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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
001-33357
(Commission file number)
PROTALIX BIOTHERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware
State or other jurisdiction
of incorporation or organization
2 University Plaza
Suite 100
Hackensack, NJ
(Address of principal executive offices)
65-0643773
(I.R.S. Employer
Identification No.)
07601
(Zip Code)
(201) 696-9345
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock, $0.001 par value
Trading Symbol(s)
PLX
Name of each exchange on which registered
NYSE American
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ⌧
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ⌧
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, a smaller reporting company, or an emerging growth company. See
definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐
☒
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☒
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an
error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ⌧
The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of June 30, 2022 was approximately $52.2 million, based on the closing price for shares of
the Registrant’s common stock reported by the NYSE American for such date.
On February 15, 2023, approximately 57,353,430 shares of the Registrant’s common stock, par value $0.001 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement related to its 2023 Annual Stockholders’ Meeting to be filed subsequently are incorporated by reference into Part III of this Annual Report on
Form 10-K. Except as expressly incorporated by reference, the registrant’s proxy statement shall not be deemed to be part of this report.
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FORM 10-K
TABLE OF CONTENTS
PART I
Business
Cautionary Statement Regarding Forward-Looking Statements and Risk Factors Summary
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
PART II
Securities
[Reserved]
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
PART IV
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PART I
Except where the context otherwise requires, the terms “we,” “us,” “our” or “the Company,” refer to the business of
Protalix BioTherapeutics, Inc. and its consolidated subsidiaries, and “Protalix” or “Protalix Ltd.” refers to the business of
Protalix Ltd., our wholly-owned subsidiary and sole operating unit.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
AND RISK FACTORS SUMMARY
The statements set forth under the sections entitled “Business,” “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and “Risk Factors,” and other statements included elsewhere in this Annual Report
on Form 10-K, particularly with respect to our plans and strategy for our business and related financing, include forward-
looking statements within the meanings of Section 27A of the Securities Act of 1933, as amended, or the Securities Act,
and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including statements regarding
expectations, beliefs, intentions or strategies for the future. When used in this report, the terms “anticipate,” “believe,”
“estimate,” “expect,” “can,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,”
“will,” “would” and other words or phrases of similar import, as they relate to our company, our subsidiaries or our
management, are intended to identify forward-looking statements. We intend that all forward-looking statements be subject
to the safe-harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements
are only predictions and reflect our views as of the date they are made with respect to future events and financial
performance, and we undertake no obligation to update or revise, nor do we have a policy of updating or revising, any
forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events, except as may be required under applicable law. Forward-looking statements are
subject to many risks and uncertainties that could cause our actual results to differ materially from any future results
expressed or implied by the forward-looking statements.
Examples of the risks and uncertainties include, but are not limited to, the following:
●
the risk that the U.S. Food and Drug Administration, or the FDA, might not grant marketing approval for
pegunigalsidase alfa, or PRX-102, by the Prescription Drug User Fee Act (PDUFA) action date or at all, and other risks
related to the timing, progress and likelihood of final approval by the FDA of the resubmitted PRX-102 Biologics License
Application, or BLA;
●
risks related to the timing, progress and likelihood of approval by the European Medicines Agency, or the
EMA, of the Marketing Authorization Application, or the MAA, for PRX-102, and of approvals by other applicable health
regulatory authorities;
●
the risk that a marketing approval of PRX-102 by either the FDA or the EMA will be conditioned on
significant limitations on its use;
●
whether, if approved by the FDA, EMA and other applicable health regulatory authorities, the use of
PRX-102 will be commercially successful;
●
the likelihood that the FDA, EMA or other applicable health regulatory authorities will approve an
alternative dosing regimen;
●
failure or delay in the commencement or completion of our preclinical studies and clinical trials, which
may be caused by several factors, including: slower than expected rates of patient recruitment; unforeseen safety issues;
