Ordinary shares that are issuable under stock options or RSUs that are currently exercisable or exercisable within 60 days of March 15,
2025 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. 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.
97
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
Number of
Shares
Beneficially
Held
Percentage of
Class
Directors and Executive Officers
Nachum (Homi) Shamir
*
*
Ofer Gonen
182,101
1.7%
Vickie R. Driver
*
*
David Fox
*
*
Shmuel (Milky) Rubinstein
*
*
Stephen T. Wills
*
*
Shmulik Hess
*
*
Ety Klinger
*
*
Hany Luxenburg
*
*
Yaron Meyer
*
*
Robert Snyder
*
*
All executive officers and directors as a group (11 persons)(1)
567,840
5.2%
Principal Shareholders (who are not Directors or Executive Officers)
Clal Biotechnology Industries Ltd. and affiliates (2)
1,481,521
13.7%
Israel Biotech Fund II, L.P. and affiliates (3)
787,018
7.0%
Deep Insight Limited Partnership and affiliates (4)
686,578
6.1%
Rosalind Advisors, Inc. and affiliates (6)
791,315
7.2%
Yelin Lapidot Holdings Management Ltd. And affiliates (7)
851,361
7.9%
*
Less than 1%.
(1) Shares beneficially owned consist of 123,279 ordinary shares held directly or indirectly by such executive officers and directors
and 444,561 ordinary shares issuable
upon exercise of outstanding options that are currently exercisable or exercisable within 60 days
of March 15, 2024.
(2) Based solely on Schedule 13D/A filed on July 19, 2024, Clal Biotechnology Industries Ltd. (“CBI”) owns directly 308,811
ordinary shares, and may be deemed to
share voting and investment power over the 1,172,710 ordinary shares owned directly by Clal Life
Sciences L.P. (“CLS”), the general partner of which, Clal
Application Center Ltd., is wholly owned by CBI. Each of Access
Industries Holdings LLC (“AIH”), Access Industries, LLC (“Access LLC”), Access Industries
Management, LLC (“AIM”),
Clal Industries Ltd. (“Clal Industries”) and Mr. Blavatnik may be deemed to share voting and investment power over the ordinary
shares owned directly by CBI and CLS because (i) Len Blavatnik controls AIM, AIH, Access LLC and AI International GP Limited (the general
partner of AI SMS,
as defined below), (ii) AIM controls Access LLC and AIH, (iii) Access LLC controls a majority of the outstanding voting
interests in AIH, (iv) AIH owns a majority
of the equity of AI SMS L.P. (“AI SMS”), (v) AI SMS controls AI Diversified Holdings
Ltd. (“Holdings Limited”), (vi) Holdings Limited owns AI Diversified
Parent S.à r.l., which owns AI Diversified Holdings
S.à r.l., which owns Access AI Ltd (“Access AI”), (vii) Access AI wholly owns Clal Industries, (viii) Clal
Industries
is the controlling shareholder of CBI, and (ix) CBI is the sole shareholder of Clal Application Center Ltd. The Reporting Persons, other
than CBI and
CLS, and each of their affiliated entities and the officers, partners, members and managers thereof, disclaims beneficial
ownership of these securities. 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.
98
(3) Based on information provided by the shareholder, the 787,018 ordinary shares include 408,397 ordinary shares that are issuable upon
the exercise of warrants held
directly by Israel Biotech Fund II, L.P. (“IBF II”). Israel Biotech Fund GP Partners II, L.P.
(“IBF GP”) is the sole general partner of IBF II, and I.B.F Management
Ltd. (“IBF Management”) is the sole general
partner of IBF GP. IBF GP and IBF Management may be deemed to share voting and dispositive power with respect to
the ordinary shares that
are beneficially owned by IBF II. The address IBF Management is HaOgen Tower, 4 Oppenheimer St., Rehovot 7670104, Israel and the
address
of the other reporting persons is 75 Fort Street, Clifton House, PO Box, 1350, KY1-1108, Grand Cayman.
(4) Based on information provided by the shareholder, the 686,578 ordinary shares include 408,397 ordinary shares that are issuable upon
the exercise of warrants held
directly by Deep Insight Limited Partnership (“Deep Insight”). Deep Insight Fund GP Limited
Partnership (“Deep Insight GP LP”) is the sole general partner of
Deep Insight, Deep Insight GP Ltd. (“Deep Insight
GP Company”) is the sole general partner of Deep Insight GP LP, Deep Insight Management Ltd. (“Deep Insight
Management”)
is the management company of Deep Insight GP LP and each of Barak Ben-Eliezer and Dr. Eyal Kishon hold 50% of the outstanding shares of
Deep
Insight GP Company and Deep Insight Management. Deep Insight GP LP, Deep Insight GP Company, Deep Insight Management, Barak Ben-Eliezer
and Dr. Eyal
Kishon may be deemed to share voting and dispositive power with respect to the Ordinary Shares that are beneficially owned
by Deep Insight. Barak Ben-Eliezer
and Dr. Eyal Kishon disclaim beneficial ownership of the Ordinary Shares reported by Deep Insight herein.
The address of each of the reporting persons is 2 Rachel
Imeinu St., Modiin, Israel 7177190.
(5) Based solely on Schedule 13D filed on July 19, 2024, Mölnlycke Health Care AB (“Mölnlycke”), MHC Sweden AB,
Mölnlycke Holding AB, Mölnlycke AB, Rotca
AB, Patricia Industries AB, and Investor AB beneficially own an aggregate of 872,093
ordinary shares, and each reporting person has sole voting power and sole
dispositive power over these ordinary shares. The address of
each of Mölnlycke, MHC Sweden AB, Mölnlycke Holding AB and Mölnlycke AB is Gamlestadsvägen
3C, 415 11, Göteborg,
Sweden. The address of each of Rotca AB, Patricia Industries AB and Investor AB is Arsenalsgatan 8C, SE-103 32, Stockholm, Sweden.
(6) Based solely on Schedule 13G/A filed on February 11, 2025, Rosalind Master Fund L.P. (“RMF”) is the record owner of 628,050
shares of ordinary shares and
163,265 shares of ordinary shares issuable upon exercise of warrants. Rosalind Advisors, Inc. is the investment
advisor to RMF and may be deemed to be the
beneficial owner of shares held by RMF. Steven Salamon is the portfolio manager of Rosalind
Advisors, Inc. and may be deemed to be the beneficial owner of
shares held by RMF. Gilad Aharon is the portfolio manager and member of
the Advisor which advises RMF. The reporting persons mentioned above has shared
voting power and dispositive power with respect to the
shares held by RMF. Notwithstanding the foregoing, Rosalind Advisors, Inc. and Mr. Salamon disclaim
beneficial ownership of the shares.
The address of RMF is P.O. Box 309 Ugland House, Grand Cayman KY1-1104, Cayman Islands, and the address of the rest of
the reporting persons
is 15 Wellesley Street West, Suite 326, Toronto, Ontario M4Y 0G7 Canada.
(7) Based solely on Schedule 13G filed on October
1, 2024, 522,645 ordinary shares are beneficially owned by provident funds managed by Yelin Lapidot Provident
Funds Management Ltd. (“Provident
Funds”), and 228,098 ordinary shares are beneficially owned by mutual funds managed by Yelin Lapidot Mutual Funds
Management Ltd.
(“Mutual Funds”). Each Provident Funds and Mutual Funds is a wholly-owned subsidiary of Yelin Lapidot Holdings Management
Ltd. (“Yelin
Lapidot Holdings”). Yelin Lapidot Holdings, Mr. Dov Yelin and Mr. Yair Lapidot have shared voting power and shared
dispositive power over the ordinary shares
held by Provident Funds and Mutual Funds. Notwithstanding the foregoing, each of Messrs. Yelin
and Lapidot, Yelin Lapidot Holdings, Provident Funds and Mutual
Funds disclaims beneficial ownership of the ordinary shares. The address
of each of the reporting persons is 50 Dizengoff St., Dizengoff Center, Gate 3, Top Tower,
13th
floor, Tel Aviv 64332, Israel.
99
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, 2022, except as follows: as reported in their filings with the SEC, during 2024, CBI and its
affiliates have
decreased their holdings from approximately 16.1% to 13.7% as a result of a dilution from the 2024 Offering as described in ITEM 5. “Operating
and
Financial Review and Prospects-Liquidity and Capital Resources.
Voting Rights
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.
Change in Control Arrangements
We are not aware of any arrangement that may at a subsequent date,
result in a change of control of the Company.
Registered Holders
As of March 15, 2025, 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
85.8]% of the 10,807,689 ordinary shares issued and outstanding as of March 15, 2025. 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.
100
B.
Related Party Transactions
The following is a description of related party transactions we
have entered into since January 1, 2022 with any of the members of our executive officers or
Board and the holders of more than 5% of
our ordinary shares.
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. This agreement was expired on July 2023 due do CBI’s holdings in the Company after the 2024 Offering.
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 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 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 2021 Registration Rights Agreement. That registration statement remains in effect as of the date of this
annual report however, Professor Lior Rosenberg
and his affiliated entity, L.R. Research & Development Ltd. is no longer a party to
this agreement since he has ceased to be an affiliate of the Company. The registration
rights under the 2021 Registration Rights Agreement
are described in more detail in Exhibit 2.1 to this Annual Report, which is incorporated by reference in ITEM 10.B.
Articles of Association.
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.
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, other than our CEO, 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. Our CEO, is entitled upon termination of employment (other than a termination by the Company for Cause, as
defined below), to receive a single lump-sum
payment equal 6 times his salary as of the last day of employment, less deductions and withholdings
under applicable law, subject him signing a separation agreement
and release of known and unknown claims in a customary form provided
by the Company.
101
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, April 3, 2023, August 15, 2023, December 1, 2023, February 26, 2024 and February 11, 2025.
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
None.
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.
Settlement of Litigation Involving Our Company
and Teva
Under a previously reported settlement agreement, as amended, we
were obligated to pay Teva $10.2 million, of which twelve quarterly equal installments were
paid from January 1, 2021 until 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, up to an aggregate amount equal to $7.2 million.
102
On July 15, 2024, we entered into Amendment No. 2 to the settlement
agreement, as amended, in which we agreed to prepay Teva $4 million as the final
payment due from us under this agreement, with 50% of
the prepayment in cash and 50% in the form of our ordinary shares.
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, 2024, 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.
C.
Markets
See “-Listing Details” above.
D.
Selling Shareholders
Not applicable.
E.
Dilution
Not applicable.
F.
Expenses of the Issue
Not applicable.
Item 10.
ADDITIONAL INFORMATION
A.
Share Capital
Not applicable.
B.
Memorandum 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-F, which information is incorporated by reference into this ITEM 10.B. of this annual report.
C.
Material Contracts
Except as described below or otherwise described in this annual
report in ITEM 4.A “History and Development of the Company”, ITEM 4.B “Business
Overview”, “ITEM 5.B ‘Operating
and Financial Review and Prospects—Liquidity and Capital Resources”, ITEM 6.C “Board Practices” and ITEM 7.B “Related
Party
Transactions”, we are not currently, nor have we been for the two years immediately preceding the date of this annual report,
party to any material contract other than
contracts entered into in the ordinary course of business.
103
For a description of the registration rights that are subject to
our 2021 Registration Rights Agreement, see “ITEM 7.B. Related Party Transactions – 2021
Registration Rights Agreement.”
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 Taiwan, 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.
For a description of the main lease agreement, see “ITEM
4. Properties.”
For a description of the turnkey scale-up agreement with Biopharmax
Group Ltd., see “ITEM 4. Properties.”
For a description of the 2024 Share Purchase Agreement, 2024 Registration
Rights Agreement, and Collaboration Agreement with Mölnlycke, see “ITEM 4.A.
Information on the Company-Business Overview”
and “ITEM 5.B. Operating and Financial Review and Prospects-Liquidity and Capital Resources.”
2022 Registration Rights Agreement
In connection with the PIPE Offering (as described in “ITEM
5. Operating and Financial Review and Prospects— B. Liquidity and Capital Resources”), in
October 2022, we entered into a
registration rights agreement with the several investors named in the PIPE Securities Purchase Agreement (the “2022 Registration
Rights
Agreement”). Pursuant to the 2022 Registration Rights Agreement, within 45 calendar days of the date of the closing of the
PIPE, we were required to file a registration
statement to register for resale of (i) Pre-Funded Warrant Shares, (ii) the PIPE Ordinary
Warrant Shares and (iii) the RD Ordinary Share Warrant (together, the
“Registrable Securities”). Pursuant to the 2022 Registration
Rights Agreement, we agreed to cause such registration statement to be declared effective under the
Securities Act of 1933, as amended
(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. We further agreed to 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 otherwise may be sold pursuant to Rule 144 under
the Securities Act. On November 10, 2022, we filed a registration
statement on Form F-1 pursuant to our obligations under the 2022 Registration Rights Agreement,
which became effective on November 25,
2022.
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.
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.
104
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 2024), 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 2024) and a marginal tax rate of up to 47% for an individual in 2024
(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. 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.
105
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).
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
NIS 721,560 for 2024, which amount is generally linked to the annual change in the Israeli consumer price index (with the exception
that
based on new Israeli legislation, that amount, and certain other statutory amounts, will not be linked to the Israeli consumer price index
for the years 2025-2027),
including, but not limited to, dividends, interest and capital gain. According to new legislation, in effect
as of January 1, 2025, an additional 2% excess tax is imposed on
Capital-Sourced Income (defined as income from any source other than
employment income, business income or income from “personal effort”), to the extent that an
individual's Capital Sourced Income
exceeds the specified threshold of NIS 721,560 (and regardless of the employment/or business income amount of such individual).
This new
excess tax applies, among other things, to income from capital gains, dividends, interest, rental income, or the sale of real property.
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;
106
•
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. 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.
107
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. 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. Applicable
U.S. Treasury Regulations have imposed additional requirements that must be met
for a foreign tax to be creditable, depending on the nature of such foreign tax, although
temporary relief from the application of
certain aspects of these Regulations has been provided until new guidance or regulations are issued. 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. Because a U.S. Holder may use foreign tax credits against only
the portion of United States
federal income tax liability that is attributed to foreign source income in the same category, a U.S. Holder’s
ability to utilize a foreign tax credit with respect to the
foreign tax imposed on any such sale or other taxable disposition, if any,
may be significantly limited. Applicable U.S. Treasury Regulations further restrict the
availability of any such credit. However,
a recent notice from the IRS indicates that the U.S. Department of the Treasury and the IRS are considering proposing
amendments to such
Regulations and allows, subject to certain conditions, taxpayers to defer the application of many aspects of such Regulations for taxable
years
beginning on or after December 28, 2021 and ending before the date that a notice or other guidance withdrawing or modifying the
temporary relief is issued (or any later
date specified in such notice or other guidance).
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.
108
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, 2024. 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.
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.
109
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 distributions 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.
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.
110
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 52%, 45% and 45% of our operating expenses
in the years ended December 31, 2024, 2023 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. 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:
Appreciation (Devaluation) of
Period
Shekel against
the U.S. dollar
(%)
Euro
against the U.S.
dollar
(%)
2022
(13.2)
(6.1)
2023
(3.1)
(3.6)
2024
(0.6)
6.3
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 $1.8
million for the year ended December 31, 2024.
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.
111
PART II
Item 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
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
We maintain disclosure controls and procedures (as that term is
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure
that information required to be disclosed
in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
SEC’s
rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and
Chief Financial
Officer, as appropriate, to allow for timely decisions regarding required disclosures. Any controls and procedures, no
matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives.
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, 2024. Based on such evaluation, our Chief Executive Officer and
Chief Financial
Officer have concluded that, as of December 31, 2024, our disclosure controls and procedures were effective at a reasonable assurance
level at a
reasonable level.
(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, 2024. 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, 2024.
(c) Attestation report of the registered public accounting firm
Somekh Chaikin, a member firm of KPMG International, an independent
registered public accounting firm, to which we refer as KPMG Israel, which audited
the financial statements included in this annual report
containing the disclosure required by this Item 15 has issued an attestation report regarding the effectiveness of our
internal control
over financial reporting. That report is included in “ITEM 18. Financial Statements” on page F-2 of this annual report, which
attestation report is
incorporated by reference in this Item 15(c).
(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 Stephen T. Wills 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, Stephen Wills 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.
112
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 2024.
Item 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Principal Accountant Fees and Services
The cost for the following professional services rendered by Somekh
Chaikin, a member firm of KPMG International, Tel-Aviv, Auditor firm ID: 1057, our
independent registered public accounting firm for the
years ended December 31, 2024 and 2023, is as follows:
2024
2023
Audit Fees
$
394,110
$
375,000
Tax Fees
24,895
23,395
Total
$
419,005
$
398,395
“Audit fees”
are the aggregate fees paid for the audit of our annual financial statements for the years 2024 and 2023. 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.
“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.
Pre-Approval Policies and Procedures
The advance approval of the audit committee or members thereof,
to whom approval authority has been delegated, is required for all audit and non- audit
services provided by our auditors.
All services provided by our auditors are approved in advance
by either the audit committee or members thereof, to whom authority has been delegated, in
accordance with the audit committee’s
pre-approval policy.
Item 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
Item 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
Item 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
Item 16G. CORPORATE
GOVERNANCE
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.
113
Item
16J. INSIDER TRADING POLICIES.
We
have adopted insider trading policies and procedures governing the purchase, sale, and other dispositions of our securities
by directors, senior management,
and employees that are reasonably designed to promote compliance with applicable insider trading laws,
rules and regulations, and any listing standards applicable to the
registrant. A copy of the insider trading policy is filed as Exhibit
11.1 to this annual report.
Item
16K. CYBERSECURITY
Cybersecurity
Risk Management and Strategy
We
have adopted a risk-based approach to protecting our information technology systems and confidential information through the adoption
of certain technical
and administrative safeguards, including certain information technology policies intended to protect the confidentiality,
integrity,
and availability of our critical systems
and information. Key elements of our cybersecurity risk management program
include:
•
technical controls deployed to protect more
critical systems and data, such as multi-factor authentication, firewalls, network segregation, and secure file transfer
protocols;
•
disaster recovery and business continuity
plan;
•
monitoring of our information technology
systems for information security risks;
•
based
on their level of risk, cybersecurity assessments of third-party
software / platforms; and
•
regular cybersecurity awareness training
of our employees, designed to help identify any new threats and to address security incidents.
We
have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially
affected or are reasonably
likely to materially affect us, including our operations, business strategy, results of operations, or financial
condition. See “Risk Factors—Risks Related to Healthcare
Laws and Other Legal Compliance Matters—Our
business and operations may suffer in the event of information technology system failures, cyberattacks or deficiencies
in our cybersecurity.”
Cybersecurity
Governance
Our
Board considers cybersecurity risk as part of its overall risk oversight function and oversees management’s implementation of our
cybersecurity risk
management program.
The
Audit Committee receives periodic reports from management on our cybersecurity risks. In addition, management updates the Audit Committee,
where it
deems appropriate, regarding any cybersecurity incidents it considers to be significant, as well as any incidents with lesser
impact potential.
Board
members receive presentations on cybersecurity topics from our Chief Operations Officer, internal security staff or external experts as
part of the Board’s
continuing education on topics that impact public companies.
The
Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full
Board also receives periodic briefings
from management on our cyber risk management program.
114
Our
IT manager, supported by external cybersecurity consultants, is responsible for assessing and managing material risks related to cybersecurity
threats. The
IT manager leads our overall cybersecurity risk management program and oversees the engagement of external
consultants as needed. Our external cybersecurity
consultants provide CISO-level services, including strategic planning, risk management,
compliance oversight, and security operations. Their
team consists of seasoned
professionals with 5 to 25 years of hands-on cybersecurity experience, many of whom have held classified roles
within Israel’s homeland security and defense
establishments.
Our
management team takes steps to stay informed about and monitor efforts to prevent, detect, mitigate, and remediate cybersecurity
risks and incidents
through various means, which may include briefings from internal security personnel; threat intelligence and other
information obtained from governmental, public or
private sources, including external consultants engaged by us; and alerts and reports
produced by security tools deployed in our IT environment.
PART
III
Item
17. FINANCIAL STATEMENTS
Not
applicable.
Item
18. FINANCIAL STATEMENTS
See
pages F-1 through F-49 of this annual report.
Item
19. EXHIBITS
Exhibit
No.
Description
1.1
Amended
and Restated Articles of Association of the Registrant, as amended(1)
1.2
Memorandum
of Association of the Registrant(2)
2.1
Description
of Securities(3)
4.1
Amended
and Restated Registration Rights Agreement dated April 6, 2021 by and among the Registrant and certain shareholders of the
Registrant(4)
4.2
Information
Rights Agreement by and between Clal Biotechnology Industries Ltd. and the Registrant(5)
4.3
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(6)
4.4†
Supply
Agreement, dated January 11, 2001, as amended, by and between the Registrant and Challenge Bioproducts Corporation Ltd.(7)
4.5†
License
Agreement, dated September 22, 2000, as amended, by and between the Registrant and Mark Klein(8)
4.6
Patent
Purchase Agreement, dated November 24, 2010, by and between the Registrant and L.R. R & D Ltd.(9)
4.7*
Form
of Indemnification Agreement(10)
4.8*
2014
Equity Incentive Plan(11)
4.9*#
2024
Equity Incentive Plan
4.10*
MediWound
Ltd.’s Compensation Policy for Executive Officers and Directors(12)
115
4.11.1†
BARDA
Contract, dated September 29, 2015, by and between the Registrant and the U.S. Biomedical Advanced Research and Development
Authority(13)
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(14)
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(15)
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(16)
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(17)
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(18)
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(19)
4.12†
BARDA
Contract, dated September 30, 2018, by and between the Registrant and the U.S. Biomedical Advanced Research and Development
Authority(20)
4.14
Unprotected
Lease Agreement, dated July 13, 2023 between the Registrant and Yezum-Tech(21)
4.15
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.(22)
4.16
Amendment
No. 1 to Settlement Agreement and Mutual General Release as of December 13, 2020, by and among Teva Pharmaceuticals Ltd. and
MediWound
Ltd.(23)
4.17
Amendment
No. 2, dated July 15, 2024, to Settlement Agreement and Mutual General Release, dated March 24, 2019, by and between MediWound
Ltd. and
Teva Pharmaceutical Industries Ltd.(24)
4.18†#
License
Agreement, dated as of May 6, 2019, by and between the Registrant and Vericel Corporation(25)
4.19†#
Supply
Agreement, dated as of May 6, 2019, by and between the Registrant and Vericel Corporation(26)
4.20
Form
of Series A Ordinary Share Purchase Warrant issued in September 2022 pursuant to a registered direct offering of the Registrant (27)
4.21
Form
of Series A Ordinary Share Purchase Warrant issued in October 2022 pursuant to a private placement (PIPE) of the Registrant (28)
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 (29)
4.23
Registration
Rights Agreement, entered into in October 2022, by and between the Registrant and the purchasers of its securities in a registered
direct offering (30)
4.24
Turnkey
scale-up agreement with Biopharmax Group Ltd.(31)
4.25
Form
of Share Purchase Agreement, dated July 15, 2024, by and between the Company and the purchasers listed on the signature pages thereto(32)
116
4.26
Form
of Registration Rights Agreement, dated July 15, 2024, by and between the Company and the purchasers of the Company’s ordinary shares
listed on the signature pages thereto(33)
4.27
Collaboration
and Rights Agreement, dated July 15, 2024, by and between the Company and Mölnlycke Health Care AB(34)
8.1
List
of subsidiaries of the Registrant(35)
11.1#
Insider
Trading Policy
12.1#
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
12.2#
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
13.1##
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
13.2##
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
97.1
Policy
for Recovery of Erroneously Awarded Compensation(36)
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)
†
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.
*
Indicates
management contract or compensatory plan or arrangement.
#
Filed
herewith.
##
Furnished
herewith.
(1)
Previously
filed with the SEC on March 21, 2024 as Exhibit 1.1 to the Registrant’s annual report on Form 20-F for the year ended December 31,
2023 (File No. 001-36349) and incorporated by reference herein.
(2)
Previously
filed with the SEC on March 3, 2014 as Exhibit 3.3 to the Registrant’s registration statement on Form F-1 (File No. 333-193856)
and
incorporated by reference herein.
(3)
Previously
filed with the SEC on March 21, 2024 as Exhibit 2.1 to the Registrant’s annual report on Form 20-F for the year ended December 31,
2023 (File No. 001-36349) and incorporated by reference herein.
(4)
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.
117
(5)
Previously
filed with the SEC on March 3, 2014 as Exhibit 4.3 to the Registrant’s registration statement on Form F-1 (File No. 333-193856)
and
incorporated by reference herein.
(6)
Previously
filed with the SEC on February 10, 2014 as Exhibit 10.2 to the Registrant’s registration statement on Form F-1 (File No. 333-193856)
and incorporated by reference herein.
(7)
Previously
filed with the SEC on February 10, 2014 as Exhibit 10.6 to the Registrant’s registration statement on Form F-1 (File No. 333-193856)
and incorporated by reference herein.
(8)
Previously
filed with the SEC on February 10, 2014 as Exhibit 10.7 to the Registrant’s registration statement on Form F-1 (File No. 333-193856)
and incorporated by reference herein.
(9)
Previously
filed with the SEC on February 10, 2014 as Exhibit 10.4 to the Registrant’s registration statement on Form F-1 (File No. 333-193856)
and incorporated by reference herein.
(10)
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.
(11)
Previously
filed with the SEC on February 25, 2020 as Exhibit 4.9 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.
(12)
Previously
furnished to the SEC on October 21, 2022 as Appendix A to the Registrant’s proxy statement for its extraordinary general meeting
of
shareholders held on November 28, 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.
(13)
Previously
filed with the SEC on February 25, 2021 as Exhibit 4.11.1 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.
(14)
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.
(15)
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.
(16)
Previously
filed with the SEC on March 19, 2018 as Exhibit 4.15 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.
(17)
Previously
filed with the SEC on February 25, 2020 as Exhibit 4.11.5 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.
(18)
Previously
filed with the SEC on February 25, 2021 as Exhibit 4.11.6 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.
(19)
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.
(20)
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.
(21)
Previously
filed with the SEC on March 21, 2024 as Exhibit 4.14 to the Registrant’s annual report on Form 20-F for the year ended December
31,
2023 (File No. 001-36349) and incorporated by reference herein.
(22)
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.
(23)
Previously
filed with the SEC on February 25, 2021 as Exhibit 4.16 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.
(24)
Previously
filed with the SEC on July 15, 2024 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.
118
(25)
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.
(26)
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.
(27)
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.
(28)
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.
(29)
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.
(30)
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.
(31)
Previously
filed with the SEC on March 21, 2024 as Exhibit 4.23 to the Registrant’s annual report on Form 20-F for the year ended December
31,
2023 (File No. 001-36349) and incorporated by reference herein.
(32)
Previously
filed with the SEC on July 15, 2024 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.
(33)
Previously
filed with the SEC on July 15, 2024 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.
(34)
Previously
filed with the SEC on July 15, 2024 as Exhibit 4.3 to the Registrant’s report of foreign private issuer on Form 6-K (File No. 001-36349)
and incorporated by reference herein.
(35)
Previously
filed with the SEC on February 25, 2021 as Exhibit 8.1 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.
(36)
Previously
filed with the SEC on March 21, 2024 as Exhibit 97.1 to the Registrant’s annual report on Form 20-F for the year ended December
31,
2023 (File No. 001-36349) and incorporated by reference herein.
119
SIGNATURES
The
registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this
annual report on its behalf.
MediWound
Ltd.
Date: March 19,
2025
By: /s/ Hani Luxenburg
Hani Luxenburg
Chief Financial
Officer
120
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER
31, 2024
INDEX
Page
Report
of Independent Registered Public Accounting Firm (PCAOB
ID No. 1057)
F-2
– F3
Consolidated
Statements of Financial Position
F-4
Consolidated
Statements of Profit or Loss and Other Comprehensive Income or Loss
F-5
Consolidated
Statements of Changes in Shareholders' Equity
F-6
Consolidated
Statements of Cash Flows
F7
- F-8
Notes
to Consolidated Financial Statements
F9 - F-49
-
- - - - - - - - - - - - - - - - - - - -
Report
of Independent Registered Public Accounting Firm
To
the Shareholders and Board of Directors
MediWound Ltd.:
Opinions
on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We
have audited the accompanying consolidated statements of financial position of MediWound Ltd. and its subsidiaries (the Company) as of
December 31, 2024 and
2023, the related consolidated statements of profit or loss and other comprehensive income or loss, changes
in shareholders’ equity, and cash flows for each of the years
in the three‑year period ended December 31, 2024, and the
related notes (collectively, the consolidated financial statements). We also have audited the Company’s
internal control over financial
reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway
Commission.
In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of December 31,
2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year
period ended December 31, 2024, in conformity with IFRS
Accounting Standards as issued by the International Accounting Standards Board
(IFRS Accounting Standards). Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework
(2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
Basis
for Opinions
The
Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Company’s
consolidated financial statements and an opinion on the Company’s internal control over
financial reporting 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 audits to obtain
reasonable assurance
about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud,
and whether effective internal control over financial
reporting was maintained in all material respects.
Our
audits of the consolidated financial statements 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. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in
the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition
and Limitations of Internal Control Over Financial Reporting
A
company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition
of the company’s assets that could have a material effect on
the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or
procedures may deteriorate.
F
- 2
Critical
Audit Matter
The
critical audit matter communicated below is a matter arising from the current period audit of the consolidated 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 consolidated financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication
of a 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 accounts or
disclosures to which it relates.
Israeli
Innovation Authority grant liability
As
discussed in Notes 2c, 3d and 14 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 $8,343 thousand as of December 31, 2024.
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 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 and effectiveness 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 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.
Somekh
Chaikin
Member
Firm of KPMG International
We
have served as the Company’s auditor since 2021.
Tel-Aviv,
Israel
March
19, 2025
F
- 3
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Consolidated
Statements of Financial Position
U.S.
dollars in thousands
As
of December 31,
Note
2024
2023
Cash
and cash equivalents
4
9,155
11,866
Short-term
and restricted bank deposits
5
34,006
29,842
Trade
receivables
6
4,800
3,700
Inventories
7
2,692
2,846
Other
receivables
8
1,510
1,441
Total
current assets
52,163
49,695
Other
receivables
-
233
Long-term
restricted bank deposits
439
440
Property,
plant and equipment
9
14,132
9,228
Right-of-use
assets
10
6,663
6,698
Intangible
assets
11
99
165
Total
non-current assets
21,333
16,764
Total
assets
73,496
66,459
Current
maturities of long-term liabilities
612
1,410
Warrants
19c
17,092
*7,296
Trade
payables and accrued expenses
12
5,281
5,528
Other
payables
13
3,556
3,891
Total
current liabilities
26,541
18,125
Grants
received in advance
3dii
736
-
Liabilities
in respect of IIA grants
14,
17b
8,149
7,677
Liabilities
in respect of TEVA
17c, 17d
-
2,256
Lease
liabilities
10
6,513
6,350
Severance
pay liability, net
16
404
456
Total
non-current liabilities
15,802
16,739
Total
liabilities
42,343
34,864
Shareholders'
equity:
19
Ordinary
shares of NIS 0.07
par value:
Authorized
20,000,000
shares as of December 31, 2024 and 20,000,000
shares as of December 31, 2023;
Issued and Outstanding 10,793,057
shares as of December 31, 2024 and 9,221,764
shares as of December
31, 2023
215
184
Share
premium
235,995
206,251
Foreign
currency translation reserve
(11)
(18)
Accumulated
deficit
(205,046)
(174,822)
Total
equity
31,153
31,595
Total
liabilities and equity
73,496
66,459
The
accompanying notes are an integral part of the consolidated financial statements.
*
restated, see also note 3n with respect to the implementation of the amendments of IAS 1
F
- 4
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Consolidated Statements of Profit
or Loss and Other Comprehensive Income or Loss
U.S.
dollars in thousands (except of share and per share data)
Year
Ended December 31
Note
2024
2023
2022
Revenues
from sale of products
6,832
6,261
5,347
Revenues
from development services
13,135
12,265
12,943
Revenues
from license agreements and royalties
255
160
8,206
Total
revenues
22a
20,222
18,686
26,496
Cost
of revenues from sale of products
6,440
4,927
3,184
Cost
of revenues from development services
11,128
10,177
9,829
Cost
of revenues from license agreements
20
4
318
Total
cost of revenues
22b
17,588
15,108
13,331
Gross
profit
2,634
3,578
13,165
Research
and development
22c
8,878
7,467
10,181
Selling
and marketing
22d
4,936
4,844
3,725
General
and administrative
22e
8,202
6,768
6,920
Other
(income) expenses
22f
18
(211)
684
Total
operating expenses
22,034
18,868
21,510
Operating
loss
(19,400)
(15,290)
(8,345)
Financial
income
2,048
10,651
461
Financial
expense
(12,811)
(1,892)
(11,637)
Financing
income (expenses), net
22g
(10,763)
8,759
(11,176)
Loss
before taxes on income
(30,163)
(6,531)
(19,521)
Taxes
on income
(61)
(185)
(78)
Net
loss
(30,224)
(6,716)
(19,599)
Other
comprehensive income (loss):
Foreign
currency translation adjustments
7
(13)
14
Total
comprehensive loss
(30,217)
(6,729)
(19,585)
Loss
per share data:
19,23
Basic
and diluted loss per share
(3.03)
(0.75)
(3.93)
Number
of shares used in calculating basic and diluted loss per share
9,959,723
9,013,144
4,987,069
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 5
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Consolidated
Statements of Changes in Shareholders’ Equity
U.S.
dollars in thousands
Share
capital Share
premium
Foreign
currency
translation
reserve
Accumulated
deficit
Total
equity
Balance
as of January 1, 2024
184
206,251
(18)
(174,822)
31,595
Net
loss
-
-
-
(30,224)
(30,224)
Other
comprehensive loss
-
-
7
-
7
Total
comprehensive loss
-
-
7
(30,224)
(30,217)
Exercise
of RSU, options and warrants (see note 19 and 20)
3
2,132
-
-
2,135
Issuance
of ordinary shares, net of issuance expenses (see note 19c)
28
24,474
-
-
24,502
Share-based
compensation
-
3,138
-
-
3,138
Balance
as of December 31, 2024
215
235,995
(11)
(205,046)
31,153
Balance
as of January 1, 2023
143
178,882
(5)
(168,106)
10,914
Net
loss
-
-
-
(6,716)
(6,716)
Other
comprehensive loss
-
-
(13)
-
(13)
Total
comprehensive loss
-
-
(13)
(6,716)
(6,729)
Exercise
of RSU
1
-
-
-
1
Issuance
of ordinary shares, net of issuance expenses (see note 19c)
40
25,429
-
-
25,469
Share-based
compensation
-
1,940
-
-
1,940
Balance
as of December 31, 2023
184
206,251
(18)
(174,822)
31,595
Balance
as of January 1, 2022
75
143,869
(19)
(148,507)
(4,582)
Net
loss
-
-
-
(19,599)
(19,599)
Other
comprehensive income
-
-
14
-
14
Total
comprehensive loss
-
-
14
(19,599)
(19,585)
Exercise
of options
(*)
(*)
-
-
(*)
Issuance
of ordinary shares, net of issuance expenses (see note 19c)
40
17,389
-
-
17,429
Exercise
of pre-funded warrants (see note 19c)
28
15,678
-
-
15,706
Share-based
compensation
-
1,946
-
-
1,946
Balance
as of December 31, 2022
143
178,882
(5)
(168,106)
10,914
*
Represents an amount lower than $1.
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 6
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Consolidated
Statements of Cash Flows
U.S.
dollars in thousands
Year
ended December 31,
2024
2023
2022
Cash
flows from operating activities:
Net
loss
(30,224)
(6,716)
(19,599)
Adjustments
to reconcile net loss to net cash used in operating activities:
Adjustments
to profit and loss items:
Depreciation
and amortization
1,483
1,303
1,272
Share-based
compensation
3,138
1,940
1,946
Revaluation
of warrants accounted at fair value
10,704
(8,310)
8,977
Issuance
expenses of warrants through profit and loss
-
-
1,911
Revaluation
of liabilities in respect of IIA grants
752
427
(132)
Revaluation
of liabilities in respect of TEVA
770
468
533
Financing
income and exchange differences of lease liability
487
257
(109)
Increase
(decrease) in severance pay liability, net
(30)
83
109
Other
(income) expenses
18
(211)
-
Financial
income, net
(2,039)
(2,231)
(74)
Un-realized
foreign currency loss
47
189
525
15,330
(6,085)
14,958
Changes
in asset and liability items:
Decrease
(increase) in trade receivables
(1,141)
5,658
(7,582)
Decrease
(increase) in inventories
187
(906)
(721)
Decrease
(increase) in other receivables
120
(894)
364
Increase
(decrease) in trade payables and accrued expenses
406
(594)
414
Increase
in grants received in advance
1,181
-
-
Increase
(decrease) in other payables
517
(928)
281
1,270
2,336
(7,244)
Net
cash used in operating activities
(13,624)
(10,465)
(11,885)
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 7
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Consolidated
Statements of Cash Flows
U.S.
dollars in thousands
Year
ended December 31,
2024
2023
2022
Cash
flows from investing activities:
Purchase
of property and equipment
(6,273)
(6,464)
(555)
Interest
received
2,252
1,947
74
Investment
in short-term bank deposits, net
(4,376)
(29,804)
-
Net
cash used in investing activities
(8,397)
(34,321)
(481)
Cash
flows from financing activities:
Repayment
of leases liabilities
(928)
(778)
(701)
Proceeds
from exercise of warrants
1,210
-
(*)
Proceeds
from exercise of pre-funded warrants
-
-
10
Proceeds
from issuance of shares
22,165
24,909
38,380
Repayment
of IIA grants, net
(219)
(380)
(258)
Repayment
of liabilities in respect of TEVA (see note 17c, 17d)
(2,834)
(834)
(1,667)
Net
cash provided by financing activities
19,394
22,917
35,764
Exchange
rate differences on cash and cash equivalent balances
(84)
(160)
(549)
Increase
(decrease) in cash and cash equivalents
(2,711)
(22,029)
22,849
Balance
of cash and cash equivalents at the beginning of the year
11,866
33,895
11,046
Balance
of cash and cash equivalents at the end of the year
9,155
11,866
33,895
Supplement
disclosure of non-cash transactions:
ROU
asset, net, recognized with corresponding lease liability
479
6,825
117
Purchase
of property and equipment in trade payables
(344)
(1,011)
-
*
Represents an amount lower than $1.
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 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
1:
General
a.
Description of the Company
and its operations:
MediWound
Ltd. Was incorporated in Israel in January 2000. The Company which is located in Yavne, Israel (The "Company" or "MediWound"), is
a 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, it 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/or full-thickness thermal burns.
The
Company commercialize Nexobrid globally through multiple sales channels.
The
Company sells Nexobrid to burn centers in the European Union, United Kingdom and Israel, primarily through its commercial organizations.
The
Company has established local distribution channels in multiple international markets, including 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 an exclusive license and supply agreements with Vericel Corporation (“Vericel”)
to commercialize
Nexobrid in North America. On September 21, 2023, the Company announced the U.S. commercial availability of Nexobrid
for the removal of
eschar in adults with deep partial and/or full-thickness thermal burns.
In August 2024, the Company
announced that the FDA has approved a pediatric indication for NexoBrid allowing for eschar removal in pediatric
patients aged newborn
through eighteen with deep partial and/or full-thickness thermal burns. With this FDA approval, NexoBrid is now authorized
for use in
the U.S. for all age groups, aligning with its approvals in the European Union and Japan.
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.
In
February 2025, the Company announced the initiation of VALUE, a global, pivotal Phase III trial evaluating EscharEx for the treatment
of venous
leg ulcers (VLUs).
F
- 9
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 approved a reverse stock split. Following that approval, on December
5, 2022,
the Company’s board of directors approved a reverse stock split, in a ratio of 1-for-7.
The reverse split became effective on December 20, 2022. (see
also Note 19b).
During
March, September and October 2022, the Company completed a series of public and private capital offerings. The gross proceeds before
deducting
underwriting discounts and commissions and offering expenses, were approximately $41,700.
The net proceeds were approximately
$37,292
(see also Note 19).
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. The net proceeds
were approximately $25,469.
On
July 15, 2024, the Company entered into a definitive share purchase agreement. The agreement includes the sale and purchase of 1,453,488
shares of the Company’s ordinary shares, each with a par value NIS 0.07
(the “Ordinary Shares”), in a private investment in public equity (the
“PIPE Offering”). The purchase price is
set at $17.20
per share. The gross proceeds from the PIPE Offering are $25,000.
c.
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.
d.
In October 2023, Israel was attacked by a terrorist
organization and entered a state of war. As of the date of these consolidated financial statements,
the war in Israel is ongoing and continues
to evolve. The company’s headquarters, manufacturing and R&D facilities are located in Israel. Currently,
activities in Israel
remain largely unaffected. During the year ended December 31, 2024, the impact of this war on the company’s results of
operations
and financial condition was immaterial.
e.
The accompanying consolidated financial statements
have been prepared on a basis which assumes that the Company will continue as a going
concern. From inception to December 31, 2024, the
Company has incurred cash outflows from operations, losses from operations, and has an
accumulated deficit of $205.0
million.
The
Company believes that its existing cash and cash equivalents, short-term and restricted bank deposits of $43.6
million as of December 31, 2024,
will be sufficient to fund its operations and capital expenditure for at least twelve months from the
date of issuance of these consolidated financial
statements.
F
- 10
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
a.
Statement of compliance
with International Financial Reporting Standards
These
financial statements have been prepared in accordance with IFRS® Accounting Standards (IFRSs) as issued by the International Accounting
Standards Board ("IASB").
These
consolidated financial statements were approved by the board of directors on March 19, 2025.
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 revenues 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 raised in U.S. dollars and U.S governmental funds denominated also in U.S. dollars.
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.
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 average
exchange rates at the quarter in which those items
are recognized. Such translation adjustments are recorded as a separate component of
accumulated other comprehensive income (loss) in
shareholders' equity.
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
- 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 2:
Basis of Preparation of the Consolidated
Financial Statements (Cont.)
c.
Use of estimates and
judgments
The
preparation of financial statements in conformity with IFRS®
Accounting Standards (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 model. The assumptions
used in the model 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.
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 3:
Material 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.
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.
b.
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
-
At
cost of purchase using the first-in, first-out method.
Finished
goods
-
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 normal capacity.
c.
Property, plant and equipment,
net:
Property,
plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation and accumulated impairment
losses. 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
7-10
Manufacturing
machinery and lab equipment
15
Computers
33
Leasehold
improvements
See
below
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
3:
Material Accounting Policies
(Cont.)
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.
d.
Government Grands:
i.
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.
ii.
Liability in respect
of European Innovation Council ("EIC"):
Grants
from the EIC in respect of research and development projects accounted for as forgivable loans according to IAS 20 but have different
characteristics than Grants from the IIA, therefore they follow a different presentational approach and presented in profit and loss as
‘other
income’ when there is reasonable assurance that:
(a)
the Company will comply with the conditions attaching to the grants; and
(b)
the grants will be received.
e.
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
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 IFRS 16 and does not
separate the lease
components from the non-lease components (such as management and maintenance services, etc.) included in a single contract.
Following
are the amortization periods of the ROU assets by class of underlying asset:
Years
Motor
vehicles
3
Buildings
5-15
F
- 14
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
3:
Material Accounting Policies
(Cont.)
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.
f.
Revenues recognition:
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.
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.
F
- 15
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
3:
Material Accounting Policies
(Cont.)
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.
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
non-refundable, 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).
Vericel
Agreement
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 Biologics License Application
(“BLA”) approval and (3) manufacturing and supply of Nexobrid.
As
of the closing date of the agreement the manufacturing and development services were at market value, therefore 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.
F
- 16
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
3:
Material Accounting Policies
(Cont.)
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 18b).
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 Vericel and the Company no longer retains continuing managerial involvement. The delivery date of the products is usually the date
of which
ownership passes.
Revenues
from distribution licensing arrangements:
The
Company accounts for the bundled license provided to the distributors 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 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.
F
- 17
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
3:
Material Accounting Policies
(Cont.)
g.
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.
h.
Financial instruments:
The
accounting policy for financial instruments in accordance with IFRS 9, "Financial Instruments" is as follows:
1.
Financial liabilities:
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.
F
- 18
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
3:
Material Accounting Policies
(Cont.)
2.
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.
i.
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.
j.
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.
F
- 19
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
3:
Material Accounting Policies
(Cont.)
k.
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, recreation and social security contributions are recognized as expenses as
the
services are rendered.
2.
Post-employment
benefits:
The
Company has liabilities for severance pay for its employees in several of jurisdictions and in Israel.
The
Company recognizes liability for severance pay mainly due to its employees in EU in accordance with local laws.
l.
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.
F
- 20
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
3:
Material Accounting Policies
(Cont.)
m.
Presentation of Financial
Statements: Classification of Liabilities as Current or Non-Current (amendment to IAS 1)
As
from January 1, 2024 the Company initially applies the amendment to IAS 1, Presentation of Financial Statements: Classification of Liabilities
as Current or Non-Current. The amendments apply retrospectively. They clarify certain requirements for determining whether a liability
should be
classified as current or non-current. This resulted in a change in the accounting policy for the classification of liabilities
that can be settled in the
Company’s own shares (e.g. warrants). Previously, the Company ignored all counterparty conversion options
when classifying the related liabilities
as current or non-current. Under the new policy, when a liability includes a counterparty conversion
option whereby the liability may be settled by a
transfer of the Company’s own shares, the Company takes into account the conversion
option in classifying the host liability as current or non-
current unless the option is classified as equity under IAS 32. As a result
of applying the Amendment, the warrants presented in these financial
statements (see note 19c), are classified as a current liability
pursuant to the conversion option.
n.
New
standards, amendments to standards and interpretations not yet adopted:
IFRS
18, Presentation and Disclosure in Financial Statements replaces IAS 1, Presentation of Financial Statements. The standard provides guidance
for improving the structure and content of the financial statements, particularly the income statement.
The
standard includes new disclosure and presentation requirements as well as requirements that were taken from IAS 1, Presentation of Financial
Statements.
As
part of the new disclosure requirements, it is required to present two subtotals in the income statement: operating profit and profit
before
financing and taxes.
Furthermore,
the results in the income statement will be classified into three new categories: an operating category, an investing category and a
financing
category.
In
addition to the changes in the structure of the income statements, the standard also includes a requirement to provide separate disclosure
in the
financial statements regarding the use of management-defined performance measures (MPM).
Furthermore,
the standard adds specific guidance for aggregation and disaggregation of items in the financial statements and in the notes.
The
Company is examining the effects of the standard on its financial statements with no plans for early adoption.
Note 4:
Cash and Cash Equivalents
December 31
2024
2023
Balance in USD
7,169
4,151
Balance in other currencies
1,986
7,715
9,155
11,866
Note 5:
Short-term and restricted bank deposits
December
31
2024
2023
Restricted
bank deposits (1)
-
167
USD
Bank deposits (2)
34,006
29,675
34,006
29,842
(1)
Restricted bank deposits which are primarily used as security for the Company’s office leases.
(2)
The USD deposits are for the period of 91-365
days and bear annual interest of 5.45%-6.39%
for 2024 and 6.26%-6.55%
for 2023.
F
- 21
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note 6:
Trade Receivables
December 31
2024
2023
Vericel (Note 18b)
472
236
BARDA (Note 18a)
877
1,245
MTEC (Note 18c)
2,339
617
Other trade receivables
1,229
1,608
Less provision for impairment
(117)
(6)
4,800
3,700
Note
7:
Inventories
December 31,
2024
2023
Raw materials
1,444
995
Finished goods*
1,248
1,851
2,692
2,846
*Finished
goods include a write-down of $216
and $326
as of December 31,2024 and 2023, respectively.
Note 8:
Other Receivables- Short Term
December 31,
2024
2023
Government authorities
494
322
Income receivables
558
397
Prepaid expenses and other
458
722
1,510
1,441
F
- 22
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note 9:
Property, Plant and Equipment
Office
furniture
Manufacturing
machinery and
lab equipment Computers
Leasehold
improvements
Total
Cost
Balance as of January 1, 2024
319
12,403
267
3,375
16,364
Additions
25
5,395
174
76
5,670
Disposals
(11)
(846)
(91)
-
(948)
Foreign currency translation
(2)
-
-
-
(2)
Balance as of December 31, 2024
331
16,952
350
3,451
21,084
Balance as of January 1, 2023
293
5,091
166
3,279
8,829
Additions
25
7,312
101
96
7,534
Foreign currency translation
1
-
-
-
1
Balance as of December 31, 2023
319
12,403
267
3,375
16,364
Accumulated
Depreciation
Balance as of January 1, 2024
184
4,266
155
2,531
7,136
Additions
23
495
65
170
753
Disposals
(11)
(833)
(91)
-
(935)
Foreign currency translation
(2)
-
-
-
(2)
Balance as of December 31, 2024
194
3,928
129
2,701
6,952
Balance as of January 1, 2023
157
3,818
97
2,391
6,463
Additions
26
448
58
140
672
Foreign currency translation
1
-
-
-
1
Balance as of December 31, 2023
184
4,266
155
2,531
7,136
Carrying amounts of all fixed asset
items
December 31, 2024
137
13,024
221
750
14,132
December 31, 2023
135
8,137
112
844
9,228
F
- 23
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
10:
Leases
a.
Lease Agreements:
The
Company's offices and its production facility in Israel are located in a building that the Company previously leased from a related
party (see
note 24a), in accordance with a sub-lease agreement. The Company subleased approximately 3,000
square meters of laboratory, office and clean
rooms space at a monthly fee NIS 125
(approximately $35).
This sub-lease agreement was amended in October 2021, to extend the period up to
October 2025 which was included in the calculation of
the lease liability and ROU asset.
In
July 2023, the company signed a termination agreement for the sub-lease agreement and signed a new lease agreement for the same area of
approximately 3,000
square meters in the same building with the owner of the building at a monthly rent fee of NIS 195
(approximately $54)
linked
to the index. The lease agreement is for 12
years with an option for an additional 3
years. The company estimation is that it will exercise the 3-
year option.
On
January 1, 2024, the company entered into a new lease agreement for 380
square meters of office, in Yavne, Israel, close to the main office, the
agreement is for two
years with options for additional three
years. The additional leased area is needed to support the company in extending its
activity. The annual fee for this
agreement is ILS 437
(approximately $120)
linked to the index. The company estimation is that it will exercise the
3-year
option.
In
addition, the Company and its subsidiary have lease agreements for 18
vehicles for the remaining period of 1.75
years on average.
b.
Amounts recognized in
profit or loss and in the statement of cash flows
Year ended December 31,
2024
2023
Interest
expense on lease liabilities
526
274
Depreciation
expenses
664
565
Cash
outflow for leases
928
778
The
Company determined the appropriate interest rate for discounting leases, with the assistance of a third party. The valuation was based
on: credit
risk, the weighted average term of the leases and other economic variables. A weighted average interest rate in a range of
1%
to 8.47%
was used to
discount future lease payments in the calculation of the lease liability.
F
- 24
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
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:
Buildings
Motor
vehicles
Total
Cost
Balance
as of January 1, 2024
6,511
652
7,163
New
leases
390
127
517
Adjustments
for indexation
221
8
229
Disposals
-
(268)
(268)
Balance
as of December 31, 2024
7,122
519
7,641
Accumulated
depreciation
Balance
as of January 1, 2024
208
257
465
Depreciation
and amortization
471
193
664
Capitalized
to Leasehold improvements
64
-
64
Disposals
-
(215)
(215)
Balance
as of December 31, 2024
743
235
978
Depreciated
cost
Balance
as of December 31, 2024
6,379
284
6,663
Buildings
Motor
vehicles
Total
Cost
Balance
as of January 1, 2023
2,341
550
2,891
New
leases
6,460
407
6,867
Adjustments
for indexation
78
3
81
Disposals
(2,368)
(308)
(2,676)
Balance
as of December 31, 2023
6,511
652
7,163
Accumulated
depreciation
Balance
as of January 1, 2023
1,342
334
1,676
Depreciation
and amortization
334
231
565
Capitalized
to Leasehold improvements
59
-
59
Disposals
(1,527)
(308)
(1,835)
Balance
as of December 31, 2023
208
257
465
Depreciated
cost
Balance
as of December 31, 2023
6,303
395
6,698
F
- 25
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
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:
Buildings
Motor
vehicles
Total
Balance
as of January 1, 2024
6,346
365
6,711
Repayment
of leases liabilities
(728)
(200)
(928)
Effect
of changes in exchange rates
(38)
(1)
(39)
New
finance lease obligation recognized
368
112
480
Adjustments
for indexation
221
8
229
Financial
expenses
508
19
527
Disposals-Termination
of leases
-
(49)
(49)
Balance
as of December 31, 2024
6,677
254
6,931
Current
maturities of long-term leases
(273)
(145)
(418)
Lease
liability Balance as of December 31, 2024
6,404
109
6,513
Buildings
Motor
vehicles
Total
Balance
as of January 1, 2023
1,199
179
1,378
Repayment
of leases liabilities
(588)
(190)
(778)
Effect
of changes in exchange rates
(19)
2
(17)
New
finance lease obligation recognized
6,460
365
6,825
Adjustments
for indexation
78
3
81
Financial
expenses
257
17
274
Disposals-Termination
of leases
(1,041)
(11)
(1,052)
Balance
as of December 31, 2023
6,346
365
6,711
Current
maturities of long-term leases
(180)
(181)
(361)
Lease
liability Balance as of December 31, 2023
6,166
184
6,350
Note
11:
Intangible
Assets, Net
License
and
Knowhow
2024
2023
Cost
Balance
as of January 1,
1,538
1,538
Additions
-
-
Balance
as of December 31,
1,538
1,538
Accumulated
Amortization
Balance
as of January 1,
1,373
1,307
Additions
66
66
Balance
as of December 31,
1,439
1,373
Amortized
cost
Balance
as of December 31,
99
165
F
- 26
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:
Trade payables and accrued
expenses
December
31
2024
2023
Trade
payables
4,096
4,223
Accrued
expenses
1,185
1,305
5,281
5,528
Note
13:
Other Payables
December
31
2024
2023
Employees
and payroll accruals
2,787
2,109
Liability
in respect of TEVA (see Note 17c)
-
1,250
Related
parties
86
83
Deferred
income
12
24
Grants
received in advance
445
-
Other
226
425
3,556
3,891
Note
14:
Liabilities in Respect
of IIA Grants
December
31
2024
2023
Balance
as of January 1,
7,803
7,566
Royalties
(212)
(190)
Amounts
carried to Profit or Loss
752
427
Balance
as of December 31,
8,343
7,803
Current
maturities
(194)
(126)
Long
term liabilities in respect of IIA grants
8,149
7,677
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 interest, net of royalties as of December 31, 2024 is approximately $13,944,
while the amortized cost of this liability
as of that date is $ 8,343,
using the interest method.