determination of dosing issues; lack of effectiveness during clinical trials; inability to satisfactorily demonstrate non-
inferiority to approved therapies; inability or unwillingness of medical investigators and institutional review boards to
follow our clinical protocols; inability to monitor patients adequately during or after treatment; and/or lack of sufficient
funding to finance our clinical trials;
●
the risk that the FDA, EMA, or other foreign regulatory authorities may not accept or approve a
marketing application we file for any of our product candidates, and other risks relating to the review process;
●
risks associated with the novel coronavirus disease, or COVID-19, outbreak and variants, which may
adversely impact our business;
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risks related to any transactions we may effect in the public or private equity markets to raise capital to
finance future research and development activities, general and administrative expenses and working capital;
●
●
risks relating to our evaluation and pursuit of strategic alternatives;
the risk that the results of our clinical trials will not support the applicable claims of safety or efficacy
and that our product candidates will not have the desired effects or will be associated with undesirable side effects or other
unexpected characteristics;
●
risks relating to our ability to manage our relationship with our collaborators, distributors or partners,
including, but not limited to, Pfizer Inc., or Pfizer, and Chiesi Farmaceutici S.p.A., or Chiesi;
deposits;
●
●
risks related to the amount and sufficiency of our cash and cash equivalents and short-term bank
risks relating to our ability to make scheduled payments of the principal of, to pay interest on or to
refinance our outstanding notes or any other indebtedness;
publish;
●
●
●
risks relating to changes to interim, topline or preliminary data from clinical trials that we announce or
risk of significant lawsuits, including stockholder litigation, which is common in the life sciences sector;
our dependence on performance by third-party providers of services and supplies, including without
limitation, clinical trial services;
●
delays in our preparation and filing of applications for regulatory approval; the inherent risks and
uncertainties in developing drug platforms and products of the type we are developing;
●
●
the impact of development of competing therapies and/or technologies by other companies;
risks related to our supply of drug product to Pfizer;
●
product candidates;
risks related to our expectations with respect to the potential commercial value of our product and
●
risks relating to the compliance by Fundação Oswaldo Cruz, or Fiocruz, an arm of the Brazilian Ministry
of Health, or the Brazilian MoH, with its purchase obligations under our supply and technology transfer agreement, which
may have a material adverse effect on us and may also result in the termination of such agreement;
●
potential product liability risks, and risks of securing adequate levels of related insurance coverage;
●
the possibility of infringing a third-party’s patents or other intellectual property rights and the uncertainty
of obtaining patents covering our products and processes and successfully enforcing our intellectual property rights against
third-parties;
●
●
risks relating to changes in healthcare laws, rules and regulations in the United States or elsewhere;
and the possible disruption of our operations due to terrorist activities and armed conflict, including as a
result of the disruption of the operations of certain regulatory authorities and of certain of our suppliers, collaborative
partners, licensees, clinical trial sites, distributors and customers.
Given these uncertainties, you should not place undue reliance on these forward-looking statements. Companies in the
pharmaceutical and biotechnology industries have suffered significant setbacks in advanced or late-stage clinical trials,
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even after obtaining promising earlier trial results or preliminary findings for such clinical trials. Even if favorable testing
data is generated from clinical trials of a drug product, the FDA or foreign regulatory authorities may not accept or approve
a marketing application filed by a pharmaceutical or biotechnology company for the drug product.
These and other risks and uncertainties are detailed under the “Risk Factors” section of this Annual Report and are
described from time to time in the reports we file with the U.S. Securities and Exchange Commission, or the Commission.
Item 1. Business
We are a biopharmaceutical company focused on the development, production and commercialization of recombinant
therapeutic proteins produced by our proprietary ProCellEx® plant cell-based protein expression system. We are the first
and only company to gain FDA approval of a protein produced through plant cell-based expression in suspension. Our
unique expression system represents a new method for developing recombinant proteins in an industrial-scale manner.
Our strategic focus is to develop tailored complex recombinant therapeutic proteins primarily produced through ProCellEx
while genetically engineering and/or chemically modifying the proteins pre- and/or post-production. We intend such
engineering and modifications to provide added clinical benefits by improving the biological characteristics (e.g.,
glycosylation, half-life, immunogenicity) of the therapeutic protein.
Our proprietary ProCellEx platform is being used to manufacture our approved and marketed product, Elelyso®, for the
treatment of Gaucher disease. We are also developing, via ProCellEx, a pipeline of products. The phase III clinical program
for PRX-102, our investigational new drug for the potential treatment of Fabry disease is complete and a BLA and an
MAA are currently under review by the FDA and the EMA, respectively. On February 23, 2023, the EMA’s Committee for
Medicinal Products for Human Use, or CHMP, adopted a positive opinion, recommending marketing authorization for
PRX-102. The CHMP opinion is now referred for final action to the European Commission, or EC. A final EC decision on
the MAA is expected in the beginning of May 2023. The FDA has indicated that the PRX-102 BLA was considered a
complete, class 2 response and set a PDUFA action date of May 9, 2023.
In addition, we are developing uricase, or PRX-115, for the treatment of severe gout, Long Acting (LA) DNase I, or PRX-
119, for the treatment of NETs-related diseases, and a number of other product candidates that are in early and preclinical
development.
Product Pipeline
Our ProCellEx Platform
ProCellEx is our proprietary platform used to produce and manufacture recombinant proteins through plant cell-based
expressions in suspension. ProCellEx consists of a comprehensive set of proprietary technologies and capabilities,
including the use of advanced genetic engineering and plant cell culture technology, enabling us to produce complex,
proprietary, and biologically equivalent proteins for a variety of human diseases. Our protein expression system facilitates
the creation and selection of high-expressing, genetically-stable cell lines capable of expressing recombinant proteins.
Our technology allows for many unique advantages, including: biologic optimization; an ability to handle complex protein
expressions; flexible manufacturing with improvements through efficiencies, enhancements and/or rapid
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horizontal scale-ups; a simplified production process; elimination of the risk of viral contaminations from mammalian
components; and intellectual property advantages.
We developed ProCellEx based on our plant cell culture technology for the development, expression and manufacturing of
recombinant proteins, which are the essential foundation of modern biotechnology. We develop new, recombinant
therapeutic proteins by using the natural capability of agrobacterium to transfer a DNA fragment into the plant
chromosome, allowing the genome of the plant cell to code for specific proteins of interest. The agrobacterium-mediated
transformed cells are then able to produce specific proteins, which are extracted and purified and can be used as therapies
to treat a variety of diseases.
ProCellEx technology can be utilized to express complex therapeutic proteins belonging to different drug classes, such as
enzymes, hormones, monoclonal antibodies, cytokines and vaccines. The entire protein expression process, from initial
nucleotide cloning to large-scale production of the protein product, occurs under Current Good Manufacturing Practice, or
cGMP-, compliant, controlled processes. Our plant cell culture technology uses cells, such as carrot and tobacco (BY-2)
cells, which undergo advanced genetic engineering and/or chemical modifications, and are grown on an industrial scale in a
disposable, flexible bioreactor system. Our system does not involve mammalian or animal-derived components or
transgenic field-grown or whole plants at any point in the production process.
Cell growth, from initiating scale-up steps from a cell-bank through large-scale production takes place in a clean-room
environment in flexible, sterile, custom-designed polyethylene bioreactors, and does not require the use of large stainless-
steel bioreactors commonly used in mammalian-based systems for recombinant protein production. The ProCellEx reactors
are easy to use and maintain, allowing for rapid horizontal scale-up and do not involve the risk of mammalian viral
contamination. Our bioreactors are well-suited for plant cell growth using a simple, inexpensive, chemically defined
growth medium. The reactors, which are custom-designed and optimized for plant cell cultures, require low initial capital
investment and are rapidly scalable at a low cost.