F
- 27
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:
Financial Instruments
a.
Risk management:
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.
December
31
2024
2023
Gain
(loss) from change:
5%
increase in NIS and EURO exchange rate
$
201 $
176
5%
decrease in NIS and EURO exchange rate
$
(201) $
(176)
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
- 28
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:
Financial Instruments
(Cont.)
3.
Liquidity risk
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, 2024
Carrying 12
months
amount
or
less
1-2
years 2-15
years
Non-derivative
financial liabilities
Current
liabilities
Current
maturities of long-term liabilities
1,138
1,138
-
-
Trade
payables and accrued expenses
5,281
5,281
-
-
Other
payables
3,556
3,556
-
-
Non-current
liabilities
Grants
received in advance
736
-
736
-
Liabilities
in respect of IIA grants
15,832
-
403
15,429
Lease
liabilities
10,010
-
901
9,109
December
31, 2023
Carrying 12
months
amount
or
less
1-2
years 2-15
years
Non-derivative
financial liabilities
Current
liabilities
Current
maturities of long-term liabilities
3,249
3,249
-
-
Trade
payables and accrued expenses
5,528
5,528
-
-
Other
payables
3,891
3,891
-
-
Non-current
liabilities
Liabilities
in respect of IIA grants
15,927
-
359
15,568
Liabilities
in respect of TEVA
3,200
-
1,000
2,200
Lease
liabilities
10,189
-
813
9,376
F
- 29
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:
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
levels 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 currents liabilities was measured by using Black and Scholes model. The following inputs
were used to determine the fair value:
Contractual
period of warrants–1.91
years.
Expected
volatility – 57.1%
Risk-free
interest rate (3) – 4.24%
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 (see note 17c).
Note
16:
Severance Pay Liability,
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
- 30
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:
Severance Pay Liability, 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. Accordingly, 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
17:
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%
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
royalty payments for the years 2024 and 2023 amounted to $122 and
$98
respectively.
b.
Under the Israeli 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
interest applicable to dollar deposits, as published on the first business
day of each calendar year. The total royalties
amount paid as of December 31, 2024 is $2,164
(see note 14).
F
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MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
17:
Liabilities and Commitments
(Cont.)
c.
In December 2020, Teva Pharmaceutical Industries
Ltd (“TEVA”) has agreed to revise a 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.
d.
Concurrently
with the PIPE offering, on July 15, 2024, the Company and TEVA entered into Amendment No. 2 (the “Amendment”) to a settlement
dated December 13, 2020, by and between the Company and TEVA (the “Agreement”). Under the terms of the Amendment, the Company pay
TEVA $4,000
as the final payment due from the Company under the Agreement, with 50% of such prepayment in cash and 50% in the form of
ordinary shares
of the Company to be issued by the Company to TEVA (as part of the PIPE offering), all in accordance with the terms and timeframe
specified
in the Amendment (“The transaction”). As a result of the transaction, the company recorded financial expenses of $546
and the liability in
respect of TEVA was settled (see note 22).
Total
liabilities recorded as of December 31, 2024 and 2023 were approximately $0
and $4,428
respectively. The financial expenses for 2024 and
2023 of $770
and $468,
respectively, were recorded in profit or loss within financial expenses.
Note
18:
Material Agreements
a.
BARDA Contracts
In
September 2015, the Company was awarded Biomedical Advance Research and Developments Authority (“BARDA”) Contract for treatment
of
thermal burn injuries. This contract was amended multiple times to extend its term until September 2025 and its total value, up to
a total amount of
$165,000
as of the end of 2022.
In
May 2023 BARDA has awarded an additional approximately $10,000
to the Company. The total amount of the contract is comprised of $110,000
to support research and development activities and up to $65,000
to procure Nexobrid for U.S. emergency preparedness (which will be split between
the Company and Vericel following Vericel agreement (see
note 18b)).
As
of December 31, 2024, the Company has recognized approximately $94,637
in the aggregate, from BARDA for support of its research and
development activities and additional $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.
In
September 2018 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 second BARDA contract expired in 2023. As of
December 31, 2023, the Company has recognized and received approximately
$4,368
of funding from the second BARDA contract.
F
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MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
18: Material Agreements (Cont.)
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 territory of North America. 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.
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. Furthermore, 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 fixed price.
Total
revenue from royalties as of December 31, 2024 and 2023 was approximately $244
and $82,
respectively.
c.
DOD and MTEC contracts:
On
February 17, 2022, the Company was entered into a contract with the U.S. Department of Defense (DoD), through the Medical Technology
Enterprise
Consortium (MTEC), to develop Nexobrid as a non-surgical solution for field-care burn treatment for the U.S. Army. The contract
provides
funding up to $2,727.
During
2023, the DOD through MTEC awarded the Company additional funding of $9,117
in addition, the company awarded directly through
MTEC funding of $1,190,
to advance the development of a new temperature stable formulation of Nexobrid.
In
May 2024 the Company was awarded an additional funding of $1,557
from the DoD through MTEC. As of December 31, 2024, the total funding
received from the DoD and MTEC is $14,591.
F
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MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
18: Material Agreements (Cont.)
d.
European Innovation Council (EIC):
On
July 16, 2024, the company was selected to receive €16,250
in blended funding from the EIC through its accelerator program. Funding of €2,500
is expected to be received as a grant, and €13,750
as an investment. The terms of the investment are currently being negotiated. In December 2024,
the company received €1,125
from the grant.
e.
During 2024, the Company signed new agreements
with suppliers to procure services totaling $9,888
for the VALUE, a global pivotal Phase III
clinical trial of EscharEx for VLU, covering a period of two
years.
f.
Biopharmax Group Ltd. contract:
On
July 17, 2023 the company signed agreement with Biopharmax Group Ltd. The objective of
this agreement is to establish, commission, and
validate a cutting-edge, sterile, and GMP-compliant manufacturing facility. The venture
aims to increase the company’s production capacity
significantly, to expand up to six times the current capacity.
The
new facility, equipped with fully operational clean rooms, will be exclusively designed for Nexobrid production. It will comply with stringent
regulations from the GMP, FDA, EMA, Israeli Ministry of Health, and relevant Israeli regulatory bodies. An estimated $12.9
million will be
invested in the project. Construction was completed in 2024, with full operational capacity by the end of 2025. Commercial
availability will depend
on securing the necessary regulatory approvals. (see also note 9).
Note
19:
Equity
a.
Share capital:
December
31
2024
2023
Authorized
number of shares
20,000,000 20,000,000
Issued
and outstanding number of shares
10,793,057 9,221,764
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 2022, 2023 and 2024 the Company issued
additional 41,395; 17,458
and 13,801
ordinary shares for each year upon vesting of
outstanding RSU’s, respectively.
2.
On November 28, 2022, at the Company’s extraordinary
general meeting of shareholders, its shareholders approved:
(a) An increase 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.
F
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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:
Equity
(Cont.)
3.
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.
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.
On
May 31, 2023 the Shareholders of the Company approved an amendment to Article 6 of the Company’s Amended and Restated Articles of
Association, which increased the Company’s authorized share capital from 900,000
NIS consisting of 12,857,143
ordinary shares par value NIS
0.07
to NIS 1,400,000,
consisting of 20,000,000
ordinary shares, par value NIS 0.07
per share.
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.
F
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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:
Equity
(Cont.)
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 agreement. 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 independent 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%.
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 loss and the issuance expenses related to the issuance of shares recorded as a
deduction from the proceeds 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 they can be redeemed in cash on the occurrence of Fundamental Transaction as determined in the agreement. 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 the 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 approximate 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
warrants.
The
net proceeds from this offering amounted to approximately $15,920.
The issuance expenses were recorded through profit and loss.
During
December 2022, the 1,407,583
pre-funded warrants were exercised into ordinary shares.
F
- 36
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:
Equity
(Cont.)
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 loss and as a deduction from proceed in equity based on
the financial
treatment of both RD and PIPE offering and in accordance with their part.
5.
On February 7, 2023, the Company completed a RD
offering of 1,964,286
new ordinary shares which were issued in consideration to offering
price of $14.0
per share. The gross proceeds were $27,500,
before deducting commissions and other offering expenses in the amount of $2,031.
6.
On July 15, 2024, the Company entered into a definitive
share purchase agreement. The agreement includes the sale and purchase of 1,453,488
shares of the Company’s ordinary shares, each with a par value NIS 0.07
(the “Ordinary Shares”), in a private investment in public equity (the
“PIPE Offering”). The purchase price is
set at $17.20
per share. The gross proceeds from the PIPE Offering are $25,000,
the issuance expenses
were $862.
7.
During 2024, 91,029
Series A warrants were exercised to the Company ordinary shares at an exercise price of $13.475
per ordinary share, in
accordance with the terms of the Series A warrants.
Note
20:
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
2024
2023
2022
Cost
of revenues
339
271
184
Research
and development
513
485
406
Selling
and marketing
26
87
42
General
and administrative
2,260
1,097
1,314
Total
share-based compensation
3,138
1,940
1,946
F
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MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note 20:
Share‑Based Compensation (Cont.)
b.
Share-based payment plan
for employees and directors:
The
Company has granted options and restricted stock units ("RSUs") for a total of 1,176,998
ordinary shares.
As
of December 31, 2024, 299,046
ordinary shares of the Company were still available for a future grant.
Any
options or RSUs, which are forfeited or not exercised before expiration, become available for future grants.
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.
In
December 2024, the Company adopted and obtained shareholder approval for its 2024 Equity Incentive Plan (the “2024 Plan”).
Options and RSU's
granted under the Company's 2024 Plan are exercisable in accordance with the terms of the Plan. Options are exercisable
within 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.
c.
Share options activity:
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
2024
2023
2022
Number
of
options
Weighted
Average
Exercise
price
Number
of
options
Weighted
Average
Exercise
price
Number
of
options
Weighted
Average
Exercise
price
Outstanding
Options at beginning
of year
957,487
19.34
764,767
30.44
537,288
44.45
Options Granted
316,165
12.73
346,950
11.87
320,775
14.25
Options Exercised
(62,683)
13.65
-
-
(807)
12.23
Options Forfeited and/or
expired
(82,871)
34.8
(154,230)
57.55
(92,489)
55.58
Outstanding options at
end of year
1,128,098
16.67
957,487
19.34
764,767
30.44
Option's Exercisable
at end of year
550,159
20.79
462,045
26.25
373,681
46.18
F
- 38
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note 20:
Share‑Based Compensation (Cont.)
The
following table summarizes information about share options outstanding:
Options
outstanding as of
December
31, 2024
Range
of exercise prices ($ )
Number
of
options
Weighted
Average
Remaining
contractual
life
Weighted
average
exercise
price
8.13-9.64
55,950
8.85
8.44
11.89-14.42
943,109
8.04
13.01
34.44-37.52
84,829
4.84
36.56
47.11-67.06
44,210
0.97
66.93
Total
1,128,098
7.56
16.67
Options
outstanding as of
December
31, 2023
Range
of exercise prices ($ )
Number
of
options
Weighted
Average
Remaining
contractual
life
Weighted
average
exercise
price
8.26-9.64
55,950
9.85
8.44
11.89-14.42
711,124
7.89
13.20
26.88-37.52
125,535
5.62
35.99
42.14-67.06
64,878
1.85
63.84
Total
957,487
7.29
19.34
The
following table summarizes information about RSU's outstanding:
RSU's
2024
RSU's
2023
RSU's
2022
Outstanding
at beginning of year
32,714
42,013
14,581
Granted
30,481
9,100
39,286
Forfeited
(454)
(941)
(27)
Vested
(13,801)
(17,458)
(11,827)
Outstanding
at the end of the period
48,940
32,714
42,013
The
fair value of the options and RSU's granted to employees and directors at the grant date for the years ended December 31, 2024, 2023 and
2022
was $3,953,
$2,320
and $2,970
respectively.
The
options and RSU’s of the Company are managed by a trustee.
F
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MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note 20:
Share‑Based Compensation (Cont.)
1.
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.
2.
On July 19, 2022, the Company’s Shareholders
General meeting approved the abovementioned grants 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.
3.
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.
4.
On February 15, 2023, the Company's Board of Directors
approved the grant of 130,600
options to purchase ordinary shares and 9,100
RSU's
under the "2014 Share Incentive Plan" to employees, officers, board members, CEO and
some consultants at fair value of $1,012
and $117,
respectively. The share options vest over a period of 1-4
years and the options are exercisable for an exercise price of $ 13.32
per share.
5.
On April 3, 2023, the Company's Board of Directors
approved the grant of 160,400
options to purchase ordinary shares under the "2014 Share
Incentive Plan", for an exercise price of $11.89
and $11.91
per share to management and board members of the Company. The share options
vest over a period of 1-4
years. The fair value of the options granted, as of the grant date, was estimated at approximately $884.
6.
On May 31, 2023 the Shareholders of the Company
approved the increase by 1,000,000
in the number of ordinary shares available for issuance
under the Company’s 2014 Equity Incentive Plan.
7.
On May 31, 2023 the Shareholders of the Company
approved the extension to the exercise period of options which were granted to certain of
the company’s directors on April 23, 2020
for an additional five
years, until April 23, 2030. According to this extension, an expense of $146
was recognized.
8.
On August 15, 2023,
the Company's Board of Directors approved the grant of 7,200
options to purchase ordinary shares under the "2014 Share
Incentive Plan", for an exercise price of $ 9.63
per share to a board member of the Company. The share options vest over a 1
year. The fair
value of the options granted, as of the grant date, was estimated at approximately $42.
F
- 40
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
20:
Share‑Based Compensation
(Cont.)
9.
On November 20, 2023, the Company's Board of Directors
approved the grant of 48,750
options to purchase ordinary shares under the "2014
Share Incentive Plan", for an exercise price of $ 8.78
and $8.13
per share to an officer and a consultant of the Company. The share options vest
over a period of 1-4
years. The fair value of the options granted, as of the grant date, was estimated at approximately $265.
10. On February 26, 2024, the Company granted 316,165
share options to employees, officers, board members, CEO and several consultants at an
exercise price of $12.73
per share and 30,481
RSUs. The share options and the RSUs vest over a period of 1-4
years. The grants to the directors
and CEO were approved in the annual shareholders’ meeting held on July 9 ,2024.
a.
The fair value of the Company's share options
granted to employees and directors for the years ended December 31, 2024, 2023 and
2022 was estimated using the binomial
option pricing models using the following assumptions:
December
31
2024
2023
2022
Dividend
yield (%)
0
0
0
Expected
volatility of the share prices (%)
61-62
61-77
59-77
Risk‑free
interest rate (%)
3.87-5.03
2.1-5.36
2.1-5.2
Early
exercise factor (%)
100-150
100-150
100-150
Weighted
average share prices (Dollar)
12.73
10.71
13.22
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).
F
- 41
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:
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
standard tax rate in the years 2022-2024 is 23%.
c.
Benefits under the Law
for the Encouragement of Capital Investments:
Tax
benefits under the Israeli 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.
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 2024, 2023 and 2022.
e.
Final tax assessments:
The
Company has finalized its tax assessments through the 2019 tax year.
The
Company's subsidiary has received the final tax assessment for the year 2022.
f.
Net operating carryforward
losses for tax purposes and other temporary differences:
As
of December 31, 2024, the Company had carryforward losses and other temporary differences mainly from R&D expenses together amounting
to
approximately $188,082.
F
- 42
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:
Income Tax (Cont.)
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 MediWound Ltd. in Israel for the years ended December 31, 2024, 2023 and 2022 as a result
of
its carryforward losses.
The
current tax expenses are in respect of taxes charged outside of Israel.
Note
22:
Supplementary Information
to the Consolidated Statements of Profit or Loss and Other Comprehensive Income or Loss
a.
Additional
information on Revenues:
Major
customers:
BARDA
contributed 31%,
56%
and 51%
of the Company’s total revenues in 2024, 2023 and 2022 respectively. Vericel contributed
12%,
4%
and
28%
of the Company’s total revenues in 2024, 2023 and 2022 respectively. MTEC contributed 34%,
10%
and 2.8%
of the Company’s total
revenues in 2024, 2023 and 2022 respectively (see also note 18).
No
other customer contributed 10% or more of the Company’s revenues in 2024, 2023 and 2022.
Geographic
information:
The
revenues reported in the financial statements are based on the location of the customers, as follows:
Year
ended December 31
2024
2023
2022
USA
(see also Note 18a, 18b, 18c)
15,463
13,078
21,872
Rest
of the world
4,759
5,608
4,624
20,222
18,686
26,496
F
- 43
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
22:
Supplementary Information
to the Consolidated Statements of Profit or Loss and Other Comprehensive Income or Loss (Cont.)
b.
Cost
of Revenues:
1.
Cost of Revenues from
sale of products
Year
ended December 31
2024
2023
2022
Salary and benefits (including
share-based compensation)
2,634
2,703
1,828
Subcontractors
128
230
58
Depreciation and amortization
630
672
426
Cost of materials
1,282
916
636
Other manufacturing expenses
1,162
1,207
779
Decrease (increase) in
inventory of finished products
604
(801)
(543)
6,440
4,927
3,184
2.
Cost of Revenues from
development services
Year
ended December 31
2024
2023
2022
Salary
and benefits
1,771
1,995
1,691
Subcontractors
9,357
8,182
8,138
11,128
10,177
9,829
3.
Cost of Revenues from
license agreements
Year
ended December 31
2024
2023
2022
Salary
and benefits
-
4
38
Royalties
payments
20
-
280
20
4
318
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
22:
Supplementary Information
to the Consolidated Statements of Profit or Loss and Other Comprehensive Income or Loss (Cont.)
c.
Research
and development expenses:
Year
ended December 31
2024
2023
2022
Salary and benefits (including
share-based compensation)
4,788
3,148
4,494
Subcontractors
2,262
2,833
4,054
Depreciation
and amortization
624
396
571
Cost
of materials
716
785
572
Other
research and development expenses
488
305
490
Total
Research and development
8,878
7,467
10,181
d.
Selling
and marketing expenses:
Year
ended December 31
2024
2023
2022
Salary and benefits
(including share-based compensation)
1,713
1,991
1,637
Marketing
and consulting
1,477
1,637
1,152
Depreciation
and amortization
27
50
49
Shipping
and delivery
411
356
385
Registration
and marketing license fees
1,308
810
502
4,936
4,844
3,725
e.
General
and administrative expenses:
Year
ended December 31
2024
2023
2022
Salary
and benefits (including share‑based compensation)
4,854
3,521
3,344
Professional
fees
2,269
2,189
2,589
Depreciation
and amortization
201
185
225
Other
878
873
762
8,202
6,768
6,920
F
- 45
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
22:
Supplementary Information
to the Consolidated Statements of Profit or Loss and Other Comprehensive Income or Loss (Cont.)
f.
Other (income) expenses:
The
other one-time income amounted $211
for the year ended December 31, 2023, is associated with the termination of sub-lease agreement (see
note 10a).
The
other one-time expenses amounted to $684
for the year ended December 31, 2022, are associated with the management changes and FDA
milestone payment fee (see note 18b).
g.
Financial income and
expense:
Year
ended December 31
2024
2023
2022
Financial
income:
Interest
income
2,048
2,341
270
Revaluation
of liabilities in respect of IIA grants
-
-
132
Revaluation
of Warrants
-
8,310
-
Exchange
differences, net
-
-
59
2,048
10,651
461
Financial
expense:
Revaluation
of liabilities in respect of IIA grants
752
427
-
Financing
income on net investment in lease
526
274
102
Finance expenses in respect
of deferred income
-
8
54
Revaluation of liabilities
in respect of TEVA
770
468
533
Exchange differences,
net
24
654
-
Revaluation of Warrants
10,704
-
8,977
Issuance expenses of
warrants through profit and loss
-
-
1,911
Other
35
61
60
12,811
1,892
11,637
Financial
income (expenses), net
(10,763)
8,759
(11,176)
F
- 46
MEDIWOUND LTD.
AND ITS SUBSIDIARIES
Notes to the Consolidated
Financial Statements
U.S.
dollars in thousands (except of share and per share data)
Note
23:
Net
Loss Per Share
a.
Details of the number
of shares and loss used in the computation of loss per share:
Year
ended December 31
2024
2023
2022
Weighted
average
number
of
shares
Loss
Weighted
average
number
of
shares
Loss
Weighted
average
number
of
shares
Loss
9,959,723
(30,224)
9,013,144
(6,716)
4,987,069
(19,599)
b.
Net loss per share:
Year
ended December 31
2024
2023
2022
Basic
and diluted loss per share:
(3.03)
(0.75)
(3.93)
In
2024, 2,523,268
warrants, 1,136,249
options and 48,937
RSU’s were excluded from the diluted weighted average number of Ordinary Shares
calculation as their effect would have been anti-dilutive.
In 2023, 2,614,297
warrants, 957,487
options and 32,714
RSU’s were excluded from the diluted weighted average number of Ordinary Shares
calculation as their effect would have been anti-dilutive.
In
2022, 2,614,297
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 anti-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 with related
parties:
Other
Payables
Directors:
As
of December 31, 2024
86
As
of December 31, 2023
83
F
- 47
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.)
2.
Transactions with related
parties:
Rental
fee:
Year
ended December 31
2024
2023
2022
Related
party
-
267
457
Professional
fee *:
Year
ended December 31
2024
2023
2022
Directors
333
502
484
Related
party
-
25
63
333
527
547
Number
of Directors
5
***9
**10
*
Not
included share-based compensation detailed in note 20.
**
During
2022 two members of the board of directors were replaced.
***
During 2023 three members of the board have left
and one member of the board was replaced. At the end of 2023, the total board
member consisted of five members.
b.
Key Officers:
1.
Balances with Key Officers
of the Company
Other
Payables
Key
Officers of the Company
As
of December 31, 2024
759
As
of December 31, 2023
518
•
Represents the officer’s gross salary plus
payments of mandatory social benefits, bonuses, and vacation provisions without share based
compensation.
F
- 48
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.)
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
2024
2023
2022
Short-term
employee benefits (*)(**)
2,542
2,084
2,880
Share-based
compensation
1,707
757
797
4,249
2,841
3,677
Number
of officers (***)
6
8
7
(*)
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.
(***)
During 2023 two key officers were replaced. At the end of 2023 the total key officers consist of six officers
Note
25:
Subsequent
events:
1.
In February 2025, the
Company announced the initiation of VALUE, a global, pivotal Phase III trial evaluating EscharEx for the treatment of venous
leg ulcers
(VLUs).
2.
On
February 11, 2025, the Board of Directors of the Company approved the granting of up to 248,100
shares and 21,950
RSUs to employees,
officers, and board members. The share options have an exercise price of $18.54
per share and will vest over a period of 1
to 4 years.
F
- 49
Exhibit 4.9
Mediwound Ltd.
2024 Share Incentive Plan
Unless otherwise defined, terms used herein shall have the meaning ascribed to them in Section 2 hereof.
1.
PURPOSE; TYPES OF AWARDS; CONSTRUCTION.
1.1. Purpose. The purpose of this 2024 Share Incentive Plan (as amended, this “Plan”) is to afford an incentive to Service Providers of Mediwound Ltd.,
an Israeli company (together with any successor corporation thereto, the “Company”), or any Affiliate of the Company, which now exists or hereafter is organized or
acquired by the Company or its Affiliates, to continue as Service Providers, to increase their efforts on behalf of the
Company or its Affiliates and to promote the success
of the Company’s business, by providing such Service Providers with opportunities to acquire a proprietary interest in the Company by the issuance of Shares or
restricted Shares (“Restricted Shares”) of the Company, and by the grant of options to purchase Shares (“Options”), Restricted Share Units (“RSUs”) and other Share-
based Awards pursuant to Sections 11
through 13 of this Plan. In addition, Awards may be granted under this Plan as donations, for any purpose that the Board finds
appropriate, at its discretion.
1.2. Types of Awards. This Plan is intended to enable the Company to issue Awards under various tax regimes, including:
(i) pursuant and subject to the provisions of Section 102 of the Ordinance (or the corresponding provision of any subsequently
enacted statute, as amended from time to time), and all regulations and interpretations
adopted by any competent authority, including the Israel
Tax Authority (the “ITA”), including the Income Tax Rules (Tax Benefits in Stock
Issuance to Employees) 5763-2003 or such other rules so
adopted from time to time (the “Rules”) (such Awards that are intended to be (as set
forth in the Award Agreement) and which qualify as such
under Section 102 of the Ordinance and the Rules, “102 Awards”);
(ii) pursuant to Section 3(i) of the Ordinance or the corresponding provision of any subsequently enacted statute, as amended
from time to time (such Awards, “3(i) Awards”);
(iii) Incentive Stock Options within the meaning of Section 422 of the Code, or the corresponding provision of any subsequently
enacted United States federal tax statute, as amended from time to time, to be granted to
Employees who are deemed to be residents of the
United States, for purposes of taxation, or are otherwise subject to U.S. Federal income tax (such Awards that are intended to be (as set forth in
the Award Agreement) and which qualify as an
incentive stock option within the meaning of Section 422(b) of the Code, “Incentive Stock
Options”); and
(iv) Options not intended to be (as set forth in the Award Agreement) or which do not qualify as an Incentive Stock Option to be
granted to Service Providers who are deemed to be residents of the United States for
purposes of taxation, or are otherwise subject to U.S.
Federal income tax (“Nonqualified Stock Options”).
In addition to the issuance of Awards under the relevant tax regimes in the United States of America and the State of Israel, and without
derogating from the generality of
Section 25, this Plan contemplates issuances to Grantees in other jurisdictions or under other tax regimes with respect to which the Committee is empowered, but is not
required, to make the requisite adjustments in
this Plan and set forth the relevant conditions in an appendix to this Plan or in the Company’s agreement with the Grantee
in order to comply with the requirements of such other tax regimes.
1.3. Company Status. This Plan contemplates the issuance of Awards by the Company as a public company.
1.4. Construction. To the extent any provision herein conflicts with the conditions of any relevant tax law, rule or regulation which are relied upon for tax
relief
in respect of a particular Award to a Grantee, the Committee is empowered, but is not required, hereunder to determine that the provisions of such law, rule or
regulation shall prevail over those of this Plan and to interpret and enforce such
prevailing provisions. With respect to 102 Awards, if and to the extent any action or the
exercise or application of any provision hereof or authority granted hereby is conditioned or subject to obtaining a ruling or tax determination from the ITA,
to the extent
required by applicable law, then the taking of any such action or the exercise or application of such section or authority with respect to 102 Awards shall be conditioned
upon obtaining such ruling or tax determination, and, if
obtained, shall be subject to any condition set forth therein; it being clarified that there is no obligation to apply
for any such ruling or tax determination (which shall be in the sole discretion of the Committee) and no assurance is made that
if applied any such ruling or tax
determination will be obtained (or the conditions thereof).