Business Highlights
Elelyso®
Elelyso for the treatment of Gaucher Disease is currently approved and marketed in 23 countries including the United
States, Australia, Canada, Israel, Brazil, Russia and Turkey. In June 2012, CHMP issued a positive opinion regarding the
benefit of Elelyso but did not immediately grant marketing authorization because of the ten-year market exclusivity granted
to Vpriv® (Takeda Shire) in August 2010 for the same condition, which was extended for an additional two years, and
expired in August 2022. Elelyso is marketed globally, excluding Brazil, through an exclusive licensing agreement with
Pfizer. We maintain the distribution rights to Elelyso in Brazil, where it is currently marketed as BioManguinhos
alfataliglicerase, through the Supply and Technology Transfer Agreement, or the Brazil Agreement, we entered into on
June 18, 2013, with Fiocruz, an arm of the Brazilian MoH. In 2022, we generated $9.5 million from sales of
BioManguinhos alfataliglicerase to the Brazilian MoH.
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Pegunigalsidase alfa (PRX-102)
PRX-102, our lead product candidate, is a late-stage clinical asset in development for the treatment of Fabry disease. We
expect PRX-102 to be the primary subject of our development efforts in the short-term. It is our proprietary, investigational,
plant cell culture expressed enzyme, and a chemically modified stabilized version of, the recombinant α-Galactosidase-A
protein, a lysosomal enzyme, under development for the treatment of Fabry disease. Fabry disease is a serious life-threatening
rare genetic disorder. Fabry patients lack or have low levels of α-galactosidase-A resulting in the progressive accumulation
of abnormal deposits of a fatty substance called globotriaosylceramide, or Gb3, in blood vessel walls throughout their body.
The abnormal storage of Gb3 increases with time and, as a result, Gb3 accumulates, primarily in the blood vessel walls. The
ultimate consequences of Gb3 deposition range from episodes of pain and impaired peripheral sensation to end-organ
failure, particularly of the kidneys, but also of the heart and the cerebrovascular system. Fabry disease occurs in one person
per 40,000 to 60,000 males.
Our phase III clinical program includes three separate clinical trials which are referred to as the BALANCE study, the
BRIDGE study and the BRIGHT study, all of which have been completed. In addition, the phase III clinical program
includes two extension studies in which subjects that participated in our phase I/II clinical trials and our phase III clinical
trials may enroll and continue to be treated with PRX-102.
On November 9, 2022, we, together with Chiesi, resubmitted to the FDA a BLA for PRX-102 for the potential treatment of
adult patients with Fabry disease. The initial BLA for PRX-102 was submitted to the FDA on May 27, 2020 under the
FDA’s Accelerated Approval pathway, and the submission was subsequently accepted by the FDA and granted Priority
Review designation. However, in April 2021, the FDA issued a Complete Response Letter, or a CRL, in response to the
initial BLA. In preparation for the BLA resubmission, we and Chiesi participated in a Type A (End of Review) meeting
with the FDA on September 9, 2021. As part of the meeting minutes provided by the FDA, which included the preliminary
comments and meeting discussion, the FDA, in principle, agreed that the data package proposed to the FDA for a BLA
resubmission has the potential to support a traditional approval of PRX-102 for the treatment of Fabry disease. The data
package in the BLA resubmission, given the change in the regulatory landscape in the United States, includes the final two-
year analyses of our BALANCE study and long-term data from our open-label extension study of PRX-102 in adult patients
treated with a 2 mg/kg every four weeks dosage of PRX-102.
On February 7, 2022, we, together with Chiesi, submitted an MAA for PRX-102 to the EMA which was subsequently
validated by the EMA. The submission was made after the October 8, 2021 meeting we held, together with Chiesi, with the
Rapporteur and Co-Rapporteur of the EMA regarding PRX-102.
The MAA submission includes a comprehensive set of preclinical, clinical and manufacturing data compiled from our
completed and ongoing clinical studies evaluating PRX-102 as a potential alternative treatment for adult patients with
Fabry disease. The submission was supported by the 12–month interim data analysis generated from the BALANCE study.