2.
DEFINITIONS.
2.1. Terms Generally. Except when otherwise indicated by the context, (i) the singular shall include the plural and the plural shall include the singular; (ii)
any
pronoun shall include the corresponding masculine, feminine and neuter forms; (iii) any definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other document
as from time to time amended, restated, supplemented or otherwise modified
(subject to any restrictions on such amendments, restatements, supplements or modifications set forth therein or herein), (iv) references to any law, constitution, statute,
treaty, regulation, rule or ordinance, including any section or other part thereof shall refer to it as amended from time to time and shall include any successor thereof,
(v) reference to a “company” or “entity” shall include a, partnership,
corporation, limited liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof, and reference to a “person” shall mean any of the foregoing or an individual, (vi) the words
“herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this Plan in its entirety, and not to any particular provision hereof, (vii) all references herein to
Sections shall be construed to refer to Sections
to this Plan; (viii) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without
limitation”; and (ix) use of the term “or” is not intended to be exclusive.
2.2. Defined Terms. The following terms shall have the meanings ascribed to them in this Section 2:
2.3. “Affiliate” shall mean, with respect to any person, any other person that, directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such person (with the term “control” or “controlled by” within the meaning of Rule 405 of Regulation C under the
Securities Act), including, without limitation, any Parent or Subsidiary, or Employer.
2.4. “Applicable Law” shall mean any applicable law, rule, regulation, statute, pronouncement, policy, interpretation, judgment, order or decree of any
federal, provincial, state or local governmental, regulatory or adjudicative authority or agency, of any jurisdiction, and the rules and regulations of any stock exchange,
over-the-counter market or trading system on which the Company’s shares are
then traded or listed.
2
2.5. “Award” shall mean any Option, Restricted Share, RSUs, Shares or any other Share-based award granted under this Plan or any award granted under
a
previous plan of the Company or its subsidiaries (including any company acquired by the Company) similar to this plan (including, but not limited to, the Company’s
2014 Equity Incentive Plan).
2.6. “Board” shall mean the Board of Directors of the Company.
2.7. Reserved.
2.8. “Code” shall mean the United States Internal Revenue Code of 1986, and any applicable regulations promulgated thereunder, all as amended.
2.9. “Committee” shall mean the compensation committee of the Board, or any other committee established or appointed by the Board to administer this
Plan,
subject to Section 3.1.
2.10. “Companies Law” shall mean the Israel Companies Law, 5759-1999, and the regulations promulgated thereunder, all as amended from time to time.
2.11. “Controlling Shareholder” shall have the meaning set forth in Section 268 of the Companies Law.
2.12. “Disability” shall mean (i) the inability of a Grantee to engage in any substantial gainful activity or to perform the major duties of the Grantee’s
position with the Company or its Affiliates by reason of any medically determinable physical or mental impairment which has lasted or can be expected to last for a
continuous period of not less than 12 months (or such other period as determined by
the Committee), as determined by a qualified doctor acceptable to the Company, (ii)
if applicable, a “permanent and total disability” as defined in Section 22(e)(3) of the Code or Section 409A(a)(2)(c)(i) of the Code, as amended from time to time,
or (iii)
as defined in a policy of the Company that the Committee deems applicable to this Plan, or that makes reference to this Plan, for purposes of this definition.
Notwithstanding the foregoing, for Awards that are subject to Section 409A of
the Code, Disability shall mean that a Grantee is disabled under Section 409A(a)(2)(C)(i)
or (ii) of the Code.
2.13. “Employee” shall mean any person treated as an employee (including an officer or a director who is also treated as an employee) in the records of the
Company or any of its Affiliates (and in the case of 102 Awards, subject to Section 9.3 or in the case of Incentive Stock Options, who is an employee for purposes of
Section 422 of the Code); provided, however, that neither service as a director
nor payment of a director’s fee shall be sufficient to constitute employment for purposes of
this Plan. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an
Employee and the
effective date of such individual’s employment or termination of employment, as the case may be. For purposes of a person’s rights, if any, under this Plan as of the time
of the Company’s determination, all such determinations by
the Company shall be final, binding and conclusive, notwithstanding that the Company or any court of law or
governmental agency subsequently makes a contrary determination.
2.14. “Employer” means, for purpose of a 102 Trustee Award, the Company or an Affiliate, Subsidiary or Parent thereof, which is an “employing
company”
within the meaning and subject to the conditions of Section 102(a) of the Ordinance.
2.15. “employment”, “employed” and words of similar
import shall be deemed to refer to the employment of Employees or to the services of any other
Service Provider, as the case may be.
2.16. “exercise”, “exercised” and words of similar
import, when referring to an Award that does not require exercise or that is settled upon vesting (such as
may be the case with RSUs or Restricted Shares, if so determined in their terms), shall be deemed to refer to the vesting of such an Award
(regardless of whether or not
the wording included reference to vesting of such an Awards explicitly).
3
2.17. “Exercise Period” shall mean the period, commencing on the date of grant of an Award, during which an Award shall be exercisable, subject to any
vesting provisions thereof (including any acceleration thereof, if any) and subject to the termination provisions hereof.
2.18. “Exercise Price” shall mean the exercise price for each Share covered by an Option or the purchase price for each Share covered by any other Award.
2.19. “Fair Market Value” shall mean, as of any date, the value of a Share or other securities, property or rights as determined by the Board, in its
discretion, subject to the following: (i) if, on such date, the Shares are listed on any securities exchange, the average closing sales price per Share on which the Shares are
principally traded over the thirty (30) day calendar period preceding
the subject date (utilizing all trading days during such 30 calendar day period), as reported in The
Wall Street Journal or such other source as the Company deems reliable; (ii) if, on such date, the Shares are then quoted in an over-the-counter
market, the average of the
closing bid and asked prices for the Shares in that market during the thirty (30) day calendar period preceding the subject date (utilizing all trading days during such 30
calendar day period), as reported in The Wall
Street Journal or such other source as the Company deems reliable; or (iii) if, on such date, the Shares are not then listed on
a securities exchange or quoted in an over-the-counter market, or in case of any other securities, property or rights,
such value as the Committee, in its sole discretion,
shall determine, with full authority to determine the method for making such determination and which determination shall be conclusive and binding on all parties, and
shall be made after such
consultations with outside legal, accounting and other experts as the Committee may deem advisable; provided, however, that, if applicable, the
Fair Market Value of the Shares shall be determined in a manner that is intended to satisfy the
applicable requirements of and subject to Section 409A of the Code, and
with respect to Incentive Stock Options, in a manner that is intended to satisfy the applicable requirements of and subject to Section 422 of the Code, subject to Section
422(e)(7) of the Code. The Committee shall maintain a written record of its method of determining such value. If the Shares are listed or quoted on more than one
established stock exchange or over-the-counter market, the Committee shall determine
the principal such exchange or market and utilize the price of the Shares on that
exchange or market (determined as per the method described in clauses (i) or (ii) above, as applicable) for the purpose of determining Fair Market Value.
2.20. “Grantee” shall mean a person who has been granted an Award(s) under this Plan.
2.21. “Ordinance” shall mean the Israeli Income Tax Ordinance (New Version) 1961, and the regulations and rules (including the Rules) promulgated
thereunder, all as amended from time to time.
2.22. “Parent” shall mean any company (other than the Company), which now exists or is hereafter organized, (i) in an unbroken chain of companies
ending
with the Company if, at the time of granting an Award, each of the companies (other than the Company) owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other companies in such
chain, or (ii) if applicable and for purposes of Incentive Stock Options, that is a
“parent corporation” of the Company, as defined in Section 424€ of the Code.
2.23. “Retirement” shall mean a Grantee’s retirement pursuant to Applicable Law or in accordance with the terms of any tax-qualified retirement plan
maintained by the Company or any of its Affiliates in which the Grantee participates or is subject to.
2.24. “Securities Act” shall mean the U.S. Securities Act of 1933, and the rules and regulations promulgated thereunder, all as amended from time to time.
4
2.25. “Service Provider” shall mean an Employee, director, officer, consultant, advisor and any other person or entity who provides services to the
Company
or any Parent, Subsidiary or Affiliate thereof. Service Providers shall include prospective Service Providers to whom Awards are granted in connection with
written offers of an employment or other service relationship with the Company or any
Parent, Subsidiary or any Affiliates thereof, provided, however, that such
employment or service shall have actually commenced.
2.26. “Shares” shall mean Ordinary Shares, par value NIS 0.07, of the Company (as adjusted for stock split, reverse stock split, bonus shares, combination
or other recapitalization events), or shares of such other class of shares of the Company as shall be designated by the Board in respect of the relevant Award(s). “Shares”
include any securities, property or rights issued or distributed with respect thereto.
2.27. “Subsidiary” shall mean any company (other than the Company), which now exists or is hereafter organized or acquired by the Company, (i) in an
unbroken chain of companies beginning with the Company if, at the time of granting an Award, each of the companies other than the last company in the unbroken chain
owns stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other companies in such chain, or (ii) if
applicable and for purposes of Incentive Stock Options, that is a “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.
2.28. “tax(es)” shall mean (a) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including all income,
capital
gains, alternative or add-on minimum, transfer, value added tax, real and personal property, withholding, payroll, employment, escheat, social security, disability, national
security, health tax, wealth surtax, stamp, registration and
estimated taxes, customs duties, fees, assessments and charges of any similar kind whatsoever (including under
Section 280G of the Code) or other tax of any kind whatsoever, (b) all interest, indexation differentials, penalties, fines, additions to
tax or additional amounts imposed
by any taxing authority in connection with any item described in clause (a), (c) any transferee or successor liability in respect of any items described in clauses (a) or (b)
payable by reason of contract,
assumption, transferee liability, successor liability, operation of Applicable Law, or as a result of any express or implied obligation to
assume Taxes or to indemnify any other person, and (d) any liability for the payment of any amounts of the
type described in clause (a) or (b) payable as a result of being
a member of an affiliated, consolidated, combined, unitary or aggregate or other group for any taxable period, including under U.S. Treasury Regulations Section 1.1502-
6(a) (or any
predecessor or successor thereof of any analogous or similar provision under Law) or otherwise.
2.29. “Ten Percent Shareholder” shall mean a Grantee who, at the time an Award is granted to the Grantee, owns shares possessing more than ten percent
(10%)
of the total combined voting power of all classes of shares of the Company or any Parent or Subsidiary, within the meaning of Section 422(b)(6) of the Code.
2.30. “Trustee” shall mean the trustee appointed by the Committee to hold the Awards (and, in relation with 102 Trustee Awards, approved by the ITA), if
so
appointed.
2.31. Other Defined Terms. The following terms shall have the meanings ascribed to them in the Sections set forth below:
Term
Section
102 Awards
1.2(i)
102 Capital Gains Track Awards
9.1
102 Non-Trustee Awards
9.2
102 Ordinary Income Track Awards
9.1
102 Trustee Awards
9.1
3(i) Awards
1.2(ii)
Award Agreement
6
Cause
6.6.4.4
Company
1.1
Effective Date
24.1
Election
9.2
Eligible 102 Grantees
9.3.1
Incentive Stock Options
1.2(iii)
Information
16.4
ITA
1.1(i)
Merger/Sale
14.2
Nonqualified Stock Options
1.2(iv)
Plan
1.1
Pool
5.1
Prior Plan
5.2
Required Holding Period
9.5
Restricted Period
11.2
Restricted Share Agreement
11
Restricted Share Unit Agreement
12
Restricted Shares
1.1
RSUs
1.1
Rules
1.11.2(i)
Securities
17.1
Successor Corporation
14.2.1
Withholding Obligations
18.5
5
3.
ADMINISTRATION.
3.1. To
the extent permitted under Applicable Law, the Articles of Association and any other governing document of the Company, this Plan shall be
administered by the Committee. In the event that there is no Committee in place at any time, this Plan shall
be administered by the Board, and, accordingly, any and all
references herein to the Committee shall be construed as references to the Board. In the event that an action necessary for the administration of this Plan is required
under Applicable
Law to be taken by the Board without the right of delegation, or if such action or power was explicitly reserved by the Board in appointing, establishing
and empowering the Committee, then such action shall be so taken by the Board. In any such
event, all references herein to the Committee shall be construed as
references to the Board. Even if such a Committee was appointed or established, the Board may take any actions that are stated to be vested in the Committee, and shall
not be
restricted or limited from exercising all rights, powers and authorities under this Plan or Applicable Law.
3.2. The
Board shall appoint the members of the Committee, may from time to time remove members from, or add members to, the Committee, and shall fill
vacancies in the Committee, however caused, provided that the composition of the Committee shall at all
times be in compliance with any mandatory requirements of
Applicable Law, the Articles of Association and any other governing document of the Company. The Committee may select one of its members as its Chairman and shall
hold its meetings at such
times and places as it shall determine. The Committee may appoint a Secretary, who shall keep records of its meetings, and shall make such
rules and regulations for the conduct of its business as it shall deem advisable and subject to mandatory
requirements of Applicable Law.
3.3. Subject
to the terms and conditions of this Plan, any mandatory provisions of Applicable Law and any provisions of any Company policy required under
mandatory provisions of Applicable Law, and in addition to the Committee’s powers contained elsewhere in
this Plan, the Committee shall have full authority, in its
discretion, from time to time and at any time, to determine any of the following, or to recommend to the Board any of the following if it is not authorized to take such
action according to
Applicable Law:
(i) eligible Grantees,
(ii) grants of Awards and setting the terms and provisions of Award Agreements (which need not be identical) and any other
agreements or instruments under which Awards are made, including the number of Shares underlying
each Award and the class of Shares
underlying each Award (if more than one class was designated by the Board),
(iii) the time or times at which Awards shall be granted,
(iv) the terms, conditions and restrictions applicable to each Award (which need not be identical) and any Shares acquired upon
the exercise or (if applicable) vesting thereof, including (1) designating Awards under
Section 1.2, (2) the vesting schedule, the acceleration
thereof and terms and conditions upon which Awards may be exercised or become vested, (3) the Exercise Price, (4) the method of payment
for Shares purchased upon the exercise or (if
applicable) vesting of the Awards, (5) the method for satisfaction of any tax withholding
obligation arising in connection with the Awards or such Shares, including by the withholding or delivery of Shares, (6) the time of the
expiration of the
Awards, (7) the effect of the Grantee’s termination of employment with the Company or any of its Affiliates, and (8) all other
terms, conditions and restrictions applicable to the Award or the Shares not inconsistent with the terms of this Plan,
(v) to accelerate, continue, extend or defer the exercisability of any Award or the vesting thereof, including with respect to the
period following a Grantee’s termination of employment or other service,
(vi) the interpretation of this Plan and any Award Agreement and the meaning, interpretation and applicability of terms referred
to in Applicable Law,
(vii) policies, guidelines, rules and regulations relating to and for carrying out this Plan, and any amendment, supplement or
rescission thereof, as it may deem appropriate,
(viii) to adopt supplements to, or alternative versions of, this Plan, including, without limitation, as it deems necessary or
desirable to comply with the laws of, or to accommodate the tax regime or custom of, foreign
jurisdictions whose citizens or residents may be
granted Awards,
(ix) the Fair Market Value of the Shares or other securities, property or rights,
6
(x) the tax track (capital gains, ordinary income track or any other track available under the Section 102 of the Ordinance) for
the purpose of 102 Awards,
(xi) the authorization and approval of conversion, substitution, cancellation or suspension under and in accordance with this
Plan of any or all Awards or Shares,
(xii) unless otherwise provided under the terms of this Plan, the amendment, modification, waiver or supplement of the terms of
any outstanding Award (including, without limitation, reducing the Exercise Price of an
Award, provided that shareholder approval is also
obtained), provided, however, that if any such amendment increases the Exercise Price of an Award or reduces the number of Shares
underlying an Award, then such amendment shall require the consent of the applicable Grantee, unless
such amendment is made pursuant to
the exercise of rights or authorities in accordance with Section 14,
(xiii) without limiting the generality of the foregoing, and subject to the provisions of Applicable Law, to grant to a Grantee, who
is the holder of an outstanding Award, in exchange for the cancellation of such Award, a
new Award having an Exercise Price lower than that
provided in the Award so canceled and containing such other terms and conditions as the Committee may prescribe in accordance with the
provisions of this Plan, provided that the aggregate value (as
determined under the Black-Scholes methodology or other methodology applied
by the Committee) of the new Award shall not exceed that of the Award being canceled or modified, and further provided that any such grant,
exchange and cancellation shall
be subject to the approval of the Company’s shareholders,
(xiv) to correct any defect, supply any omission, or reconcile any inconsistency in this Plan or any Award Agreement and all
other determinations and take such other actions with respect to this Plan or any Award as it
may deem advisable to the extent not inconsistent
with the provisions of this Plan or Applicable Law, and
(xv) any other matter which is necessary or desirable for, or incidental to, the administration of this Plan and any Award
thereunder.
3.4. The
authority granted hereunder includes the authority to modify Awards to eligible individuals who are foreign nationals or are individuals who are
employed outside Israel to recognize differences in local law, tax policy or custom, in order to
effectuate the purposes of this Plan but without amending this Plan.
3.5. The
Board and the Committee shall be free at all times to make such determinations and take such actions as they deem fit. The Board and the
Committee need not take the same action or determination with respect to all Awards, with respect to certain
types of Awards, with respect to all Service Providers or any
certain type of Service Providers and actions and determinations may differ as among the Grantees, and as between the Grantees and any other holders of securities of the
Company.
3.6. All
decisions, determinations, and interpretations of the Committee, the Board and the Company under this Plan shall be final and binding on all
Grantees (whether before or after the issuance of Shares pursuant to Awards), unless otherwise determined
by the Committee, the Board or the Company, respectively.
The Committee shall have the authority (but not the obligation) to determine the interpretation and applicability of Applicable Law to any Grantee or any Awards. No
member of the Committee
or the Board shall be liable to any Grantee for any action taken or determination made in good faith with respect to this Plan or any Award
granted hereunder.
3.7. Any
officer or authorized signatory of the Company shall have the authority to act on behalf of the Company with respect to any matter, right,
obligation, determination or election which is the responsibility of or which is allocated to the Company
herein, provided such person has apparent authority with respect
to such matter, right, obligation, determination or election. Such person or authorized signatory shall not be liable to any Grantee for any action taken or determination
made in good
faith with respect to this Plan or any Award granted hereunder.
7
4.
ELIGIBILITY.
Awards may be granted to Service Providers of the Company or any Affiliate thereof, taking into account, at the Committee’s discretion and
without an obligation to do
so, the qualification under each tax regime pursuant to which such Awards are granted, subject to the limitation on the granting of Incentive Stock Options set forth in
Section 8.1. A person who has been granted an Award
hereunder may be granted additional Awards, if the Committee shall so determine, subject to the limitations
herein. However, eligibility in accordance with this Section 4 shall not entitle any person to be granted an Award, or, having been granted
an Award, to be granted an
additional Award.
Awards may differ in number of Shares covered thereby, the terms and conditions applying to them or on the Grantees or in any other respect
(including, that there should
not be any expectation (and it is hereby disclaimed) that a certain treatment, interpretation or position granted to one shall be applied to the other, regardless of whether or
not the facts or circumstances are the same
or similar).
5.
SHARES.
5.1. The
maximum aggregate number of Shares that may be issued pursuant to Awards under this Plan (the “Pool”) shall be 280,375, subject to adjustment
as provided in Section 14.1. Notwithstanding the foregoing, the total number of Shares that may be issued pursuant to Incentive Stock Options granted under this
Plan
shall be 280,375, subject to adjustment as provided in Section 14.1. The Board may, at its discretion, reduce the number of Shares that may be issued pursuant to Awards
under this Plan, at any time (provided that such reduction does not
derogate from any issuance of Shares in respect Awards then outstanding).
5.2. Any
Shares (a) underlying an Award granted hereunder or an award granted under the Company’s 2014 Equity Incentive Plan (the “Prior Plan”) (in an
amount not to exceed 1,198,880 Shares under the Prior Plan) that has expired, or was cancelled, terminated, forfeited or settled in cash in lieu of issuance of Shares, for
any reason, without having been exercised; (b) if permitted by the Company,
tendered to pay the Exercise Price of an Award (or the exercise price or other purchase price
of any option or other award under the Prior Plan, or withholding tax obligations with respect to an Award or any awards under the Prior Plan; or (c) if
permitted by the
Company, subject to an Award or any award under the Prior Plan that are not delivered to a Grantee because such Shares are withheld to pay the Exercise Price of such
Award or of any award under the Prior Plan, or withholding tax
obligations with respect to such Award or such other award; shall automatically, and without any further
action on the part of the Company or any Grantee, again be available for grant pursuant to Awards and for issuance upon exercise or (if
applicable) vesting of Awards for
the purposes of this Plan (unless this Plan shall have been terminated), and, in the case of Shares underlying awards under the Prior Plan, the Pool under this Plan shall
automatically be deemed to be increased by
the amount of any such Shares being made available from the Prior Plan, unless the Board determines otherwise. Such
Shares may be, in whole or in part, authorized but unissued Shares, (or, subject to obtaining a ruling as it applies to 102 Awards)
treasury shares (dormant shares), or
Shares that shall have been or may be repurchased by the Company (to the extent permitted under the Companies Law).
5.3. Any
Shares under the Pool that are not subject to outstanding or exercised Awards at the termination of this Plan shall cease to be reserved for the
purpose of this Plan.
5.4. From
and after the Effective Date, no further grants or awards shall be made under the Prior Plan(s); however, Awards made under the Prior Plan before
the Effective Date shall continue in effect in accordance with their terms.
8
6.
TERMS AND CONDITIONS OF AWARDS.
Each Award granted pursuant to this Plan shall be evidenced by a written or electronic agreement between the Company and the Grantee or a
written or electronic notice
delivered by the Company (the “Award Agreement”), in substantially such form or forms and containing such terms and
conditions, as the Committee shall from time to
time approve. The Award Agreement shall comply with and be subject to the following general terms and conditions and the provisions of this Plan (except for any
provisions applying to Awards under
different tax regimes), unless otherwise specifically provided in such Award Agreement, or the terms referred to in other Sections of
this Plan applying to Awards under such applicable tax regimes, or terms prescribed by Applicable Law. Award
Agreements need not be in the same form and may differ
in the terms and conditions included therein.
6.1. Number of Shares. Each Award Agreement shall state the number of Shares covered by the Award.
6.2. Type of Award. Each Award Agreement may state the type of Award granted thereunder, provided that the tax treatment of any Award, whether or not
stated in the
Award Agreement, shall be as determined in accordance with Applicable Law.
6.3. Exercise Price. Each Award Agreement shall state the Exercise Price, if applicable. Unless otherwise set forth in this Plan, an Exercise Price of an
Award of
less than the par value of the Shares (if shares bear a par value) shall comply with Section 304 of the Companies Law. Subject to Sections 3.3(xii), 7.2 and 8.2
and to the foregoing, the Committee may reduce the Exercise Price of any outstanding
Award, on terms and subject to such conditions as it deems advisable. The
Exercise Price shall also be subject to adjustment as provided in Section 14 hereof. The Exercise Price of any outstanding Award granted to a Grantee who is subject to
U.S.
federal income tax shall be determined in accordance with Section 409A of the Code, or, with respect to an Award of Incentive Stock Options, Section 422 of the
Code.
6.4. Manner of Exercise.
6.4.1. An Award may be exercised, as to any or all Shares as to which the Award has become exercisable, by written notice delivered in person or
by mail (or such other methods of delivery prescribed by the Company) to the General Counsel of the Company or, if no such officer is then incumbent, to the
Chief Financial Officer of the Company or to such other person as determined by the
Committee, or in any other manner as the Committee shall prescribe from
time to time, specifying the number of Shares with respect to which the Award is being exercised (which may be equal to or lower than the aggregate number of
Shares that have
become exercisable at such time, subject to the last sentence of this Section), accompanied by payment of the aggregate Exercise Price for such
Shares in the manner specified in the following sentence. The Exercise Price shall be paid in full with
respect to each Share, at the time of exercise, either in (i)
cash, (ii) if the Company’s shares are listed for trading on any securities exchange or over-the-counter market, and if the Committee so determines, all or part of
the Exercise Price and
any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker
approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company or the
Trustee, (iii) if the Company’s shares are listed for
trading on any securities exchange or over-the-counter market, and if the Committee so determines, all or part of the Exercise Price and any withholding taxes may
be paid by the delivery (on a
form prescribed by the Company) of an irrevocable direction to pledge Shares to a securities broker or lender approved by the
Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company or the Trustee, or (iv) in
such other manner as the Committee shall
determine, which may include procedures for net exercise as set forth in Section 6.4.2. The application of net exercise with respect to any 102 Awards shall be
subject to obtaining a ruling from the ITA, to
the extent required by applicable law, or to the provisions of guidance or ruling of the ITA and any other applicable
rules and regulations.
9
6.4.2 Upon the approval of the Committee, an Award may be exercised by way of net (or “cashless”) exercise. Net (or “cashless”) exercise means,
as expressed also by the formula below, that in lieu of payment of the exercise
price to the Company, the Awards are exercised into such number of Shares (“X”)
equal to: the total number of Shares underlying the vested Awards being exercised by net exercise (“Y”), multiplied by a fraction, (i) the numerator of which is the
fair value per Share as of the date of exercise (“A”), less the exercise price per vested Award exercised by net exercise (“B”); and (ii) the denominator of which is
the fair value per Share (“A”) (such number of shares to be rounded down to the
nearest whole number). Net exercise shall be conditioned on the exercise price
being less the fair value per Share, and accordingly if X is a negative number, then X shall be equal to zero. The fair value per Share shall be determined in
accordance
with any ITA guidelines, rules or rulings.
X =
Y * (A - B)
A
6.5. Term and Vesting of Awards.
6.5.1. Each Award Agreement shall provide the vesting schedule for the Award as determined by the Committee. The Committee shall have the
authority to determine the vesting schedule and accelerate the vesting of any outstanding Award at
such time and under such circumstances as it, in its sole
discretion, deems appropriate. Unless otherwise resolved by the Committee and stated in the Award Agreement, and subject to Sections 6.6 and 6.7 hereof,
Awards shall vest and become
exercisable under the following schedule: twenty-five percent (25%) of the Shares covered by the Award, on the first anniversary of
the vesting commencement date determined by the Committee (and in the absence of such determination, of date on
which such Award was granted), and six and
one-quarter percent (6.25%) of the Shares covered by the Award at the end of each subsequent three-month period thereafter over the course of the following three
(3) years; provided that the Grantee
remains continuously engaged as a Service Provider of the Company or its Affiliates throughout such vesting dates.
6.5.2. The Award Agreement may contain performance goals and measurements (which, in case of 102 Trustee Awards, may, if then required, be
subject to obtaining a specific tax ruling or determination from the ITA), and the provisions
with respect to any Award need not be the same as the provisions with
respect to any other Award. Such performance goals may include, but are not limited to, sales, earnings before interest and taxes, return on investment, earnings
per share, any
combination of the foregoing or rate of growth of any of the foregoing, as determined by the Committee. The Committee may adjust performance
goals pursuant to Awards previously granted to take into account changes in law and accounting and tax
rules and to make such adjustments as the Committee
deems necessary or appropriate to reflect the inclusion or the exclusion of the impact of extraordinary or unusual items, events or circumstances.
6.5.3. The Exercise Period of an Award will be ten (10) years from the date of grant of the Award, unless otherwise determined by the Committee
and stated in the Award Agreement, but subject to the vesting provisions described above and the
early termination provisions set forth in Sections 6.6 and 6.7
hereof. At the expiration of the Exercise Period, any Award, or any part thereof, that has not been exercised within the term of the Award and the Shares covered
thereby not paid for
in accordance with this Plan and the Award Agreement shall terminate and become null and void, and all interests and rights of the Grantee in
and to the same shall expire.
10
6.6. Termination.
6.6.1. Unless otherwise determined by the Committee or in this Section 6.6, and subject to Section 6.7 hereof, an Award may not be exercised
unless the Grantee is then a Service Provider of the Company or an Affiliate thereof or, in the
case of an Incentive Stock Option, an employee of a company or a
parent or subsidiary company of such company issuing or assuming the Option in a transaction to which Section 424(a) of the Code applies, and unless the
Grantee has remained
continuously so employed since the date of grant of the Award and throughout the vesting dates.
6.6.2. In the event that the employment or service of a Grantee shall terminate, all Awards of such Grantee that are unvested at the time of such
termination shall terminate on the date of such termination, and (other than by reason of
death, Disability or Retirement) all Awards of such Grantee that are vested
and exercisable at the time of such termination may be exercised within up to three (3) months after the date of such termination (or such different period as the
Committee
shall prescribe), but in any event no later than the date of expiration of the Award’s term as set forth in the Award Agreement or pursuant to this Plan;
provided, however, that if the Company (or the Subsidiary or Affiliate, when applicable) shall
terminate the Grantee’s employment or service for Cause (as defined
below) (whether occurring prior to or after termination of employment or service), all Awards theretofore granted to such Grantee (whether vested or not) shall
terminate, unless
otherwise determined by the Committee, and any Shares issued upon exercise or (if applicable) vesting of Awards (including other Shares or
securities issued or distributed with respect thereto), whether held by the Grantee or by the Trustee for the
Grantee’s benefit, shall be deemed to be irrevocably
offered for sale to the Company, any of its Affiliates or any person designated by the Company to purchase, at the Company’s election and subject to Applicable
Law, either for no consideration,
for the par value of such Shares (if shares bear a par value) or against payment of the Exercise Price previously received by the
Company for such Shares upon their issuance, as the Committee deems fit, upon written notice to the Grantee at any
time prior to, at or after the Grantee’s
termination of employment or service. Such Shares or other securities shall be sold and transferred within 30 days from the date of the Company’s notice of its
election to exercise its right. If the
Grantee fails to transfer such Shares or other securities to the Company, the Company, at the decision of the Committee, shall
be entitled to forfeit or repurchase such Shares and to authorize any person to execute on behalf of the Grantee any
document necessary to effect such transfer,
whether or not the share certificates are surrendered. The Company shall have the right and authority to affect the above either by: (i) repurchasing all of such
Shares or other securities held by the
Grantee or by the Trustee for the benefit of the Grantee, or designate the purchaser of all or any part of such Shares or other
securities, for the Exercise Price paid for such Shares, the par value of such Shares (if shares bear a par value) or
for no payment or consideration whatsoever, as
the Committee deems fit; (ii) forfeiting all or any part of such Shares or other securities; (iii) redeeming all or any part of such Shares or other securities, for the
Exercise Price paid for such
Shares, the par value of such Shares (if shares bear a par value) or for no payment or consideration whatsoever, as the Committee
deems fit; (iv) taking action in order to have all or any part of such Shares or other securities converted into
deferred shares entitling their holder only to their par
value (if shares bear a par value) upon liquidation of the Company; or (v) taking any other action which may be required in order to achieve similar results; all as
shall be determined by the
Committee, at its sole and absolute discretion, and the Grantee is deemed to irrevocably empower the Company or any person which
may be designated by it to take any action by, in the name of or on behalf of the Grantee to comply with and give
effect to such actions (including, voting such
shares, filling in, signing and delivering share transfer deeds, etc.).
11
6.6.3. Notwithstanding anything to the contrary, the Committee, in its absolute discretion, may, on such terms and conditions as it may determine
appropriate, extend the periods for which Awards held by any Grantee may continue to vest and
be exercisable; it being clarified that such Awards may lose their
entitlement to certain tax benefits under Applicable Law (including, without limitation, qualification of an Award as an Incentive Stock Option) as a result of the
modification of
such Awards and/or in the event that the Award is exercised beyond the later of: (i) three (3) months after the date of termination of the
employment or service relationship; or (ii) the applicable period under Section 6.7 below with respect to a
termination of the employment or service relationship
because of the death, Disability or Retirement of Grantee.
6.6.4. For purposes of this Plan:
6.6.4.1. A termination of employment or service of a Grantee shall not be deemed to occur (except to the extent required by the Code with
respect to the Incentive Stock Option status of an Option) in case of (i) a transition or
transfer of a Grantee among the Company and its Affiliates, (ii) a change in
the capacity in which the Grantee is employed or renders service to the Company or any of its Affiliates or a change in the identity of the employing or
engagement entity
among the Company and its Affiliates, provided, in case of the foregoing clauses (i) and (ii) above, that the Grantee has remained continuously
employed by and/or in the service of the Company and its Affiliates since the date of grant of the Award
and throughout the vesting period; or (iii) if the Grantee
takes any unpaid leave as set forth in Section 6.8.
6.6.4.2. An entity or an Affiliate thereof assuming an Award or issuing in substitution thereof in a transaction to which Section 424(a) of the
Code applies or in a Merger/Sale in accordance with Section 14 shall be deemed as an
Affiliate of the Company for purposes of this Section 6.6, unless the
Committee determines otherwise.
6.6.4.3. In the case of a Grantee whose principal employer or service recipient is a Subsidiary or Affiliate, the Grantee’s employment shall
also be deemed terminated for purposes of this Section 6.6 as of the date on which such
principal employer or service recipient ceases to be a Subsidiary or
Affiliate.
6.6.4.4. The term “Cause” shall mean (irrespective of, and in addition to, any definition included in any other agreement or
instrument
applicable to the Grantee, and unless otherwise determined by the Committee) any of the following: (i) any theft, fraud, embezzlement, dishonesty, willful
misconduct, breach of fiduciary duty for personal profit, falsification of any
documents or records of the Company or any of its Affiliates, felony or similar act by
the Grantee (whether or not related to the Grantee’s relationship with the Company); (ii) an act of moral turpitude by the Grantee, or any act that causes
significant
injury to, or is otherwise adversely affecting, the reputation, business, assets, operations or business relationship of the Company (or a Subsidiary or Affiliate,
when applicable); (iii) any breach by the Grantee of any material
agreement with or of any material duty of the Grantee to the Company or any Subsidiary or
Affiliate thereof (including breach of confidentiality, non-disclosure, non-use, non-competition or non-solicitation covenants towards the Company or any of
its
Affiliates) or failure to abide by code of conduct or other policies (including, without limitation, policies relating to confidentiality and reasonable workplace
conduct); (iv) any act which constitutes a breach of a Grantee’s fiduciary duty
towards the Company or an Affiliate or Subsidiary, including disclosure of
confidential or proprietary information thereof or acceptance or solicitation to receive unauthorized or undisclosed benefits, irrespective of their nature, or funds,
or
promises to receive either, from individuals, consultants or corporate entities that the Company or a Subsidiary does business with; (v) the Grantee’s
unauthorized use, misappropriation, destruction, or diversion of any tangible or intangible asset
or corporate opportunity of the Company or any of its Affiliates
(including, without limitation, the improper use or disclosure of confidential or proprietary information); or (vi) any circumstances that constitute grounds for
termination for cause
under the Grantee’s employment or service agreement with the Company or Affiliate, to the extent applicable. For the avoidance of doubt,
the determination as to whether a termination is for Cause for purposes of this Plan, shall be made in good
faith by the Committee and shall be final and binding on
the Grantee.
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6.7. Death, Disability or Retirement of Grantee.
6.7.1. If a Grantee shall die while employed by, or performing service for, the Company or its Affiliates, or within the three (3) month period (or
such longer period of time as determined by the Committee, in its discretion) after the date
of termination of such Grantee’s employment or service (or within such
different period as the Committee may have provided pursuant to Section 6.6 hereof), or if the Grantee’s employment or service shall terminate by reason of
Disability, all
Awards theretofore granted to such Grantee may (to the extent otherwise vested and exercisable and unless earlier terminated in accordance with
their terms) be exercised by the Grantee or by the Grantee’s estate or by a person who acquired the
legal right to exercise such Awards by bequest or inheritance,
or by a person who acquired the legal right to exercise such Awards in accordance with applicable law in the case of Disability of the Grantee, as the case may be,
at any time within
one (1) year (or such longer period of time as determined by the Committee, in its discretion) after the death or Disability of the Grantee (or
such different period as the Committee shall prescribe), but in any event no later than the date of
expiration of the Award’s term as set forth in the Award
Agreement or pursuant to this Plan. In the event that an Award granted hereunder shall be exercised as set forth above by any person other than the Grantee,
written notice of such exercise
shall be accompanied by a certified copy of letters testamentary or proof satisfactory to the Committee of the right of such person to
exercise such Award.
6.7.2. In the event that the employment or service of a Grantee shall terminate on account of such Grantee’s Retirement, all Awards of such
Grantee that are exercisable at the time of such Retirement may, unless earlier terminated in
accordance with their terms, be exercised at any time within the three
(3) month period after the date of such Retirement (or such different period as the Committee shall prescribe).
6.8. Suspension of Vesting. Unless the Committee provides otherwise, vesting of Awards granted hereunder shall be suspended during any unpaid leave of
absence, other
than in the case of any (i) leave of absence which was pre-approved by the Company explicitly for purposes of continuing the vesting of Awards, or (ii)
transfers between locations of the Company or any of its Affiliates, or between the Company and
any of its Affiliates, or any respective successor thereof. For clarity, for
purposes of this Plan, military leave, statutory maternity or paternity leave, or sick leave are not deemed unpaid leaves of absence, unless otherwise determined by the
Committee.
6.9. Securities Law Restrictions. Except as otherwise provided in the applicable Award Agreement or other agreement between the Service Provider and the
Company, if
the exercise of an Award following the termination of the Service Provider’s employment or service (other than for Cause) would be prohibited at any time
solely because the issuance of Shares would violate the registration requirements under the
Securities Act or equivalent requirements under equivalent laws of other
applicable jurisdictions, then the Award shall remain exercisable and terminate on the earlier of (i) the expiration of a period of three (3) months (or such longer period of
time as determined by the Committee, in its discretion) after the termination of the Service Provider’s employment or service during which the exercise of the Award
would not be in such violation, or (ii) the expiration of the term of the Award as
set forth in the Award Agreement or pursuant to this Plan. In addition, unless
otherwise
provided in a Grantee’s Award Agreement, if the sale of any Shares received upon exercise or (if applicable) vesting of an Award following the
termination of the
Grantee’s employment or service (other than for Cause) would violate the Company’s insider trading policy, then the Award shall terminate on
the earlier of (i) the
expiration of a period equal to the applicable post-termination exercise period after the termination of the Grantee’s employment or service during which the exercise of
the Award would not be in violation of the Company’s insider trading policy, or (ii) the expiration of the term of the Award
as set forth in the applicable Award
Agreement or pursuant to this Plan.
6.10. Other Provisions. The Award Agreement evidencing Awards under this Plan shall contain such other terms and conditions not inconsistent with this
Plan as the
Committee may determine, at or after the date of grant, including provisions in connection with the restrictions on transferring the Awards or Shares covered
by such Awards, which shall be binding upon the Grantees and any purchaser, assignee or
transferee of any Awards, and other terms and conditions as the Committee
shall deem appropriate.
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7.
NONQUALIFIED STOCK OPTIONS.
Awards granted pursuant to this Section 7 are intended to constitute Nonqualified Stock Options and shall be subject to the general terms
and conditions specified in
Section 6 hereof and other provisions of this Plan, except for any provisions of this Plan applying to Awards under different tax laws or regulations. In the event of any
inconsistency or contradictions between the
provisions of this Section 7 and the other terms of this Plan, this Section 7 shall prevail. However, if for any reason an
Option granted pursuant to Section 8 (or portion thereof) does not qualify as an Incentive Stock Option, then, to the extent
of such non-qualification, such Option (or
portion thereof) shall be regarded as a Nonqualified Stock Option granted under this Plan. In no event will the Board, the Company or any Parent or Subsidiary or any of
their respective employees or
directors have any liability to Grantee (or any other person) due to the failure of the Option to qualify for any reason as an Incentive Stock
Option.
7.1. Certain Limitations on Eligibility for Nonqualified Stock Options. Nonqualified Stock Options may not be granted to a Service Provider who is deemed
to be a
resident of the United States for purposes of taxation or who is otherwise subject to United States federal income tax unless the Shares underlying such Options
constitute “service recipient stock” under Section 409A of the Code or unless such
Options comply with the payment requirements of Section 409A of the Code.
7.2. Exercise Price. The Exercise Price of a Nonqualified Stock Option shall not be less than 100% of the Fair Market Value of a Share on the date of grant
of such
Option unless the Committee specifically indicates that the Awards will have a lower Exercise Price and the Award complies with Section 409A of the Code.
Notwithstanding the foregoing, a Nonqualified Stock Option may be granted with an exercise
price lower than the minimum exercise price set forth above if such Award
is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of that complies with Section 424(a) of the Code or
1.409A-1(b)(5)(v)(D) of the U.S. Treasury Regulations or any successor guidance.
8.
INCENTIVE STOCK OPTIONS.
Awards granted pursuant to this Section 8 are intended to constitute Incentive Stock Options and shall be granted subject to the following
special terms and conditions,
the general terms and conditions specified in Section 6 hereof and other provisions of this Plan, except for any provisions of this Plan applying to Awards under different
tax laws or regulations. In the event of any
inconsistency or contradictions between the provisions of this Section 8 and the other terms of this Plan, this Section 8 shall
prevail.
8.1. Eligibility for Incentive Stock Options. Incentive Stock Options may be granted only to Employees of the Company, or to Employees of a Parent or
Subsidiary,
determined as of the date of grant of such Options. An Incentive Stock Option granted to a prospective Employee upon the condition that such person
become an Employee shall be deemed granted effective on the date such person commences employment,
with an exercise price determined as of such date in
accordance with Section 8.2.
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8.2. Exercise Price. The Exercise Price of an Incentive Stock Option shall not be less than one hundred percent (100%) of the Fair Market Value of the
Shares covered
by the Awards on the date of grant of such Option or such other price as may be determined pursuant to the Code. Notwithstanding the foregoing, an
Incentive Stock Option may be granted with an exercise price lower than the minimum exercise price
set forth above if such Award is granted pursuant to an assumption
or substitution for another option in a manner that complies with the provisions of Section 424(a) of the Code.
8.3. Date of Grant. Notwithstanding any other provision of this Plan to the contrary, no Incentive Stock Option may be granted under this Plan after 10
years from
the date this Plan is adopted, or the date this Plan is approved by the shareholders, whichever is earlier.
8.4. Exercise Period. No Incentive Stock Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Award,
subject
to Section 8.6. No Incentive Stock Option granted to a prospective Employee may become exercisable prior to the date on which such person commences
employment.
8.5. $100,000 Per Year Limitation. The aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the Shares with
respect to
which all Incentive Stock Options granted under this Plan and all other “incentive stock option” plans of the Company, or of any Parent or Subsidiary, become
exercisable for the first time by each Grantee during any calendar year shall not exceed
one hundred thousand United States dollars ($100,000) with respect to such
Grantee. To the extent that the aggregate Fair Market Value of Shares with respect to which such Incentive Stock Options and any other such incentive stock options are
exercisable for the first time by any Grantee during any calendar year exceeds one hundred thousand United States dollars ($100,000), such options shall be treated as
Nonqualified Stock Options. The foregoing shall be applied by taking options
into account in the order in which they were granted. If the Code is amended to provide
for a different limitation from that set forth in this Section 8.5, such different limitation shall be deemed incorporated herein effective as of the date and
with respect to
such Awards as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonqualified Stock Option in
part by reason of the limitation set forth in this Section 8.5,
the Grantee may designate which portion of such Option the Grantee is exercising. In the absence of such
designation, the Grantee shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates
representing each such portion
may be issued upon the exercise of the Option.
8.6. Ten Percent Shareholder. In the case of an Incentive Stock Option granted to a Ten Percent Shareholder, notwithstanding the foregoing provisions of
this Section
8.6, (i) the Exercise Price shall not be less than one hundred and ten percent (110%) of the Fair Market Value of a Share on the date of grant of such Incentive
Stock Option, and (ii) the Exercise Period shall not exceed five (5) years from the
effective date of grant of such Incentive Stock Option.
8.7. Payment of Exercise Price. Each Award Agreement evidencing an Incentive Stock Option shall state each alternative method by which the Exercise
Price thereof may
be paid.
8.8. Leave of Absence. Notwithstanding Section 6.8, a Grantee’s employment shall not be deemed to have terminated if the Grantee takes any leave as set
forth in
Section 6.8(i); provided, however, that if any such leave exceeds three (3) months, on the day that is three (3) months following the commencement of such leave
any Incentive Stock Option held by the Grantee shall cease to be treated as an
Incentive Stock Option and instead shall be treated thereafter as a Nonqualified Stock
Option, unless the Grantee’s right to return to employment is guaranteed by statute or contract.
15
8.9. Exercise Following Termination for Disability. Notwithstanding anything else in this Plan to the contrary, Incentive Stock Options that are not exercised
within
three (3) months following termination of the Grantee’s employment with the Company or its Parent or Subsidiary or a corporation or a Parent or Subsidiary of
such corporation issuing or assuming an Option in a transaction to which Section 424(a) of
the Code applies, or within one year in case of termination of the Grantee’s
employment with the Company or its Parent or Subsidiary due to a Disability (within the meaning of Section 22(e)(3) of the Code), shall be deemed to be Nonqualified
Stock
Options.
8.10. Adjustments to Incentive Stock Options. Any Awards Agreement providing for the grant of Incentive Stock Options shall indicate that adjustments
made pursuant to
this Plan with respect to Incentive Stock Options could constitute a “modification” of such Incentive Stock Options (as that term is defined in Section
424(h) of the Code) or could cause adverse tax consequences for the holder of such Incentive
Stock Options and that the holder should consult with his or her tax advisor
regarding the consequences of such “modification” on his or her
income tax treatment with respect to the Incentive Stock Option.
8.11. Notice to Company of Disqualifying Disposition. Each Grantee who receives an Incentive Stock Option must agree to notify the Company in writing
immediately
after the Grantee makes a Disqualifying Disposition of any Shares received pursuant to the exercise of Incentive Stock Options. A “Disqualifying
Disposition” is any disposition (including any sale) of such Shares before the later of (i) two years
after the date the Grantee was granted the Incentive Stock Option, or
(ii) one year after the date the Grantee acquired Shares by exercising the Incentive Stock Option. If the Grantee dies before such Shares are sold, these holding period
requirements do not apply and no disposition of the Shares will be deemed a Disqualifying Disposition.
9.
102 AWARDS.
Awards granted pursuant to this Section 9 are intended to constitute 102 Awards and shall be granted subject to the following special terms
and conditions, the general
terms and conditions specified in Section 6 hereof and other provisions of this Plan, except for any provisions of this Plan applying to Awards under different tax laws or
regulations. In the event of any inconsistency or
contradictions between the provisions of this Section 9 and the other terms of this Plan, this Section 9 shall prevail.
9.1. Tracks. Awards granted pursuant to this Section 9 are intended to be granted pursuant to Section 102 of the Ordinance pursuant to either (i) Section
102(b)(2) or (3) thereof (as applicable), under the capital gain track (“102 Capital Gain Track Awards”), or (ii) Section 102(b)(1) thereof under the ordinary income
track (“102
Ordinary Income Track Awards”, and together with 102 Capital Gain Track Awards, “102 Trustee Awards”). 102 Trustee Awards shall be
granted subject
to the special terms and conditions contained in this Section 9, the general terms and conditions specified in Section 6 hereof and other provisions of this Plan, except for
any provisions of this Plan applying to Options under
different tax laws or regulations.
9.2. Election of Track. Subject to Applicable Law, the Company may grant only one type of 102 Trustee Awards at any given time to all Grantees who are to
be granted
102 Trustee Awards pursuant to this Plan, and shall file an election with the ITA regarding the type of 102 Trustee Awards it elects to grant before the date of
grant of any 102 Trustee Awards (the “Election”). Such Election shall also apply to any other securities, including bonus shares, received by any Grantee as a result of
holding the 102 Trustee Awards. The Company may change the
type of 102 Trustee Awards that it elects to grant only after the expiration of at least 12 months from the
end of the year in which the first grant was made in accordance with the previous Election, or as otherwise provided by Applicable Law. Any
Election shall not prevent
the Company from granting Awards, pursuant to Section 102(c) of the Ordinance without a Trustee (“102 Non-Trustee Awards”).
16
9.3. Eligibility for Awards.
9.3.1. Subject to Applicable Law, 102 Awards may only be granted to an "employee" within the meaning of Section 102(a) of the Ordinance
(which as of the date of the adoption of this Plan means (i) individuals employed by an Israeli company
being the Company or any of its Affiliates, and (ii)
individuals who are serving and are engaged personally (and not through an entity) as “office holders” by such an Israeli company), but may not be granted to a
Controlling Shareholder (“Eligible 102 Grantees”). Eligible 102 Grantees may receive only 102 Awards, which may either be granted to a Trustee or granted
under Section 102 of
the Ordinance without a Trustee.
9.4. 102 Award Grant Date.
9.4.1. Each 102 Award will be deemed granted on the date determined by the Committee, subject to Section 9.4.2, provided that (i) the Grantee
has signed all documents required by the Company or pursuant to Applicable Law, and (ii) with
respect to 102 Trustee Award, the Company has provided all
applicable documents to the Trustee in accordance with the guidelines published by the ITA, and if an agreement is not signed and delivered by the Grantee within
90 days from the date
determined by the Committee (subject to Section 9.4.2), then such 102 Trustee Award shall be deemed granted on such later date as such
agreement is signed and delivered and on which the Company has provided all applicable documents to the Trustee
in accordance with the guidelines published by
the ITA. In the case of any contradiction, this provision and the date of grant determined pursuant hereto shall supersede and be deemed to amend any date of grant
indicated in any corporate resolution
or Award Agreement.
9.4.2. Unless otherwise permitted by the Ordinance, any grants of 102 Trustee Awards that are made on or after the date of the adoption of this
Plan or an amendment to this Plan, as the case may be, that may become effective only at the
expiration of thirty (30) days after the filing of this Plan or any
amendment thereof (as the case may be) with the ITA in accordance with the Ordinance shall be conditional upon the expiration of such 30-day period, such
condition shall be read
and is incorporated by reference into any corporate resolutions approving such grants and into any Award Agreement evidencing such
grants (whether or not explicitly referring to such condition), and the date of grant shall be at the expiration of
such 30-day period, whether or not the date of grant
indicated therein corresponds with this Section. In the case of any contradiction, this provision and the date of grant determined pursuant hereto shall supersede
and be deemed to amend any date
of grant indicated in any corporate resolution or Award Agreement.
9.5. 102 Trustee Awards.
9.5.1. Each 102 Trustee Award, each Share issued pursuant to the exercise of any 102 Trustee Award, and any rights granted thereunder, including
bonus shares, shall be issued to and registered in the name of the Trustee and shall be held in
trust for the benefit of the Grantee for the requisite period prescribed
by the Ordinance (the “Required Holding Period”). In the event that the
requirements under Section 102 of the Ordinance to qualify an Award as a 102 Trustee
Award are not met, then the Award may be treated as a 102 Non-Trustee Award or 3(i) Award, all in accordance with the provisions of the Ordinance. After
expiration of the Required Holding Period, the Trustee may release such 102 Trustee Awards and any such Shares, provided that (i) the Trustee has received an
acknowledgment from the ITA that the Grantee has paid any applicable taxes due pursuant to
the Ordinance, or (ii) the Trustee and/or the Company and/or the
Employer withholds all applicable taxes and compulsory payments due pursuant to the Ordinance arising from the 102 Trustee Awards and/or any Shares issued
upon exercise or (if
applicable) vesting of such 102 Trustee Awards. The Trustee shall not release any 102 Trustee Awards or Shares issued upon exercise or (if
applicable) vesting thereof prior to the payment in full of the Grantee’s tax and compulsory payments
arising from such 102 Trustee Awards and/or Shares or the
withholding referred to in (ii) above.
17
9.5.2. Each 102 Trustee Award shall be subject to the relevant terms of the Ordinance, the Rules and any determinations, rulings or approvals
issued by the ITA, which shall be deemed an integral part of the 102 Trustee Awards and shall
prevail over any term contained in this Plan or Award Agreement
that is not consistent therewith. Any provision of the Ordinance, the Rules and any determinations, rulings or approvals by the ITA not expressly specified in this
Plan or Award
Agreement that are necessary to receive or maintain any tax benefit pursuant to Section 102 of the Ordinance shall be binding on the Grantee. Any
Grantee granted a 102 Trustee Awards shall comply with the Ordinance and the terms and conditions of
the trust agreement entered into between the Company and
the Trustee. The Grantee shall execute any and all documents that the Company and/or its Affiliates and/or the Trustee determine from time to time to be
necessary in order to comply with the
Ordinance and the Rules.
9.5.3. During the Required Holding Period, the Grantee shall not release from trust or sell, assign, transfer or give as collateral, the Shares
issuable upon the exercise or (if applicable) vesting of a 102 Trustee Awards and/or any
securities issued or distributed with respect thereto, until the expiration of
the Required Holding Period. Notwithstanding the above, if any such sale, release or other action occurs during the Required Holding Period it may result in
adverse tax
consequences to the Grantee under Section 102 of the Ordinance and the Rules, which shall apply to and shall be borne solely by such Grantee.
Subject to the foregoing, the Trustee may, pursuant to a written request from the Grantee, but subject to
the terms of this Plan, release and transfer such Shares to a
designated third party, provided that both of the following conditions have been fulfilled prior to such release or transfer: (i) payment has been made to the ITA of
all taxes and
compulsory payments required to be paid upon the release and transfer of the Shares, and confirmation of such payment has been received by the
Trustee and the Company, and (ii) the Trustee has received written confirmation from the Company that all
requirements for such release and transfer have been
fulfilled according to the terms of the Company’s corporate documents, any agreement governing the Shares, this Plan, the Award Agreement and any Applicable
Law.