Data generated from our completed BRIDGE study, our phase I/II clinical trial in naive or untreated patients, and from our
extension studies with 1 mg/kg every two weeks were also included in the submission. In addition, the MAA includes data
from our completed 12–month switch–over BRIGHT study in adult patients with Fabry disease treated with a 2 mg/kg
every four weeks dosage to support an additional potential treatment regimen for Fabry patients. As part of the EMA
review process, Chiesi and the Company received the Day 120 list of questions in June 2022, and the full response package
thereto was submitted to the EMA in September 2022 (following a 3-month clock-stop period). An essential portion of the
response included the submission of the final analysis of the two-year BALANCE study (the final Clinical Study Report),
and an interim analysis of our long-term, open-label extension study of PRX-102 in adult patients with Fabry disease
treated with the 2 mg/kg every four weeks dosage.
We have entered into two exclusive global licensing and supply agreements for PRX-102. On October 19, 2017,
Protalix Ltd., our wholly-owned subsidiary, entered into an Exclusive License and Supply Agreement with Chiesi, or the
Chiesi Ex-US Agreement, pursuant to which Chiesi was granted an exclusive license for all markets outside of the United
States to commercialize PRX-102. On July 23, 2018, Protalix Ltd. entered into an Exclusive License and Supply
Agreement with Chiesi, or the Chiesi US Agreement, with respect to the commercialization of PRX-102 in the United
States.
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PRX-115
PRX-115 is our plant cell-expressed recombinant PEGylated Uricase (urate oxidase) – a chemically modified enzyme
under development for the potential treatment of severe gout. Gout is the most common inflammatory arthritis in the
United States, affecting an estimated 9.2 million adults. An estimated approximately 2% of the gout population is
considered to have chronic refractory disease. Gout is caused by factors that elevate serum uric acid, or sUA, levels, which
may include diet or genetic predisposition and environmental factors leading to hyperuricemia and tissue deposition of
monosodium urate crystals, tophi, in joints and soft tissues, causing acute and chronic inflammation, and is characterized
by recurrent flares. Gout flares lead to substantial morbidity by causing severe pain, reduced quality of life, decreased
physical function, increased healthcare costs, and lost economic productivity. Furthermore, gout is strongly associated with
metabolic syndromes, and may contribute to myocardial infarction, type 2 diabetes mellitus, chronic kidney disease, or
CKD, and premature mortality.
PRX-119
PRX-119 is our plant cell-expressed PEGylated recombinant human DNase I product candidate which we are designing to
have an elongated half-life in the circulation for the potential treatment of NETs-related diseases. NETs, Neutrophil
extracellular traps, are web-like structures, released by activated neutrophils that trap and kill a variety of microorganisms.
NETs are composed of DNA, histones, antimicrobial and pro-inflammatory proteins. Excessive formation or ineffective
clearance of NETs can cause different pathological effects. NETs formation has been observed in various autoimmune,
inflammatory and fibrotic conditions, diverse forms of thrombosis, cancer and metastasis. According to scientific literature,
animal studies have demonstrated that DNase I treatment reduce NETs toxicity. Our proprietary modified DNase I may
potentially enable effective treatment of acute and chronic conditions.
2022 and Recent Company Developments
Recent Developments
● On February 21, 2023, we announced our participation in the 19th Annual WORLDSymposium™ 2023,
which took place on February 22-26, 2023 at the Hilton Orlando in Orlando, Florida. We hosted an informational booth at
the symposium.
● On February 24, 2023, we, together with Chiesi, announced that the CHMP has adopted a positive opinion,
recommending marketing authorization for PRX-102. The CHMP opinion is now referred for final action to the EC. A
final EC decision on the MAA is expected in the beginning of May 2023.
2022 Developments
● On February 24, 2022, we, together with Chiesi, announced that the PRX-102 MAA was submitted to the
EMA following the October 8, 2021 meeting we, together with Chiesi, held with the Rapporteur and Co-Rapporteur of the
EMA regarding PRX-102, and that the submission was subsequently validated by the EMA. At the meeting, we and
Chiesi discussed the scope of the anticipated MAA submission for the European Union, and the Rapporteur and Co-
Rapporteur were generally supportive of a planned MAA submission.
● On March 18, 2022, we, together with Chiesi, announced final results from our BRIGHT study, a phase III
clinical trial of PRX-102 for the treatment of Fabry disease designed to evaluate the safety, efficacy and pharmacokinetics
of PRX-102 treatment, 2 mg/kg every four weeks, in up to 30 patients with Fabry disease previously treated with a
commercially available ERT (Replagal® (agalsidase alfa; marketed by Takeda Pharmaceutical Company Limited (after
the acquisition of Shire Plc)) or Fabrazyme® (agalsidase beta; marketed by Sanofi after the acquisition of Genzyme)).
● On April 4, 2022, we, together with Chiesi, announced topline results from the BALANCE study evaluating
PRX-102, 1 mg/kg, administered every two weeks, compared to agalsidase beta for the treatment of Fabry disease.
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● On June 30, 2022, we held our Annual Meeting at which our stockholders: (1) elected the six persons
nominated by our Board of Directors to serve as directors of our Company; (2) approved, on a non-binding, advisory
basis, the compensation of our named executive officers; (3) adopted the amendments to the Plan to increase the number
of shares of common stock available under our Amended and Restated Pro BioTherapeutics, Inc. 2006 Stock Incentive
Plan, as amended, from 5,725,171 shares to 8,475,171 shares and to amend certain other terms of the Plan; (4) approved
the Charter Amendment; and (5) ratified the appointment of Kesselman & Kesselman, Certified Public Accountants (Isr.),
a member of PricewaterhouseCoopers International Limited, as our independent registered public accounting firm for the
fiscal year ending December 31, 2022.
● On June 30, 2022, Shmuel “Muli” Ben Zvi, Ph.D. joined our Board of Directors. Dr. Ben Zvi is the new
Chairman of the Audit Committee and is also serving on the Compensation Committee.
● On August 29, 2022, we entered into a Fill/Finish Agreement, or the F/F Agreement, and a Letter
Agreement, or the Letter Agreement, in each case with Chiesi.
● On November 9, 2022, we, together with Chiesi, resubmitted the BLA for PRX-102 for the potential
treatment of adult patients with Fabry disease.
● On December 5, 2022, we hosted a key opinion leader (KOL) webinar featuring Myrl D. Holida, PA-
C, University of Iowa Stead Family Children’s Hospital, who discussed the robust PRX-102 clinical program.
● On December 5, 2022, we announced that the FDA had accepted the resubmitted BLA for PRX-102. The
FDA indicated in the BLA filing communication letter that the resubmitted BLA was considered a complete, class 2
response and set a PDUFA action date of May 9, 2023.
● On December 21, 2022, we announced that we have decided that it is our company’s best interest to
voluntarily delist our common stock from the Tel Aviv Stock Exchange, or the TASE. The delisting will take effect on
March 22, 2023, and the last trading date on the TASE is March 20, 2023.
In light of recent developments relating to the COVID-19 pandemic and the focus of healthcare providers and hospitals on
fighting the virus and its variants, and consistent with the FDA’s updated industry guidance for conducting clinical trials
issued on March 18, 2020, we and our contract research organizations have made certain adjustments to the operation of
our clinical trials in an effort to ensure the monitoring and safety of patients and minimize risk to trial integrity during the
pandemic and generally, and we may need to make adjustments again in the future.
We are in close contact with our principal investigators, clinical sites and clinical research organizations, which are
primarily located in the United States and Europe, and to date, the COVID-19 pandemic has had a minimal effect on the
performance of the phase III clinical trials of PRX-102 as many of the patients were already treated in home care settings.
We were able to complete all three of the clinical trials.
We are in close contact with our principal investigators and clinical sites and our clinical research organizations, which are
primarily located in the United States and Europe, and to date, the COVID-19 pandemic has had a minimal effect on the
performance of the phase III clinical trials of PRX-102 as many of the patients were already treated in home care settings.
We were able to complete all three of the clinical trials.