9.5.4. If a 102 Trustee Award is exercised or (if applicable) vested, the Shares issued upon such exercise or (if applicable) vesting shall be issued
in the name of the Trustee for the benefit of the Grantee.
9.5.5. Upon or after receipt of a 102 Trustee Award, if required, the Grantee may be required to sign an undertaking to release the Trustee from
any liability with respect to any action or decision duly taken and executed in good faith by
the Trustee in relation to this Plan, or any 102 Trustee Awards or Share
granted to such Grantee thereunder.
9.6. 102 Non-Trustee Awards. The foregoing provisions of this Section 9 relating to 102 Trustee Awards shall not apply with respect to 102 Non-Trustee
Awards, which
shall, however, be subject to the relevant provisions of Section 102 of the Ordinance and the applicable Rules. The Committee may determine that 102
Non-Trustee Awards, the Shares issuable upon the exercise or (if applicable) vesting of a 102
Non-Trustee Awards and/or any securities issued or distributed with respect
thereto, shall be allocated or issued to the Trustee, who shall hold such 102 Non-Trustee Awards and all accrued rights thereon (if any), in trust for the benefit of the
Grantee and/or the Company, as the case may be, until the full payment of tax arising from the 102 Non-Trustee Awards, the Shares issuable upon the exercise or (if
applicable) vesting of a 102 Non-Trustee Awards and/or any securities issued or
distributed with respect thereto. The Company may choose, alternatively, to force the
Grantee to provide it with a guarantee or other security, to the satisfaction of each of the Trustee and the Company, until the full payment of the applicable
taxes.
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9.7. Written Grantee Undertaking. To the extent and with respect to any 102 Trustee Award, and as required by Section 102 of the Ordinance and the Rules,
by virtue
of the receipt of such Award, the Grantee is deemed to have provided, undertaken and confirm the following written undertaking (and such undertaking is
deemed incorporated into any documents signed by the Grantee in connection with the employment
or service of the Grantee and/or the grant of such Award), and which
undertaking shall be deemed to apply and relate to all 102 Trustee Awards granted to the Grantee, whether under this Plan or other plans maintained by the Company, and
whether
prior to or after the date hereof.
9.7.1. The Grantee shall comply with all terms and conditions set forth in Section 102 of the Ordinance with regard to the “Capital Gain Track” or
the “Ordinary Income Track”, as applicable, and the applicable rules and regulations
promulgated thereunder, as amended from time to time;
9.7.2. The Grantee is familiar with, and understands the provisions of, Section 102 of the Ordinance in general, and the tax arrangement under the
“Capital Gain Track” or the “Ordinary Income Track” in particular, and its tax consequences;
the Grantee agrees that the 102 Trustee Awards and Shares that may
be issued upon exercise or (if applicable) vesting of the 102 Trustee Awards (or otherwise in relation to the 102 Trustee Awards), will be held by the Trustee
appointed pursuant to
Section 102 of the Ordinance for at least the duration of the "Holding Period" (as such term is defined in Section 102) under the "Capital
Gain Track" or the “Ordinary Income Track”, as applicable. The Grantee understands that any release of such
102 Trustee Awards or Shares from trust, or any sale
of the Share prior to the termination of the Holding Period, as defined above, will result in taxation at marginal tax rate, in addition to deductions of appropriate
social security, health tax
contributions or other compulsory payments; and
9.7.3. The Grantee agrees to the trust agreement signed between the Company, the Employer and the Trustee appointed pursuant to Section 102 of
the Ordinance.
10.
3(i) AWARDS.
Awards granted pursuant to this Section 10 are intended to constitute 3(i) Awards and shall be granted subject to the general terms and
conditions specified in Section 6
hereof and other provisions of this Plan, except for any provisions of this Plan applying to Awards under different tax laws or regulations. In the event of any
inconsistency or contradictions between the provisions
of this Section 10 and the other terms of this Plan, this Section 10 shall prevail.
10.1. To
the extent required by the Ordinance or the ITA or otherwise deemed by the Committee to be advisable, the 3(i) Awards and/or any shares or other
securities issued or distributed with respect thereto granted pursuant to this Plan shall be issued to
a Trustee nominated by the Committee in accordance with the
provisions of the Ordinance or the terms of a trust agreement, as applicable. In such event, the Trustee shall hold such Awards and/or other securities issued or
distributed with respect
thereto in trust, until exercised or (if applicable) vested by the Grantee and the full payment of tax arising therefrom, pursuant to the Company’s
instructions from time to time as set forth in a trust agreement, which will have been entered into
between the Company and the Trustee. If determined by the Board or
the Committee, and subject to such trust agreement, the Trustee will also hold the shares issuable upon exercise or (if applicable) vesting of the 3(i) Awards, as long as
they are
held by the Grantee. If determined by the Board or the Committee, and subject to such trust agreement, the Trustee shall be responsible for withholding any taxes
to which a Grantee may become liable upon issuance of Shares, whether due to the
exercise or (if applicable) vesting of Awards.
10.2. Shares
pursuant to a 3(i) Award shall not be issued, unless the Grantee delivers to the Company payment in cash or by bank check or such other form
acceptable to the Committee of all withholding taxes due, if any, on account of the Grantee acquired Shares
under the Award or gives other assurance satisfactory to the
Committee of the payment of those withholding taxes.
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11.
RESTRICTED SHARES.
The Committee may award Restricted Shares to any eligible Grantee, including under Section 102 of the Ordinance. Each Award of Restricted
Shares under this Plan
shall be evidenced by a written agreement between the Company and the Grantee (the “Restricted Share Agreement”), in such
form as the Committee shall from time
to time approve. The Restricted Shares shall be subject to all applicable terms of this Plan, which in the case of Restricted Shares granted under Section 102 of the
Ordinance shall include Section 9 hereof, and
may be subject to any other terms that are not inconsistent with this Plan. The provisions of the various Restricted Shares
Agreements entered into under this Plan need not be identical. The Restricted Share Agreement shall comply with and be
subject to Section 6 and the following terms
and conditions, unless otherwise specifically provided in such Agreement and not inconsistent with this Plan, or Applicable Law:
11.1. Purchase Price. Section 6.4 shall not apply. Each Restricted Share Agreement shall state an amount of Exercise Price to be paid by the Grantee, if any,
in
consideration for the issuance of the Restricted Shares and the terms of payment thereof, which may include payment in cash or, subject to the Committee’s approval,
payment by issuance of promissory notes or other evidence of indebtedness on such
terms and conditions as determined by the Committee.
11.2. Restrictions. Restricted Shares may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of
descent
and distribution (in which case they shall be transferred subject to all restrictions then or thereafter applicable thereto), until such Restricted Shares shall have
vested (the period from the date on which the Award is granted until the date of
vesting of the Restricted Share thereunder being referred to herein as the “Restricted
Period”). The Committee may also impose such additional
or alternative restrictions and conditions on the Restricted Shares, as it deems appropriate, including the
satisfaction of performance criteria (which, in case of 102 Trustee Awards, may be subject to obtaining a specific tax ruling or
determination from the ITA). Such
performance criteria may include, but are not limited to, sales, earnings before interest and taxes, return on investment, earnings per share, any combination of the
foregoing or rate of growth of any of the
foregoing, as determined by the Committee or pursuant to the provisions of any Company policy required under mandatory
provisions of Applicable Law. Certificates for shares issued pursuant to Restricted Share Awards, if issued, shall bear an
appropriate legend referring to such restrictions,
and any attempt to dispose of any such shares in contravention of such restrictions shall be null and void and without effect. Such certificates may, if so determined by
the Committee, be held in
escrow by an escrow agent appointed by the Committee, or, if a Restricted Share Award is made pursuant to Section 102 of the Ordinance, by
the Trustee. In determining the Restricted Period of an Award the Committee may provide that the foregoing
restrictions shall lapse with respect to specified percentages
of the awarded Restricted Shares on successive anniversaries of the date of such Award. To the extent required by the Ordinance or the ITA, the Restricted Shares issued
pursuant to
Section 102 of the Ordinance shall be issued to the Trustee in accordance with the provisions of the Ordinance and the Restricted Shares shall be held for the
benefit of the Grantee for at least the Required Holding Period.
11.3. Forfeiture; Repurchase. Subject to such exceptions as may be determined by the Committee, if the Grantee’s continuous employment with or service
to the Company
or any Affiliate thereof shall terminate for any reason prior to the expiration of the Restricted Period of an Award or prior to the timely payment in full of
the Exercise Price of any Restricted Shares, any Shares remaining subject to vesting or
with respect to which the purchase price has not been paid in full, shall thereupon
be forfeited, transferred to, and redeemed, repurchased or cancelled by, as the case may be, in any manner as set forth in Section 6.6.2(i) through (v), subject to
Applicable Law and the Grantee shall have no further rights with respect to such Restricted Shares.
11.4. Ownership. During the Restricted Period the Grantee shall possess all incidents of ownership of such Restricted Shares, subject to Section 6.10 and
Section 11.2,
including the right to vote and receive dividends with respect to such Shares. All securities, if any, received by a Grantee with respect to Restricted Shares
as a result of any stock split, stock dividend, combination of shares, or other similar
transaction shall be subject to the restrictions applicable to the original Award.
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12.
RESTRICTED SHARE UNITS.
An RSU is an Award covering a number of Shares that is settled, if vested and (if applicable) exercised, by issuance of those Shares. An
RSU may be awarded to any
eligible Grantee, including under Section 102 of the Ordinance. The Award Agreement relating to the grant of RSUs under this Plan (the “Restricted Share Unit
Agreement”), shall be in such form as the Committee shall from time to time approve. The RSUs shall be subject to all applicable terms of this Plan, which in the case
of RSUs granted under Section
102 of the Ordinance shall include Section 9 hereof, and may be subject to any other terms that are not inconsistent with this Plan. The
provisions of the various Restricted Share Unit Agreements entered into under this Plan need not be identical.
RSUs may be granted in consideration of a reduction in
the recipient’s other compensation.
12.1. Exercise Price. No payment of Exercise Price shall be required as consideration for RSUs, unless included in the Award Agreement or as required by
Applicable
Law (including, Section 304 of the Companies Law), and Section 6.4 shall apply, if applicable.
12.2. Shareholders’ Rights. The Grantee shall not possess or own any ownership rights in the Shares underlying the RSUs and no rights as a shareholder
shall exist
prior to the actual issuance of Shares in the name of the Grantee.
12.3. Settlements of Awards. Settlement of vested RSUs shall be made in the form of Shares or cash (in case of 102 Trustee Awards, the settlement shall be
made in the
form of shares only). Distribution to a Grantee of an amount (or amounts) from settlement of vested RSUs can be deferred to a date after settlement as
determined by the Committee. The amount of a deferred distribution may be increased by an
interest factor or by dividend equivalents. Until the grant of RSUs is
settled, the number of Shares underlying such RSUs shall be subject to adjustment pursuant hereto.
12.4. Section 409A Restrictions. Notwithstanding anything to the contrary set forth herein, any RSUs granted under this Plan that are not exempt from the
requirements
of Section 409A of the Code shall contain such restrictions or other provisions so that such RSUs will comply with the requirements of Section 409A of the
Code, if applicable to the Company. Such restrictions, if any, shall be determined by the
Committee and contained in the Restricted Share Unit Agreement evidencing
such RSU. For example, such restrictions may include a requirement that any Shares that are to be issued in a year following the year in which the RSU vests must be
issued
in accordance with a fixed, pre-determined schedule.
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13.
OTHER SHARE OR SHARE-BASED AWARDS.
13.1. The
Committee may grant other Awards under this Plan pursuant to which Shares (which may, but need not, be Restricted Shares pursuant to Section
11 hereof), cash (in settlement of Share-based Awards) or a combination thereof, are or may in the future
be acquired or received, or Awards denominated in stock units,
including units valued on the basis of measures other than market value.
13.2. The
Committee may also grant stock appreciation rights without the grant of an accompanying option, which rights shall permit the Grantees to
receive, at the time of any exercise of such rights, cash equal to the amount by which the Fair Market Value
of the Shares in respect to which the right was granted is so
exercised exceeds the exercise price thereof. The exercise price of any such stock appreciation right granted to a Grantee who is subject to U.S. federal income tax shall
be determined
in compliance with Section 7.2.
13.3. Such
other Share-based Awards as set forth above may be granted alone, in addition to, or in tandem with any Award of any type granted under this
Plan (without any obligation or assurance that that such Share-based Awards will be entitled to tax
benefits under Applicable Law or to the same tax treatment as other
Awards under this Plan).
14.
EFFECT OF CERTAIN CHANGES.
14.1. General.
14.1.1. In the event of a division or subdivision of the outstanding share capital of the Company, any distribution of bonus shares (stock split),
consolidation or combination of share capital of the Company (reverse stock split),
reclassification with respect to the Shares or any similar recapitalization events,
the Committee shall make, without the need for a consent of any holder of an Award, adjustments as determined by the Committee to be appropriate, in its
discretion,
in order to adjust (i) the number and class of shares reserved and available for grants of Awards, (ii) the number and class of shares covered by
outstanding Awards, (iii) the Exercise Price per share covered by any Award, (iv) the terms and
conditions concerning vesting and exercisability and the term and
duration of the outstanding Awards, (v) the type or class of security, asset or right underlying the Award (which need not be only that of the Company, and may be
that of the
surviving corporation or any affiliate thereof or such other entity party to any of the above transactions), and (vi) any other terms of the Award that in
the opinion of the Committee should be adjusted.
14.1.2. In the event of a merger (including, a reverse merger and a reverse triangular merger), consolidation, amalgamation or like transaction of
the Company with or into another corporation, exchange of shares, a business combination, a
reorganization, a spin-off or other corporate divestiture or division,
or other similar occurrences, the Committee shall have the authority to make any adjustments as determined by the Committee to be appropriate, in its discretion,
without the
need for a consent of any holder of an Award.
14.1.3. In the event of a distribution of cash dividend by the Company to all holders of Shares, the Committee shall have the authority to
determine, without the need for a consent of any holder of an Award, that the Exercise Price of any
Award, which is outstanding and unexercised on the record
date of such distribution, shall be reduced by an amount equal to the per Share gross dividend amount distributed by the Company, and the Committee may
determine that the Exercise Price
following such reduction shall be not less than the par value of a Share. The approval of the Company’s shareholders shall be
obtained for such reduction in Exercise Price.
14.1.4. The application of any provisions of this Section with respect to any 102 Awards shall be subject to obtaining a ruling from the ITA, to the
extent required by applicable law and subject to the terms and conditions of any such
ruling.
14.1.5. Any fractional shares resulting from adjustment pursuant to this Section 14.1 shall be treated as determined by the Committee, and in the
absence of such determination shall be rounded down to the nearest whole share, and the
Company shall have no obligation to make any cash or other payment
with respect to such fractional shares.
14.1.6. No adjustment shall be made by reason of the distribution of subscription rights or rights offering to outstanding shares or other issuance
of shares by the Company, unless the Committee determines otherwise.
14.1.7. The adjustments determined pursuant to this Section 14.1 (including a determination that no adjustment is to be made) shall be final,
binding and conclusive.
22
14.2. Merger/Sale of Company. In the event of (i) a sale of all or substantially all of the assets of the Company, or a sale (including an exchange) of all or
substantially all of the shares of the Company, to any person, or a purchase by a
shareholder of the Company or by an Affiliate of such shareholder, of all the shares of the
Company held by all or substantially all other shareholders or by other shareholders who are not Affiliated with such acquiring party; (ii) a merger
(including, a reverse
merger and a reverse triangular merger), consolidation, amalgamation or like transaction of the Company with or into another corporation; (iii) a scheme of arrangement
for the purpose of effecting such sale, merger,
consolidation, amalgamation or other transaction; (iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company, or (v) such other transaction or set of circumstances that is determined by the Board, in
its discretion, to be a transaction
subject to the provisions of this Section 14.2; excluding any of the foregoing transactions in clauses (i) through (iv) if the Board determines that such transaction should
be excluded from the definition hereof and the applicability of this Section 14.2 (such transaction, a “Merger/Sale”), then, without derogating from the general authority
and power of the Board or the Committee under this Plan, without the Grantee’s consent and action and without any prior notice requirement, the
Committee shall make
such determination as to the treatment of Awards, that is consistent with the guidelines set forth in this Section 14.2:
14.2.1. Share Consideration. Unless otherwise determined by the Committee in the event of a Merger/Sale where the consideration to be
paid to
the Company’s shareholders consists solely of shares or other securities, any Award then outstanding shall be assumed or be substituted by the Company, or by the
successor corporation in such Merger/Sale or by any parent or Affiliate
thereof (the “Successor Corporation”).
For the purposes of this Section 14.2.1, the Award shall be considered assumed or substituted if, following a
Merger/Sale, the Award confers on the holder thereof
the right to purchase or receive, for each Share underlying an Award immediately prior to the Merger/Sale, the consideration (whether shares or other securities)
distributed to or received by
holders of Shares in the Merger/Sale for each Share held on the effective date of the Merger/Sale (and if holders were offered a choice
or several types of shares or other publicly traded equity or debt securities as consideration, the Grantees shall
be offered the same choice upon exercise and/or
vesting of the Award). Any of the consideration referred to in this Section 14.2.1 shall be subject to the same vesting and expiration terms of the Awards applying
immediately prior to the Merger/Sale.
14.2.2. Cash Consideration.
In any Merger/Sale where the consideration to be paid to the Company’s shareholders consists solely
of cash, each Grantee shall be entitled
to receive, in respect of each Share underlying an Award that is vested, a cash payment equal to the spread (if any), which is the amount (if any) by which the cash
consideration per Share to the Company’s
shareholders in the Merger/Sale exceeds the exercise price per Share of the Award. Any such cash consideration referred
to in this Section 14.2.2 shall be subject to such payment terms as shall be determined by the Committee, in its discretion. To
the extent the cash consideration per
Share in the Merger/Sale is lower than the Exercise Price per Share of the Award, thereby rendering the Award “out of the money” in respect of the Merger/Sale,
the Award will be canceled for no consideration
pursuant to the Merger/Sale.
23
14.2.3. Mixed Consideration.
In any Merger/Sale where the consideration to be paid to the Company’s shareholders consists of a
mixture of shares or other securities and
cash, each Share underlying an Award that is vested shall be treated in the same manner as an outstanding Share held by a shareholder of the Company. In such
case, the component of the consideration per Share
of an Award that is shares or other securities shall be subject to the terms of Section 14.2.1, while the
component of the consideration per Share of an Award that is cash shall be subject to the terms of Section 14.2.2.
14.2.4. Other Consideration.
In any Merger/Sale where the consideration to be paid to the Company’s shareholders consists of
shares or other securities of a company or
other entity that are not traded or quoted on a national securities exchange, over-the-counter market or other public market, or if the consideration has a value that
is not readily determinable (for
example, contingent value rights (CVRs)), the Committee may, in its discretion, determine the applicable treatment for vested
Awards in such Merger/Sale, including the manner and timing by which the consideration that is payable to the Company’s
shareholders shall be payable (if at all)
to Grantees, and the appropriate valuation for such security(ies) or other consideration in respect of outstanding vested Awards. In furtherance of the foregoing, the
Committee may, in such a situation,
provide that the terms of any Award shall be otherwise amended, modified or terminated, as determined by the Committee to
be fair in the circumstances
14.2.5. Discretion of Committee as to Other Matters. Regardless of whether or not vested Awards are assumed or substituted or paid out in
cash
due to a Merger/Sale pursuant to this Section 14.2, but subject to the provisions of Sections 14.2.1 through 14.2.4 hereof, the Committee may (but shall not be
obligated to):
14.2.5.1. provide for the cancellation of all unvested Awards upon or immediately prior to the closing of the Merger/Sale, unless the
Committee provides for the Grantee to have the right to exercise the Award, or otherwise for the
acceleration of vesting of such Award, as to all or part of the
Shares covered by the Award which would not otherwise be exercisable or vested, under such terms and conditions as the Committee shall determine;
14.2.5.2. determine: (i) that any payments made in respect of
Awards shall be made or delayed to the same extent that payment of
consideration to the holders of the Shares in connection with the Merger/Sale is made or delayed as a result of escrows, indemnification, earn outs, holdbacks or
any other
contingencies or conditions; (ii) the terms and conditions applying to the payment made or payable to the Grantees, including participation in escrow,
indemnification, releases, earn-outs, holdbacks or any other contingencies; and (iii) that any
terms and conditions applying under the applicable definitive
transaction agreements shall apply to the Grantees (including, appointment and engagement of a shareholders or sellers representative, payment of fees or other
costs and expenses
associated with such services, indemnifying such representative, and authorization to such representative within the scope of such
representative’s authority in the applicable definitive transaction agreements).
14.2.5.3. determine to suspend the Grantee’s rights to exercise
any vested portion of an Award for a period of time prior to the signing or
consummation of a Merger/Sale transaction.
14.3 Without limiting the generality of this Section 14, if the consideration in exchange for Awards in a Merger/Sale includes any securities and due receipt
thereof by any Grantee (or by the Trustee for the benefit of such Grantee) may require under applicable law (i) the registration or qualification of such securities or of any
person as a broker or dealer or agent with respect to such securities;
or (ii) the provision to any Grantee of any information under the Securities Act or any other securities
laws, then the Committee may determine that the Grantee shall be paid in lieu thereof, against surrender of the Shares or cancellation of any
other Awards, an amount in
cash or other property, or rights, or any combination thereof, as determined by the Committee to be fair in the circumstances, and subject to such terms and conditions as
determined by the Committee. Nothing herein
shall entitle any Grantee to receive any form of consideration that such Grantee would be ineligible to receive as a result
of such Grantee’s failure to satisfy (in the Committee’s sole determination) any condition, requirement or limitation that
is generally applicable to the Company’s
shareholders, or that is otherwise applicable under the terms of the Merger/Sale, and in such case, the Committee shall determine the type of consideration and the terms
applying to such Grantees.
24
14.4 Neither the authorities and powers of the Committee under this Section 14, nor the exercise or implementation thereof, shall (i) be restricted or limited
in
any way by any adverse consequences (tax or otherwise) that may result to any holder of an Award, and (ii) as, inter alia, being a feature
of the Award upon its grant,
be deemed to constitute a change or an amendment of the rights of such holder under this Plan, nor shall any such adverse consequences (as well as any adverse tax
consequences that may result from any tax ruling or
other approval or determination of any relevant tax authority) be deemed to constitute a change or an amendment of
the rights of such holder under this Plan, and may be effected without consent of any Grantee and without any liability to the
Company or its Affiliates, or to their
respective officers, directors, employees and representatives, and the respective successors and assigns of any of the foregoing. The Committee need not take the same
action with respect to all Awards or
with respect to all Service Providers. The Committee may take different actions with respect to the vested and unvested portions of
an Award. The Committee may determine an amount or type of consideration to be received or distributed in a
Merger/Sale which may differ as among the Grantees, and
as between the Grantees and any other holders of shares of the Company.
14.5 The Committee may determine that upon a Merger/Sale any Shares held by Grantees (or for Grantee’s benefit) are sold in accordance with instructions
issued
by the Committee in connection with such Merger/Sale, which shall be final, conclusive and binding on all Grantees.
14.6 All of the Committee’s determinations pursuant to this Section 14 shall be at its sole and absolute discretion (subject to the mandatory treatment of
Awards under Sections 14.2.2 and 14.2.3 above), and shall be final, conclusive and binding on all Grantees (including, for clarity, as it relates to Shares issued upon
exercise or vesting of any Awards or that are Awards, unless otherwise
determined by the Committee) and without any liability to the Company or its Affiliates, or to
their respective officers, directors, employees, shareholders and representatives, and the respective successors and assigns of any of the
foregoing, in connection with the
method of treatment, chosen course of action or determinations made hereunder.
14.7 If determined by the Committee, the Grantees shall be subject to the definitive agreement(s) in connection with the Merger/Sale as applying to holders
of Shares including, such terms, conditions, representations, undertakings, liabilities, limitations, releases, indemnities, appointing and indemnifying shareholders/sellers
representative, participating in transaction expenses,
shareholders/sellers representative expense fund and escrow arrangement, in each case as determined by the
Committee. Each Grantee shall execute (and authorizes any person designated by the Company to so execute, as well as (if applicable)
the Trustee holding any Shares
for the Grantee’s behalf) such separate agreement(s) or instruments as may be requested by the Company, the Successor Corporation or the acquiror in connection with
such in such Merger/Sale or otherwise under
or for the purpose of implementing this Section 14, and in the form required by them. The execution of such separate
agreement(s) may be a condition to the receipt of assumed or substituted Awards, payment in lieu of the Award, the
exercise of any Award or otherwise to be entitled to
benefit from shares or other securities, cash or other property, or rights, or any combination thereof, pursuant to this Section 14 (and the Company (and, if applicable, the
Trustee) may
exercise its authorization above and sign such agreement on behalf of the Grantee or subject the Grantee to the provisions of such agreements).
14.8 Reservation of Rights. Except as expressly provided in this Section 14 (if so provided), the Grantee of an Award hereunder shall have no rights by
reason of any event referred to in this Section 14. Any
issuance by the Company of shares of any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to, the number, type or price of shares
subject to an Award. The grant of an Award pursuant to
this Plan shall not affect in any way the right or power of the Company to take any action, make any adjustments or enter into any transaction.
25
15
NON-TRANSFERABILITY OF AWARDS; SURVIVING BENEFICIARY.
15.2 All
Awards granted under this Plan by their terms shall not be transferable, other than by will or by the laws of descent and distribution, unless
otherwise determined by the Committee or under this Plan, provided that with respect to Shares issued
upon exercise, Shares issued upon the vesting of Awards or
Awards that are Shares, the restrictions on transfer shall be the restrictions referred to in Section 16 (Conditions upon Issuance of Shares) hereof. Subject to the above
provisions, the
terms of such Award, this Plan and any applicable Award Agreement shall be binding upon the beneficiaries, executors, administrators, heirs and
successors of such Grantee. Awards may be exercised or otherwise realized, during the lifetime of the
Grantee, only by the Grantee or by his guardian or legal
representative, to the extent provided for herein. Any transfer of an Award not permitted hereunder (including transfers pursuant to any decree of divorce, dissolution or
separate
maintenance, any property settlement, any separation agreement or any other agreement with a spouse) and any grant of any interest in any Award to, or creation
in any way of any direct or indirect interest in any Award by, any party other than the
Grantee shall be null and void and shall not confer upon any party or person, other
than the Grantee, any rights. A Grantee may file with the Committee a written designation of a beneficiary, who shall be permitted to exercise such Grantee’s Award
or
to whom any benefit under this Plan is to be paid, in each case, in the event of the Grantee’s death before he or she fully exercises his or her Award or receives any or all
of such benefit, on such form as may be prescribed by the Committee and
may, from time to time, amend or revoke such designation. If no designated beneficiary
survives the Grantee, the executor or administrator of the Grantee’s estate shall be deemed to be the Grantee’s beneficiary. Notwithstanding the foregoing, upon
the
request of the Grantee and subject to Applicable Law the Committee, at its sole discretion, may permit the Grantee to transfer the Award to a trust whose beneficiaries are
the Grantee and/or the Grantee’s immediate family members (all or
several of them).
15.3 Notwithstanding
any other provisions of the Plan to the contrary, no Incentive Stock Option may be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, other than by will or by the laws of descent and distribution or in accordance with a
beneficiary designation pursuant to Section 15.1. Further,
all Incentive Stock Options granted to a Grantee shall be exercisable during his or her lifetime only by such Grantee.
15.4 As
long as the Shares are held by the Trustee in favor of the Grantee, all rights possessed by the Grantee over the Shares are personal, and may not be
transferred, assigned, pledged or mortgaged, other than by will or laws of descent and
distribution.
15.5 If
and to the extent a Grantee is entitled to transfer an Award and/or Shares underlying an Award in accordance with the terms of the Plan and any other
applicable agreements, such transfer shall be subject (in addition, to any other conditions or
terms applying thereto) to receipt by the Company from such proposed
transferee of a written instrument, on a form reasonably acceptable to the Company, pursuant to which such proposed transferee agrees to be bound by all provisions of
the Plan and
any other applicable agreements, including without limitation, any restrictions on transfer of the Award and/or Shares set forth herein (however, failure to so
deliver such instrument to the Company as set forth above shall not derogate from all
such provisions applying on any transferee).
15.6 The
provisions of this Section 15 shall apply to the Grantee and to any purchaser, assignee or transferee of any Shares.
26
16
CONDITIONS UPON ISSUANCE OF SHARES; GOVERNING PROVISIONS.
16.2 Legal Compliance. The grant of Awards and the issuance of Shares upon exercise or settlement of Awards shall be subject to compliance with all
Applicable Law as
determined by the Company, including, applicable requirements of federal, state and foreign law with respect to such securities. The Company shall
have no obligations to issue Shares pursuant to the exercise or settlement of an Award and Awards
may not be exercised or settled, if the issuance of Shares upon exercise
or settlement would constitute a violation of any Applicable Law as determined by the Company, including, applicable federal, state or foreign securities laws or other
law or
regulations or the requirements of any stock exchange or market system upon which the Shares may then be listed. In addition, no Award may be exercised unless
(i) a registration statement under the Securities Act or equivalent law in another
jurisdiction shall at the time of exercise or settlement of the Award be in effect with
respect to the shares issuable upon exercise of the Award, or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the
Award may be
issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act or equivalent law in another jurisdiction. The
inability of the Company to obtain authority from any regulatory
body having jurisdiction, if any, deemed by the Company to be necessary to the lawful issuance and sale
of any Shares hereunder, and the inability to issue Shares hereunder due to non-compliance with any Company policies with respect to the sale of
Shares, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority or compliance shall not have been obtained or achieved.
As a condition to the exercise of an Award, the
Company may require the person exercising such Award to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any Applicable Law or regulation and to make any representation or warranty with respect thereto as
may be requested by the
Company, including to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to
sell or distribute such Shares, all in form and
content specified by the Company.
16.3 Provisions Governing Shares. Shares issued pursuant to an Award shall be subject to this Plan (unless otherwise determined by the Committee), and
shall be
subject to the Articles of Association of the Company, any other governing documents of the Company, all policies, manuals and internal regulations adopted by
the Company from time to time, in each case, as may be amended from time to time, any
provisions concerning restrictions on the use of inside information and other
provisions deemed by the Company to be appropriate in order to ensure compliance with Applicable Law. Each Grantee shall execute (and authorizes any person
designated by
the Company to so execute, as well as (if applicable) the Trustee holding any Shares for the Grantee’s behalf) such separate agreement(s) as may be
requested by the Company relating to matters set forth in or otherwise for the purpose of
implementing this Section 16.2. The execution of such separate agreement(s)
may be a condition by the Company to the exercise of any Award and the Company (and, if applicable, the Trustee) may exercise its authorization above and sign such
agreement on behalf of the Grantee or subject the Grantee to the provisions of such agreements.
27
16.4 Share Purchase Transactions; Forced Sale. In the event that the Board approves a Merger/Sale effected by way of a forced or compulsory sale (whether
pursuant to
the Company’s Articles of Association, pursuant to Section 341 of the Companies Law or any shareholders agreement or otherwise) or in the event of a
transaction for the sale of all shares of the Company, then, without derogating from such
provisions and in addition thereto, the Grantee shall be obligated, and shall be
deemed to have agreed to the offer to effect the Merger/Sale (and the Shares held by or for the benefit of the Grantee shall be included in the shares of the Company
approving the terms of such Merger/Sale for the purpose of satisfying the required majority), and shall sell all of the Shares held by or for the benefit of the Grantee on
the terms and conditions applying to the holders of Shares, in accordance
with the instructions then issued by the Board, whose determination shall be final. No Grantee
shall contest, bring any claims or demands, or exercise any appraisal rights related to any of the foregoing. Each Grantee shall execute (and authorizes
any person
designated by the Company to so execute, as well as (if applicable) the Trustee holding any Shares for the Grantee’s behalf) such documents and agreements, as may be
requested by the Company relating to matters set forth in or otherwise
for the purpose of implementing this Section 16.3. The execution of such separate agreement(s)
may be a condition by the Company to the exercise of any Award and the Company (and, if applicable, the Trustee) may exercise its authorization above
and sign such
agreement on behalf of the Grantee or subject the Grantee to the provisions of such agreements.
16.5 Data Privacy; Data Transfer. Information related to Grantees and Awards hereunder, as shall be received from Grantee or others, and/or held by, the
Company or
its Affiliates from time to time, and which information may include sensitive and personal information related to Grantees (“Information”), will
be used by
the Company or its Affiliates (or third parties appointed by any of them, including the Trustee) to comply with any applicable legal requirement, or for administration of
the Plan as they deems necessary or advisable, or for the
respective business purposes of the Company or its Affiliates (including in connection with transactions related
to any of them). The Company and its Affiliates shall be entitled to transfer the Information among the Company or its Affiliates, and
to third parties for the purposes set
forth above, which may include persons located abroad (including, any person administering the Plan or providing services in respect of the Plan or in order to comply
with legal requirements, or the Trustee,
their respective officers, directors, employees and representatives, and the respective successors and assigns of any of the
foregoing), and any person so receiving Information shall be entitled to transfer it for the purposes set forth above. The
Company shall use commercially reasonable
efforts to ensure that the transfer of such Information shall be limited to the reasonable and necessary scope. By receiving an Award hereunder, Grantee acknowledges
and agrees that the Information is
provided at Grantee’s free will and Grantee consents to the storage and transfer of the Information as set forth above.
17
RESERVED
18
AGREEMENT REGARDING TAXES; DISCLAIMER.
18.2 If
the Company shall so require, as a condition of exercise or (if applicable) vesting of an Award, the release of Shares by the Trustee or the expiration
of the Restricted Period, a Grantee shall agree that, no later than the date of such occurrence,
the Grantee will pay to the Company (or the Trustee, as applicable) or make
arrangements satisfactory to the Company and the Trustee (if applicable) regarding payment of any applicable taxes and compulsory payments of any kind required by
Applicable Law to be withheld or paid.
18.3 TAX LIABILITY. ALL TAX CONSEQUENCES UNDER ANY APPLICABLE LAW WHICH MAY ARISE FROM THE GRANT OF ANY
AWARDS OR THE EXERCISE OR (IF APPLICABLE) VESTING THEREOF,
THE SALE OR DISPOSITION OF ANY SHARES GRANTED HEREUNDER OR
ISSUED UPON EXERCISE OR (IF APPLICABLE) THE VESTING OF ANY AWARD, THE ASSUMPTION, SUBSTITUTION, CANCELLATION OR PAYMENT
IN LIEU OF AWARDS OR FROM ANY OTHER ACTION IN CONNECTION WITH THE
FOREGOING (INCLUDING WITHOUT LIMITATION ANY TAXES
AND COMPULSORY PAYMENTS, SUCH AS SOCIAL SECURITY OR HEALTH TAX PAYABLE BY THE GRANTEE OR THE COMPANY IN CONNECTION
THEREWITH) SHALL BE BORNE AND PAID SOLELY BY THE GRANTEE, AND THE GRANTEE SHALL
INDEMNIFY THE COMPANY, ITS SUBSIDIARIES
AND AFFILIATES AND THE TRUSTEE, AND SHALL HOLD THEM HARMLESS AGAINST AND FROM ANY LIABILITY FOR ANY SUCH TAX OR
PAYMENT OR ANY PENALTY, INTEREST OR INDEXATION THEREON. EACH GRANTEE AGREES TO, AND UNDERTAKES
TO COMPLY WITH, ANY
RULING, SETTLEMENT, CLOSING AGREEMENT OR OTHER SIMILAR AGREEMENT OR ARRANGEMENT WITH ANY TAX AUTHORITY IN
CONNECTION WITH THE FOREGOING WHICH IS APPROVED BY THE COMPANY.
28
18.4 NO TAX ADVICE. THE GRANTEE IS ADVISED TO CONSULT WITH A TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES
OF RECEIVING, EXERCISING OR DISPOSING OF AWARDS
HEREUNDER. THE COMPANY DOES NOT ASSUME ANY RESPONSIBILITY TO ADVISE
THE GRANTEE ON SUCH MATTERS, WHICH SHALL REMAIN SOLELY THE RESPONSIBILITY OF THE GRANTEE.
18.5 TAX TREATMENT. THE COMPANY AND ITS AFFILIATES (INCLUDING THE EMPLOYER) DO NOT UNDERTAKE OR ASSUME ANY
LIABILITY OR RESPONSIBILITY TO THE EFFECT THAT ANY AWARD
SHALL QUALIFY WITH ANY PARTICULAR TAX REGIME OR RULES APPLYING
TO PARTICULAR TAX TREATMENT, OR BENEFIT FROM ANY PARTICULAR TAX TREATMENT OR TAX ADVANTAGE OF ANY TYPE AND THE
COMPANY AND ITS AFFILIATES (INCLUDING THE EMPLOYER) SHALL BEAR NO
LIABILITY IN CONNECTION WITH THE MANNER IN WHICH ANY
AWARD IS TREATED FOR TAX PURPOSES, REGARDLESS OF WHETHER THE AWARD WAS GRANTED OR WAS INTENDED TO QUALIFY UNDER ANY
PARTICULAR TAX REGIME OR TREATMENT. THIS PROVISION SHALL SUPERSEDE ANY TYPE OF
AWARDS OR TAX QUALIFICATION INDICATED IN
ANY CORPORATE RESOLUTION OR AWARD AGREEMENT, WHICH SHALL AT ALL TIMES BE SUBJECT TO THE REQUIREMENTS OF APPLICABLE
LAW. THE COMPANY AND ITS AFFILIATES (INCLUDING THE EMPLOYER) DO NOT UNDERTAKE AND SHALL NOT
BE REQUIRED TO TAKE ANY
ACTION IN ORDER TO QUALIFY ANY AWARD WITH THE REQUIREMENT OF ANY PARTICULAR TAX TREATMENT AND NO INDICATION IN ANY
DOCUMENT TO THE EFFECT THAT ANY AWARD IS INTENDED TO QUALIFY FOR ANY TAX TREATMENT SHALL IMPLY SUCH AN
UNDERTAKING.
THE COMPANY AND ITS AFFILIATES (INCLUDING THE EMPLOYER) DO NOT UNDERTAKE TO REPORT FOR TAX PURPOSES ANY AWARD IN ANY
PARTICULAR MANNER, INCLUDING IN ANY MANNER CONSISTENT WITH ANY PARTICULAR TAX TREATMENT. NO ASSURANCE IS MADE BY THE
COMPANY OR ANY OF ITS AFFILIATES (INCLUDING THE EMPLOYER) THAT ANY PARTICULAR TAX TREATMENT ON THE DATE OF GRANT WILL
CONTINUE TO EXIST OR THAT THE AWARD WOULD QUALIFY AT THE TIME OF EXERCISE, VESTING OR DISPOSITION THEREOF WITH ANY
PARTICULAR TAX
TREATMENT. THE COMPANY AND ITS AFFILIATES (INCLUDING THE EMPLOYER) SHALL NOT HAVE ANY LIABILITY OR
OBLIGATION OF ANY NATURE IN THE EVENT THAT AN AWARD DOES NOT QUALIFY FOR ANY PARTICULAR TAX TREATMENT, REGARDLESS OF
WHETHER THE COMPANY COULD HAVE
OR SHOULD HAVE TAKEN ANY ACTION TO CAUSE SUCH QUALIFICATION TO BE MET AND SUCH
QUALIFICATION REMAINS AT ALL TIMES AND UNDER ALL CIRCUMSTANCES AT THE RISK OF THE GRANTEE. THE COMPANY DOES NOT
UNDERTAKE OR ASSUME ANY LIABILITY TO CONTEST A
DETERMINATION OR INTERPRETATION (WHETHER WRITTEN OR UNWRITTEN) OF ANY
TAX AUTHORITIES, INCLUDING IN RESPECT OF THE QUALIFICATION UNDER ANY PARTICULAR TAX REGIME OR RULES APPLYING TO
PARTICULAR TAX TREATMENT. IF THE AWARDS DO NOT QUALIFY UNDER ANY
PARTICULAR TAX TREATMENT IT COULD RESULT IN ADVERSE
TAX CONSEQUENCES TO THE GRANTEE.
29
18.6 The
Company or any Subsidiary or Affiliate (including the Employer) may take such action as it may deem necessary or appropriate, in its discretion,
for the purpose of or in connection with withholding of any taxes and compulsory payments which the
Trustee, the Company or any Subsidiary or Affiliate (including the
Employer) (or any applicable agent thereof) is required by any Applicable Law to withhold in connection with any Awards, including, without limitations, any income
tax, social
benefits, social insurance, health tax, pension, payroll tax, fringe benefits, excise tax, payment on account or other tax-related items related to the Grantee’s
participation in the Plan and applicable by law to the Grantee (collectively, “Withholding Obligations”). Such actions may include (i) requiring a Grantees to remit to
the Company or the Employer in cash an amount sufficient to
satisfy such Withholding Obligations and any other taxes and compulsory payments, payable by the
Company or the Employer in connection with the Award or the exercise or (if applicable) the vesting thereof; (ii) subject to Applicable Law, allowing
the Grantees to
surrender Shares to the Company, in an amount that at such time, reflects a value that the Committee determines to be sufficient to satisfy such Withholding Obligations;
(iii) withholding Shares otherwise issuable upon the exercise
of an Award at a value which is determined by the Company to be sufficient to satisfy such Withholding
Obligations; or (iv) any combination of the foregoing. The Company shall not be obligated to allow the exercise or vesting of any Award by or on
behalf of a Grantee
until all tax consequences arising therefrom are resolved in a manner acceptable to the Company.
18.7 Each
Grantee shall notify the Company in writing promptly and in any event within ten (10) days after the date on which such Grantee first obtains
knowledge of any tax authority inquiry, audit, assertion, determination, investigation, or question
relating in any manner to the Awards granted or received hereunder or
Shares issued thereunder and shall continuously inform the Company of any developments, proceedings, discussions and negotiations relating to such matter, and shall
allow the
Company and its representatives to participate in any proceedings and discussions concerning such matters. Upon request, a Grantee shall provide to the
Company any information or document relating to any matter described in the preceding sentence,
which the Company, in its discretion, requires.
18.8 With
respect to 102 Non-Trustee Options, if the Grantee ceases to be employed by the Company, Parent, Subsidiary or any Affiliate (including the
Employer), the Grantee shall extend to the Company and/or the Employer a security or guarantee for the
payment of taxes due at the time of sale of Shares, all in
accordance with the provisions of Section 102 of the Ordinance and the Rules.
18.9 If a
Grantee makes an election under Section 83(b) of the Code to be taxed with respect to an Award as of the date of transfer of Shares rather than as of
the date or dates upon which the Grantee would otherwise be taxable under Section 83(a) of the
Code, such Grantee shall deliver a copy of such election to the Company
upon or prior to the filing such election with the U.S. Internal Revenue Service. Neither the Company nor any Affiliate (including the Employer) shall have any liability
or
responsibility relating to or arising out of the filing or not filing of any such election or any defects in its construction.
19
RIGHTS AS A SHAREHOLDER; VOTING AND DIVIDENDS.
19.2 Subject
to Section 11.4, a Grantee shall have no rights as a shareholder of the Company with respect to any Shares covered by an Award until the
Grantee shall have exercised or (as applicable) vests in the Award, paid any Exercise Price therefor and
becomes the record holder of the subject Shares. In the case of
102 Awards, the Trustee shall have no rights as a shareholder of the Company with respect to the Shares covered by such Award until the Trustee becomes the record
holder for such
Shares for the Grantee’s benefit, and the Grantee shall not be deemed to be a shareholder and shall have no rights as a shareholder of the Company with
respect to the Shares covered by the Award until the date of the release of such Shares from the
Trustee to the Grantee and the transfer of record ownership of such Shares
to the Grantee (provided, however, that the Grantee shall be entitled to receive from the Trustee any cash dividend or distribution made on account of the Shares held by
the
Trustee for such Grantee’s benefit, subject to any tax withholding and compulsory payment). No adjustment shall be made for dividends (ordinary or extraordinary,
whether in shares or other securities, cash or other property, or rights, or any
combination thereof) or distribution of other rights for which the record date is prior to the
date on which the Grantee or Trustee (as applicable) becomes the record holder of the Shares covered by an Award, except as provided in Section 14
hereof.
30
19.3 With
respect to all Awards issued in the form of Shares hereunder or upon the exercise or (if applicable) the vesting of Awards hereunder, any and all
voting rights attached to such Shares shall be subject to Section 6.10, and the Grantee shall be
entitled to receive dividends distributed with respect to such Shares,
subject to the provisions of the Company’s Articles of Association, as amended from time to time, and subject to any Applicable Law.
19.4 The
Company may, but shall not be obligated to, register or qualify the sale of Shares under any applicable securities law or any other Applicable Law.
20
NO REPRESENTATION BY COMPANY.
By granting the Awards, the Company is not, and shall not be deemed as, making any representation or warranties to the Grantee regarding
the Company, its business
affairs, its prospects or the future value of its Shares and such representations and warranties are hereby disclaimed. The Company shall not be required to provide to any
Grantee any information, documents or material in
connection with the Grantee’s considering an exercise of an Award. To the extent that any information, documents or
materials are provided, the Company shall have no liability with respect thereto. Any decision by a Grantee to exercise an Award
shall solely be at the risk of the
Grantee.
21
NO RETENTION RIGHTS.
Nothing in this Plan, any Award Agreement or in any Award granted or agreement entered into pursuant hereto shall confer upon any Grantee
the right to continue in the
employ of, or be in the service of the Company or any Subsidiary or Affiliate thereof as a Service Provider or to be entitled to any remuneration or benefits not set forth
in this Plan or such agreement, or to interfere
with or limit in any way the right of the Company or any such Subsidiary or Affiliate to terminate such Grantee’s
employment or service (including, any right of the Company
or any of its Affiliates to immediately cease the Grantee’s employment or service or to shorten all or part of
the notice period, regardless of whether notice of termination was given by the Company or its Affiliates or by the Grantee).
Awards granted under this Plan shall not be
affected by any change in duties or position of a Grantee, subject to Sections 6.6 through 6.8. No Grantee shall be entitled to claim, and the Grantee hereby waives any
claim against the Company or any
Subsidiary or Affiliate that he or she was prevented from continuing to vest Awards as of the date of termination of his or her
employment with, or services to, the Company or any Subsidiary or Affiliate. No Grantee shall be entitled to any
compensation in respect of the Awards which would
have vested had such Grantee’s employment or engagement with the Company (or any Subsidiary or Affiliate) not been terminated.
22
PERIOD DURING WHICH AWARDS MAY BE GRANTED.
Awards may be granted pursuant to this Plan from time to time within a period of ten (10) years from the Effective Date, which period may
be extended from time to time
by the Board. From and after such date (as extended) no grants of Awards may be made and this Plan shall continue to be in full force and effect with respect to Awards
or Shares issued thereunder that remain
outstanding.
31
23
AMENDMENT OF THIS PLAN AND AWARDS.
23.1 The
Board at any time and from time to time may suspend, terminate, modify or amend this Plan, whether retroactively or prospectively. Any
amendment effected in accordance with this Section shall be binding upon all Grantees and all Awards, whether
granted prior to or after the date of such amendment, and
without the need to obtain the consent of any Grantee. No termination or amendment of this Plan shall affect any then outstanding Award unless expressly provided by
the Board.
23.2 If
required by Applicable Law (and subject to changes in Applicable Law that would permit otherwise), the following shall require the approval of the
Company’s shareholders (as and when prescribed by Applicable Law): (i) increase in the maximum
aggregate number of Shares that may be issued under this Plan as
Incentive Stock Options (except by operation of the provisions of Section 14.1), (ii) change in the class of persons eligible to receive Incentive Stock Options, (iii) a grant
of
Options at a lower exercise price in exchange for the surrender and cancelation of existing Options bearing a higher exercise price, (iv) a reduction of the exercise
price of outstanding Options, (iv) any other repricing event with respect to
outstanding Options, and (v) any other amendment of this Plan that would require approval of
the Company’s shareholders under Applicable Law. Unless not permitted by Applicable Law, if the grant of an Award is subject to approval by shareholders,
the date of
grant of the Award shall be determined as if the Award had not been subject to such approval. Failure to obtain approval by the shareholders shall not in any way
derogate from the valid and binding effect of any grant of an Award that
is not an Incentive Stock Option. Upon approval of an amendment to this Plan by the
shareholders of the Company as set forth above, all Incentive Stock Options granted under this Plan on or after such amendment shall be fully effective as if the
shareholders of the Company had approved the amendment on the same date.
23.3 The
Board or the Committee at any time and from time to time may modify or amend any Award theretofore granted, including any Award Agreement,
whether retroactively or prospectively.
24
APPROVAL.
24.1 This
Plan shall take effect upon its adoption by the Board (the “Effective Date”).
24.2 Solely
with respect to grants of Incentive Stock Options, this Plan shall also be subject to shareholders’ approval, within one year of the Effective Date,
by a majority of the votes cast on the proposal at a meeting or a written consent of shareholders
(however, if the grant of an Award is subject to approval by shareholders,
the date of grant of the Award shall be determined as if the Award had not been subject to such approval). Failure to obtain such approval by the shareholders within
such
period shall not in any way derogate from the valid and binding effect of any grant of an Award, except that any Options previously granted under this Plan may not
qualify as Incentive Stock Options but, rather, shall constitute Nonqualified Stock
Options. Upon approval of this Plan by the shareholders of the Company as set forth
above, all Incentive Stock Options granted under this Plan on or after the Effective Date shall be fully effective as if the shareholders of the Company had
approved this
Plan on the Effective Date.
24.3 102
Awards are conditional upon the filing with or approval by the ITA, if required, as set forth in Section 9.4. Failure to so file or obtain such approval
shall not in any way derogate from the valid and binding effect of any grant of an Award that
is not a 102 Award.
25
RULES PARTICULAR TO SPECIFIC COUNTRIES; SECTION 409A.
25.1 Notwithstanding
anything herein to the contrary, the terms and conditions of this Plan may be supplemented or amended with respect to a particular
country or tax regime by means of an appendix to this Plan, and to the extent that the terms and conditions set forth
in any appendix conflict with any provisions of this
Plan, the provisions of such appendix shall govern. Terms and conditions set forth in such appendix shall apply only to Awards granted to Grantees under the jurisdiction
of the specific country
or such other tax regime that is the subject of such appendix and shall not apply to Awards issued to a Grantee not under the jurisdiction of such
country or such other tax regime. The adoption of any such appendix shall be subject to the approval
of the Board or the Committee, and if determined by the Committee
to be required in connection with the application of certain tax treatment, pursuant to applicable stock exchange rules or regulations or otherwise, then also the approval
of the
shareholders of the Company at the required majority.
32
25.2 This
Section 25.2 shall only apply to Awards granted to Grantees who are subject to United States Federal income tax.
25.2.1 It is the intention of the Company that no Award shall be deferred compensation subject to Section 409A of the Code unless and to the
extent that the Committee specifically determines otherwise as provided in Section 25.2.2, and the
Plan and the terms and conditions of all Awards shall be
interpreted and administered accordingly.
25.2.2 The terms and conditions governing any Awards that the Committee determines will be subject to Section 409A of the Code, including any
rules for payment or elective or mandatory deferral of the payment or delivery of Shares or cash
pursuant thereto, and any rules regarding treatment of such
Awards in the event of a Change in Control, shall be set forth in the applicable Award Agreement and shall be intended to comply in all respects with Section
409A of the Code, and the Plan
and the terms and conditions of such Awards shall be interpreted and administered accordingly.
25.2.3 The Company shall have complete discretion to interpret and construe the Plan and any Award Agreement in any manner that establishes
an exemption from (or compliance with) the requirements of Section 409A of the Code. If for any
reason, such as imprecision in drafting, any provision of the
Plan and/or any Award Agreement does not accurately reflect its intended establishment of an exemption from (or compliance with) Code Section 409A, as
demonstrated by consistent
interpretations or other evidence of intent, such provision shall be considered ambiguous as to its exemption from (or compliance with)
Section 409A of the Code and shall be interpreted by the Company in a manner consistent with such intent, as
determined in the discretion of the Company. If,
notwithstanding the foregoing provisions of this Section 25.2.3, any provision of the Plan or any such agreement would cause a Grantee to incur any additional tax
or interest under Section 409A of
the Code, the Company may reform such provision in a manner intended to avoid the incurrence by such Grantee of any such
additional tax or interest; provided
that the Company shall maintain, to the extent reasonably practicable, the original intent and economic benefit to the Grantee of
the applicable provision without violating the provisions of Section 409A of the Code. For the avoidance of doubt, no
provision of this Plan shall be interpreted or
construed to transfer any liability for failure to comply with the requirements of Section 409A from any Grantee or any other individual to the Company or any of
its affiliates, employees or agents.
25.2.4 Notwithstanding any other provision in the Plan, any Award Agreement, or any other written document establishing the terms and
conditions of an Award, if any Grantee is a “specified employee,” within the meaning of Section 409A of
the Code, as of the date of his or her “separation from
service” (as defined under Section 409A of the Code), then, to the extent required by Treasury Regulation Section 1.409A-3(i)(2) (or any successor provision), any
payment made to such Grantee
on account of his or her separation from service shall not be made before a date that is six months after the date of his or her
separation from service. The Committee may elect any of the methods of applying this rule that are permitted under
Treasury Regulation Section 1.409A-3(i)(2)
(ii) (or any successor provision).
25.2.5 Notwithstanding any other provision of this Section 25.2 to the contrary, although the Company intends to administer the Plan so that
Awards will be exempt from, or will comply with, the requirements of Section 409A of the Code, the
Company does not warrant that any Award under the Plan
will qualify for favorable tax treatment under Section 409A of the Code or any other provision of federal, state, local, or non-United States law. The Company
shall not be liable to any
Grantee for any tax, interest, or penalties the Grantee might owe as a result of the grant, holding, vesting, exercise, or payment of any
Award under the Plan.
33
26
GOVERNING LAW; JURISDICTION.
This Plan and all determinations made, and actions taken pursuant hereto shall be governed by the laws of the State of Israel, except with respect to matters that are
subject to tax laws, regulations and rules of any specific jurisdiction, which shall be governed by the respective laws, regulations and
rules of such jurisdiction. Certain
definitions, which refer to laws other than the laws of such jurisdiction, shall be construed in accordance with such other laws. The competent courts located in Tel-Aviv-
Jaffa, Israel shall have
exclusive jurisdiction over any dispute arising out of or in connection with this Plan and any Award granted hereunder. By signing any Award
Agreement or any other agreement relating to an Award, each Grantee irrevocably submits to such exclusive
jurisdiction.
27
NON-EXCLUSIVITY OF THIS PLAN.
The adoption of this Plan shall not be construed as creating any limitations on the power or authority of the Company to adopt such other
or additional incentive or other
compensation arrangements of whatever nature as the Company may deem necessary or desirable or preclude or limit the continuation of any other plan, practice or
arrangement for the payment of compensation or fringe
benefits to employees generally, or to any class or group of employees, which the Company or any Affiliate now
has lawfully put into effect, including any retirement, pension, savings and stock purchase plan, insurance, death and disability benefits
and executive short-term or long-
term incentive plans.
28
MISCELLANEOUS.
28.1 Survival. The Grantee shall be bound by and the Shares issued upon exercise or (if applicable) the vesting of any Awards granted hereunder shall
remain subject
to this Plan after the exercise or (if applicable) the vesting of Awards, in accordance with the terms of this Plan, whether or not the Grantee is then or at
any time thereafter employed or engaged by the Company or any of its Affiliates.
28.2 Additional Terms. Each Award awarded under this Plan may contain such other terms and conditions not inconsistent with this Plan as may be
determined by the
Committee, in its sole discretion.
28.3 Fractional Shares. No fractional Share shall be issuable upon exercise or vesting of any Award. Unless a different rounding rule is applied by the
Company, the
number of Shares to be issued shall be rounded down to the nearest whole Share, with any Share remaining at the last vesting date due to such rounding to
be issued upon exercise at such last vesting date.
28.4 Severability. If any provision of this Plan, any Award Agreement or any other agreement entered into in connection with an Award shall be determined
to be
illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with
their terms, and all provisions shall remain enforceable in any other jurisdiction.
In addition, if any particular provision contained in this Plan, any Award Agreement or
any other agreement entered into in connection with an Award shall, for any reason, be held to be excessively broad as to duration, geographic scope, activity
or subject,
it shall be construed by limiting and reducing such provision as to such characteristic so that the provision is enforceable to fullest extent compatible with Applicable
Law as it shall then appear.
28.5 Captions and Titles. The use of captions and titles in this Plan or any Award Agreement or any other agreement entered into in connection with an
Award is for
the convenience of reference only and shall not affect the meaning or interpretation of any provision of this Plan or such agreement.
* * *
34
Exhibit 11.1
MEDIWOUND LTD.
INSIDER TRADING POLICY
This document sets forth the Insider Trading Policy (the “Policy”) of MediWound Ltd. and its subsidiaries (collectively, “MediWound”). The Policy establishes
the policies and
procedures that govern trading by MediWound personnel in MediWound securities and securities of any other company about which such personnel
learns material, nonpublic information in the course of performing his or her duties for MediWound. The
Policy has been adopted by MediWound to fulfill its
responsibilities as a public company under U.S. federal securities laws to prevent insider trading and to help its personnel avoid the severe consequences associated with
violations of the insider
trading laws. The Policy is also intended to prevent even the appearance of improper conduct on the part of anyone employed by or associated
with MediWound. Should you have any questions regarding this Policy, please contact the Company’s General
Counsel (the “Stock Compliance Officer”).
IT IS IMPORTANT THAT ALL MEDIWOUND PERSONNEL REVIEW THE POLICY CAREFULLY. NONCOMPLIANCE WITH THE POLICY IS
GROUNDS FOR IMMEDIATE DISMISSAL. FAILURE TO COMPLY WITH THE POLICIES AND
PROCEDURES SET FORTH BELOW ALSO CAN RESULT IN
A SERIOUS VIOLATION OF U.S. FEDERAL SECURITIES LAWS, LEADING TO POTENTIAL CIVIL AND CRIMINAL PENALTIES.
I. Scope of Policy
All directors, executive officers and other employees of MediWound, and, if designated by the Stock Compliance Officer as a covered individualsentity (1) all
directors and
executive officers of a joint venture in which MediWound has a financial interest (such joint venture is referred to as a “Related Company”) and (2), any
consultant, or contractor, or contractual counter-party (e.g., a distributor) ofto MediWound, to
the extent he, she or it possesses knowledge of nonpublic information that
may be material to the Company’s financial performance, are subject to the prohibitions set forth in this Insider Trading Policy (each such person subject to the Policy is
referred to as a “Covered Person”).
The restrictions imposed by the Policy apply to trading in any MediWound securities, as well as any instrument that derives its value (in whole or in part) from the price
of MediWound securities,
including but not limited to, puts, calls, warrants, options and convertible securities whether or not issued by MediWound (a “Derivative
Security”), subject to the qualification, as provided in Part VI of this Policy, that all Covered Persons are
prohibited from engaging in certain types of transactions,
including short sales of (and economically equivalent transactions relating to) MediWound securities. The restrictions imposed by the Policy also apply to trades in
securities of any Related
Company and any other company about which any Covered Person learns material, nonpublic information in the course of performing his or her
duties for MediWound, such as securities of any company with which MediWound may be entering into or
negotiating major transactions and Derivative Securities of
any of such securities.
II. Persons Subject to this Policy
Each of the policies and procedures under the Policy that is binding on a Covered Person also applies to the “Associates” of such Covered Person, which consist
of: (i) any Family
Member (as defined below) who resides in the household of a Covered Person; (ii) anyone else who lives in the household of a Covered Person; and
(iii) any Family Member who does not live in the household of a Covered Person but whose transactions in
MediWound securities or Derivative Securities are directed
by or subject to the influence or control of a Covered Person (such as parents or children who consult with a Covered Person before they trade in MediWound securities
or Derivative
Securities). Family Members consist of the following persons: any child, stepchild, grandchild, parent, stepparent, grandparent, spouse (or comparable co-
habitation relationship), sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law, in each case including adoptive relationships.
This Policy applies to any entities that a Covered Person controls, including any controlled companies, corporations, partnerships or trusts, and transactions by
such entities
should be treated for the purposes of this Policy as if they were for the account of the Covered Person, unless the entity confirms to the reasonable
satisfaction of the Stock Compliance Officer that it has implemented policies and procedures
designed to prevent such Covered Person from controlling or influencing
transactions by the entity involving MediWound securities or Derivative Securities while such person is in possession of material non-public information.
Situations may exist where a Covered Person has a record ownership of or beneficial interest in securities, but has no responsibility for investment decisions,
such as, for
example, where the investment decisions have been delegated to an investment adviser. In such cases, this Policy is not intended to proscribe dealings in
securities so long as the Covered Person has neither discussed the merits of the investment
with, nor provided inside information to, the person or persons having the
decision-making investment responsibility, and so long as the Covered Person does not have the contractual right to participate in such decision-making. Similarly, this
Policy does not proscribe the purchase, sale or holding of an interest in a publicly traded mutual fund, even if the fund holds or trades in MediWound securities or
Derivative Securities.
As set forth in a separate Addendum to this Policy, all directors and executive officers of MediWound, and any other employees of MediWound, or employees
of, or consultants or
contractors to, MediWound or a Related Company or Covered Persons designated by the Stock Compliance Officer (each such person subject to the
Addendum is referred to as an “Addendum Covered Person”) are required to obtain prior approval for all
trades in MediWound securities or Derivative Securities and are
prohibited from holding MediWound securities in a margin account or pledging MediWound securities.
III. General Insider Trading Prohibition
Any Covered Person who possesses knowledge of any “material information” concerning MediWound that has not been disclosed to the public is prohibited
from (i) trading in MediWound
securities or Derivative Securities, (ii) advising others to trade or to refrain from trading in MediWound securities or Derivative
Securities, or (iii) disclosing the material information to any other person for the purpose of enabling such person
to trade or to refrain from trading in MediWound
securities or Derivative Securities. These restrictions remain in effect until the information is fully disclosed to the public or until the information, although not disclosed,
ceases to be material.
Any Covered Person who obtains, in the course of his or her employment with or engagement by MediWound, knowledge of any “material information”
concerning any other company that
has not been disclosed to the public is prohibited from (i) trading in securities of such other company or Derivative Securities of such
other company, (ii) advising others to trade in securities of such other company or Derivative Securities of such
other company, or (iii) disclosing the material
information to any other person for the purpose of enabling such person to trade in securities of such other company or Derivative Securities of such other company.
These restrictions remain in effect
until the information is fully disclosed to the public or until the information, although not disclosed, ceases to be material.
For purposes of insider trading liability, it does not matter that delaying the transaction until the material, nonpublic information is disclosed or ceases to be
material might
cause the Covered Person or an Associate of a Covered Person to incur a financial loss, or whether there is some independent reason for the transaction
(such as the need to raise money for an emergency expenditure). In addition, except in the limited
circumstances discussed below (see “Part V – Approved Trading
Plans” below), it does not matter that a Covered Person or an Associate of a Covered Person may have decided to engage in a transaction before learning of the
undisclosed material
information. Further, it also is irrelevant that publicly disclosed information about MediWound would, without consideration of the undisclosed
material information, provide a substantial basis for engaging in the transaction. The U.S. federal
securities laws do not recognize any such mitigating circumstances and
further, even the appearance of an improper transaction must be avoided to preserve MediWound’s reputation for adhering to the highest standards of conduct.
Material Information
In general, information is considered material as it relates to any company if there is a substantial likelihood that a reasonable investor would consider the
information important
in making a decision to buy, hold or sell securities of such company. While this standard is not always easy to apply, any information that could be
expected to affect the price of MediWound’s ordinary shares (or other MediWound security that is the
subject of the transaction), whether positive or negative, should be
considered material. Some examples of information that is almost always regarded as material include: significant transactions such as pending or proposed mergers,
tender offers,
acquisitions or dispositions; financial results and forecasts (especially earnings or losses estimates); corporate restructurings; new product or project
announcements of a significant nature; significant product defects or modifications; receipt,
cancellation or deferral of significant purchase orders; regulatory rulings;
unanticipated changes in the level of sales, earnings or expenses or earnings that are not consistent with the consensus expectations of the investment community;
material
changes to previously filed financial statements; changes in auditors or auditor notification that MediWound may no longer rely on an audit report; credit rating
changes; stock splits; reverse stock splits; stock dividends; changes in dividends
policy; equity or debt offerings, significant borrowings, or other material financial
transactions; management changes; entry into or loss of a substantial contract not in the ordinary course of business; impending bankruptcy or the existence of
severe
liquidity problems; and similar matters.
Any Covered Person who has questions as to the materiality of any nonpublic information is advised to contact the Stock Compliance Officer for guidance. When in
doubt as to the materiality of any
nonpublic information, Covered Persons should refrain from trading.
Public Disclosure
Disclosure of material information to the public generally means the disclosure of the information in a filing with the Securities and Exchange Commission (the
“SEC”) (such as
MediWound’s annual report on Form 20-F or current reports on Form 6-K) or otherwise released broadly to the marketplace (such as by a press release).
More limited dissemination of the information, such as in a company communication to employees (even
if it is to all employees generally) does not qualify as public
disclosure. To ensure adequate disclosure, two full trading days should be permitted following public disclosure to allow the securities markets an opportunity to digest
the news.
Tipping
Covered Persons who cannot trade in MediWound securities, Derivative Securities, securities of any other company or derivative securities of such securities, by
reason of the
possession of material, nonpublic information also may not either (i) disclose such information to any other person for the purpose of allowing the other
person to trade in the above securities, or (ii) provide trading advice with respect to the
above securities (even though the nonpublic information that provides the basis
for the advice is not disclosed to the person). Any such disclosure or trading advice constitutes a violation of the U.S. federal securities laws (referred to as
“tipping”) and
can result in liability for both the tipper and the tippee, as well as for MediWound and supervisory personnel.
IV. Blackout Periods
Regular Blackout Periods
There are four regular blackout periods with respect to trading per year (the “Blackout Periods”). Each Blackout Period begins at 12:01 a.m. Eastern time on the
16th day of the
third month of the quarter (i.e., 12:01 a.m. Eastern time on each March 16, June 16, September 16 and December 16) and ends at 11:59 p.m. Eastern time
at the close of trading on the second full trading day following the public dissemination by
MediWound of its quarterly (or, in the case of the fourth quarter, annual)
financial results by press release to the national wire services or by making a filing with the SEC.
Designated Blackout Periods
All Covered Persons are prohibited from trading in MediWound securities and Derivative Securities during blackout periods. A Covered Person may not make
a gift of MediWound
securities or Derivative Securities, except to a Family Member, during a Blackout Period without the prior approval of the Stock Compliance
Officer.
Designated Blackout Periods
Any Covered Person, at any time and from time to time, may be informed by the Stock Compliance Officer that he or she, and his or her Associates, are subject
to a designated
blackout period due to such person’s involvement in or knowledge of a particular matter. Covered Persons so advised are prohibited from trading in, or
granting a gift of, MediWound securities or Derivative Securities until they receive further notice
from the Stock Compliance Officer. The existence of a designated
blackout will not be announced other than to those who are subject to it. Any Covered Person or their Associates made aware of the existence of a designated blackout
period should not
disclose the existence of such blackout for any reason.
IT IS IMPORTANT TO KEEP IN MIND THAT THE PROHIBITION ON TRADING ON MATERIAL, NONPUBLIC INFORMATION CONTINUES TO
APPLY EVEN IF A BLACKOUT PERIOD IS NOT IN EFFECT.
V. Approved Trading Plans
Transactions by Covered Persons and their Associates pursuant to a written trading plan that meets the requirements of Rule 10b5-1 under the Securities
Exchange Act of 1934, as
amended (the “Exchange Act”) (an “Approved Plan”) will not violate this Policy and are not subject to the Blackout Period restrictions if the
following conditions are met:
•
the Stock Compliance Officer must approve the Approved Plan (or any modification thereof) prior to any transaction being completed thereunder; and, even
after such approval, an Approved Plan remains subject to the Company’s right to
suspend, discontinue or otherwise prohibit any transaction in the Company’s
securities under such plan at a later time;
•
The Approved Plan must comply with the requirements of the Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, including the following:
(i)
it must be a written, binding contract, instruction or plan entered into outside of a Blackout Period and at such time when the Covered Person is not in
possession of material, nonpublic information;
(ii)
the Approved Plan must expressly specify the amounts, prices and dates of transactions (specifically or through a written formula, algorithm, or
computer program, or a combination thereof) or confer discretionary authority on another
person (who is not a Covered Person or Associate and
otherwise is not in possession of material non-public information) to effect one or more purchase or sale transactions for the account of the instructing
person;
(iii)
the instructing person may not exercise any subsequent influence over how, when or whether the transactions are effected; and
(iv)
the purchase or sale must occur pursuant to the Approved Plan.
•
Any Covered Person or their Associates must report to the Stock Compliance Officer (i) all transactions made pursuant to the Approved Plan and (ii) the
completion or termination of the Approved Plan.
•
When entering into an Approved Plan, a director and/or officer must include in the plan a representation that such person (1) is not in possession of material,
non-public information about the Company or its securities; and (2) is adopting
the Approved Plan in good faith and not as part of a plan or scheme to evade
Rule 10b-5 under the Securities Exchange Act of 1934, as amended.
A contract, instruction or plan of the type described above will generally only be necessary for an Addendum Covered Person and should not generally be necessary
for a Covered
Person who is not subject to Blackout Periods (as defined in the Addendum).
In accordance with Rule 10b5-1 under the Exchange Act, an Approved Plan must meet certain additional conditions, including:
•
The plan must provide for the requisite cooling off period before transactions can commence under the plan.
•
An individual may not have more than one Approved Plan in effect at a given time, other than under the limited circumstances permitted by Rule 10b5-1 and
subject to pre-approval by the Stock Compliance Officer.
•
An Approved Plan may only be modified outside of a blackout period and, in any event, when such person does not otherwise possess material non-public
information, and any such modification to (or any termination of) an Approved Plan is
subject to pre-approval by the Stock Compliance Officer.
•
A discretionary Approved Plan, where the discretion or control over trading is transferred to a broker, is permitted, if pre-approved by the Stock Compliance
Officer, provided that the broker is not aware of any material non-public
information when interacting with the Approved Plan.
VI. Short Sale Prohibition and Other Restricted Transaction
MediWound considers it improper and inappropriate for any Covered Person or their Associates to engage in short-term or speculative transactions in
MediWound securities or in other
transactions in MediWound securities that may transfer the full risks and rewards of ownership over MediWound securities. Therefore,
it is MediWound’s policy that Covered Persons and their Associates may not engage, in any of the following
transactions:
•
Publicly Traded Options. A transaction in options is, in effect, a bet on the short-term movement of MediWound shares and therefore creates the appearance of
trading based on inside information. Transactions in options also may focus
attention on short-term performance at the expense of long-term objectives.
Accordingly, transactions in puts, calls or other derivative securities, on an exchange or in any other organized market, are prohibited absent prior written
approval
of the Stock Compliance Officer.
•
Standing Orders. A standing order placed with a broker to sell or purchase MediWound shares at a specified price leaves the shareholder with no control over
the timing of the transaction. A transaction pursuant to a standing order – which
does not meet the standards of an Approved Plan – executed by the broker when
the Covered Person is aware of material nonpublic information may result in unlawful insider trading. Accordingly, standing orders are prohibited during any
regular
or designated blackout period and at any time that the Covered Person is aware of material, non-public information.
•
Hedging Transactions. Certain forms of hedging or monetization transactions allow Covered Persons to lock in much of the value of their MediWound
securities, often in exchange for all or part of the potential for upside appreciation in
the securities. These transactions allow the Covered Person to continue to
own the covered MediWound security, but without the full risks and rewards of ownership. Such transactions may use methodologies or financial instruments
including,
but not limited to, short sales, puts, calls, collars, prepaid variable forward contracts and exchange funds. When that occurs, the Covered Person may
no longer have the same objectives as MediWound’s other security holders. Therefore,
Covered Persons are prohibited from employing any such methodologies
or using any such financial instruments with respect to a MediWound security absent prior written approval of the Stock Compliance Officer.
Any Covered Person who has questions as to whether a particular strategy would violate the Policy is advised to contact the Stock Compliance Officer.
VII. Application of the Policy to MediWound’s Equity Incentive Plans and Bona Fide Gifts
The provisions of the Policy apply to various investment decisions concerning MediWound securities made by a Covered Person in connection with
MediWound’s equity incentive plans,
as are in effect from time to time.
Equity Incentive Plans
The Policy does not apply to the grant or the cash exercise of share options granted under MediWound’s equity incentive plans as in effect from time to time,
and also would not
apply to the delivery of shares to MediWound, or the withholding of shares by MediWound, upon exercise of such options as payment of the exercise
price for such options or for tax withholding, to the extent such transactions are permissible under the
equity incentive plans. However, the delivery of MediWound
shares to any third party in payment for the exercise price of a share option and/or for tax withholding, known as a “cashless” or “same-day sale” exercise, as well as any
sale to a third
party of MediWound shares acquired upon the exercise of a share option, is subject to the same restrictions that apply to any other sale of MediWound
shares, including the Blackout Period restrictions and the Prior Approval Requirement set forth in
the Addendum if the person effecting any such transaction is an
Addendum Covered Person. These restrictions also apply to any Associate who acquires a transferred stock option.
The Policy also does not apply to the award of restricted shares or restricted share units or the withholding of shares by MediWound from such restricted shares
or restricted share
units for tax withholding purposes. The sale of MediWound shares acquired on the date of release of such restricted shares or restricted share units to
any third party (including for tax withholding purposes) is subject to the same restrictions that
apply to any other sale of MediWound shares, including the Blackout
Period restrictions and the Prior Approval Requirement set forth in the Addendum if the person effecting any such transaction is an Addendum Covered Person.
Gifts
A bona fide gift of MediWound securities or Derivative Securities to a Family Member is not subject to the restrictions contained in the Policy. Except during a
designated blackout period as
provided in Part IV of the Policy, a bona fide gift of MediWound securities or Derivative Securities to a charitable, educational or a similar
institution or to a person who is not a Family Member is not subject to the restrictions contained in the
Policy; however, such a bona fide gift to a non-Family Member
will require the prior approval of the Stock Compliance Officer if effected during a regular quarterly Blackout Period. The recipient of a gift who is a Covered Person or
an Associate of
a Covered Person would be subject to the restrictions of this Policy in connection with any subsequent sale of the gifted securities.
VIII. Post-Termination Transactions
The restrictions imposed by the Policy will continue to apply to a Covered Person and his or her Associates after the termination of his or her employment with
or engagement by
MediWound for such period of time as such Covered Person is aware of material, nonpublic information until that information has become public or is
no longer material.
IX. Reason for the Prohibition
Under the U.S. federal securities laws, it is unlawful for any director, officer or employee of, or any person otherwise associated with, a public company to trade,
or to enable
others to trade, in the securities of that company while in possession of material, nonpublic information. Violators may be subject to criminal prosecution
and/or civil liability.
A criminal prosecution can result in a fine of up to $5 million (no matter how small the profit or even if there is a loss) and imprisonment for up to 20 years.
Civil actions may
be brought by a private plaintiff or the SEC. A person who has been found in a civil action brought by the SEC to have violated the prohibition on
insider trading by purchasing or selling a security while in possession of material, nonpublic
information, or by communicating such information to another person who
engages in such trading, can be held liable for a penalty up to three times the profit gained, or the loss avoided, by the person who traded while in possession of material,
nonpublic information. The SEC also has the authority to obtain a court order that bars a person who has engaged in insider trading from serving, either permanently or
for a period of time, as a director or officer of a public company. There are no
limits on the size of the transaction that can trigger insider trading liability. Relatively small
trades have in the past occasioned civil and criminal investigations and lawsuits.
Insider trading also can generate significant adverse publicity and, as a result, cause a substantial loss of confidence in MediWound and its securities on the part
of the public
and the securities markets. This could have an adverse impact on the price of MediWound shares and other securities to the detriment of MediWound and its
shareholders.
Remember, anyone scrutinizing your transactions in MediWound securities or Derivative Securities will be doing so after the fact, with the benefit of hindsight. As a
practical matter, before engaging
in any transaction, you should carefully consider how enforcement authorities and others might view the transaction in hindsight.
X. Conclusion
MediWound will strictly enforce the prohibitions against insider trading and the additional restrictions and procedures set forth in this Policy. Any Covered
Person, or their
Associates, of MediWound or any Related Company who is uncertain regarding the applicability of the Policy is urged to contact the Stock Compliance
Officer prior to executing any sale or purchase transaction involving MediWound securities or
Derivative Securities to determine if he or she may properly proceed.
Directors and officers of MediWound should be particularly careful, since avoiding the appearance of engaging in share transactions on the basis of material, nonpublic
information
can be as important as avoiding consummating a transaction actually based on such information.
MEDIWOUND LTD.
INSIDER TRADING POLICY
ACKNOWLEDGMENT
The undersigned hereby acknowledges receipt of the attached Insider Trading Policy (the “Policy”) of MediWound Ltd. (“MediWound”) and hereby covenants
that he or she will strictly
comply with the Policy. The undersigned hereby agrees that if he or she is contemplating a sale or purchase transaction involving any
MediWound securities or a Derivative Security (as defined in the Policy) and is unsure of the applicability of the
Policy that he or she will contact the Stock Compliance
Officer prior to executing the transaction to determine if he or she may properly proceed.
Directors and any executive officers should be particularly careful to avoid even the appearance of engaging in any stock transaction on the basis of material,
nonpublic
information, which can be as important as avoiding a transaction actually based on such information.
By:
Name:
Title:
Date:
Please acknowledge your receipt of the attached insider trading policy by dating and signing this acknowledgment and returning it to Yaron Meyer, General
Counsel and Corporate
Secretary at yaronm@mediwound.com.
ADDENDUM TO MEDIWOUND LTD. INSIDER TRADING POLICY
APPLICABLE TO DIRECTORS, OFFICERS AND CERTAIN DESIGNATED EMPLOYEES
In addition to compliance with the general insider trading prohibition, all directors and executive officers of MediWound, and any other employees of
MediWound, or employees of, or
consultants or contractors to, MediWound or Covered Persons designated by the Stock Compliance Officer (each such person subject
to the Addendum is referred to as an “Addendum Covered Person”) are required to adhere to the following additional
restrictions and procedures when trading in
MediWound securities and Derivative Securities. Capital terms used herein and not otherwise defined herein shall have the meaning ascribed to such term under the
MediWound Ltd. Insider Trading Policy.
I. Prior Approval Requirements
In addition to the Blackout Periods and compliance with the general prohibition on insider trading, an Addendum Covered Person must obtain the approval of
the Stock Compliance
Officer before effecting a trade in MediWound securities or any Derivative Security (the “Prior Approval Requirement”) (to the extent that such
persons are permitted to trade in Derivative Securities consistent with the Short Sale Prohibition and
Other Restricted Transactions described in Part VI). The Prior
Approval Requirement also applies to Associates of the foregoing individuals. A request form for prior approval should be submitted at least 48 hours prior to the
proposed transaction
date. Covered Persons who have questions regarding Prior Approval Requirement are advised to contact the Stock Compliance Officer.
II. Margin Accounts and Pledges
An Addendum Covered Person may not hold MediWound securities in a margin account or pledge MediWound securities as collateral because a margin or
foreclosure sale may occur when
such Addendum Covered Person is aware of material nonpublic information or otherwise prohibited from trading in MediWound
securities. Under certain circumstances an exception may be granted for an Addendum Covered Person to pledge MediWound
securities as collateral for a loan (not
including margin debt) where the Addendum Covered Person clearly demonstrates the financial capacity to repay the loan without resorting to the pledged securities.
Any Addendum Covered Person that wishes to do
so must submit a request for approval to the Stock Compliance Officer at least two weeks prior to the proposed
execution of documents evidencing the proposed pledge
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 19, 2025
Exhibit 12.2
CERTIFICATIONS
I, Hani Luxenburg, 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/ Hani Luxenburg
Hani Luxenburg
Chief Financial Officer
Date: March 19, 2025
Exhibit 13.1
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
In connection with the Annual Report of MediWound Ltd. (the “Company”) on Form 20-F for the fiscal year ended
December 31, 2024 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 19, 2025
Exhibit 13.2
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
In connection with the Annual Report of MediWound Ltd. (the “Company”) on Form 20-F for the fiscal year ended December
31, 2024 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Hani Luxenburg, 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/ Hani Luxenburg
Hani Luxenburg
Chief Financial Officer
Date: March 19, 2025
Exhibit 15.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statements (Nos. 333-223767, 333-195517, 333-210375, 333-230487,
333-236635, 333-255784, 333-
266697 and 333-273997) on Form S-8, and (Nos. 333-265203, 333-268297 and 333-281843) on Form F-3 of our report dated March 19, 2025, with respect to the
consolidated financial statements of MediWound Ltd. and the
effectiveness of internal control over financial reporting.
/s/ Somekh Chaikin
Somekh Chaikin
Member Firm of KPMG International
Tel Aviv, Israel
March 19, 2025