Our Marketed Product
Elelyso®
Elelyso (taliglucerase alfa), our first commercial product for the treatment of Gaucher disease, is the first plant cell derived
recombinant protein therapeutic approved by major regulatory authorities, including the FDA and the EMA. Elelyso is
approved in 23 markets for infusion as an ERT for the long-term treatment of adult and pediatric patients with a confirmed
diagnosis of type 1 Gaucher disease. We have licensed to Pfizer the global rights for Elelyso, excluding Brazil. In Brazil,
we maintain the distribution rights to taliglucerase alfa, marketed as BioManguinhos alfataliglicerase,
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through the Brazil Agreement. In 2022, we generated $9.5 million from sales of BioManguinhos alfataliglicerase to the
Brazilian MoH.
Gaucher disease, also known as glucocerebrosidase, or GCD, deficiency, is a rare genetic autosomal recessive disorder and
one of the most common Lysosomal Storage Disorders in the world. It is one of a group of disorders that affect specific
enzymes that normally break down fatty substances for reuse in the cells. If the enzymes are missing or do not work
properly, the substances can build up and become toxic. Gaucher disease occurs when a lipid called glucosylceramide
accumulates in the cells of the bone marrow, lungs, spleen, liver, and sometimes the brain. Gaucher disease symptoms can
include fatigue, anemia, easy bruising and bleeding, severe bone pain and easily broken bones, and distended stomach due
to an enlarged spleen and thrombocytopenia. Epidemiology of Gaucher disease varies. Recent literature provides that
prevalence of Gaucher disease ranges from 0.70 to 1.75 per 100,000 in the general population. In people of Ashkenazi
Jewish heritage, estimates of occurrence vary from approximately 1 in 400 to 1 in 850 people. The global market for
Gaucher disease was approximately $1.6 billion in 2022, is forecasted to be approximately $1.6 billion in 2023.
The current standard of care for Gaucher disease is ERT, which is a medical treatment where recombinant enzymes are
injected into patients to replace the lacking or dysfunctional enzyme. In Gaucher disease, recombinant GCD is infused to
replace the mutated or deficient natural GCD enzyme. Elelyso is the only alternative ERT treatment of Gaucher disease to
Sanofi Genzyme’s Cerezyme® and Takeda’s (Shire) Vpriv.
Our Clinical Development Pipeline
Pegunigalsidase alfa (PRX-102)
PRX-102 is our lead product candidate and we expect it to be the primary subject of our development efforts in the short-
term. It is our proprietary, investigational, plant cell culture expressed enzyme, and a chemically modified stabilized version of,
the recombinant α-Galactosidase-A protein, a lysosomal enzyme, under development for the treatment of Fabry disease. Fabry
disease is a serious life-threatening rare genetic disorder. Fabry patients lack or have low levels of α-galactosidase-A
resulting in the progressive accumulation of abnormal deposits of a fatty substance called Gb3 in blood vessel walls
throughout their body. The abnormal storage of Gb3 increases with time. The ultimate consequences of Gb3 deposition
range from episodes of pain and impaired peripheral sensation to end-organ failure, particularly of the kidneys, but also of
the heart and the cerebrovascular system. Fabry disease occurs in one person per 40,000 to 60,000 males. The global
market for Fabry disease is forecasted to be approximately $2.0 billion and $2.1 billion in 2022 and 2023, respectively, and
to grow at a CAGR of approximately 8.7% from 2022-2028.
Fabry disease is generally treated with an ERT, agalsidase alfa or agalsidase beta. In the currently approved ERTs, the
missing α-galactosidase-A is replaced with a recombinant form of the protein via intravenous, or IV, infusion once every
two weeks. Fabry disease, if left untreated, will progress from a less severe condition to a more serious one. It can have a
significant impact on quality of life due to presence of serious, chronic and debilitating complications, including
cardiovascular and renal complications, and comorbid conditions such as pain can have a significant impact on the
psychological well-being of Fabry patients and their social functioning. Fabry disease involves substantial reduction in life
expectancy. Causes of death are most often cardiovascular disease and, to a lesser extent, cerebrovascular disease and renal
disease. The life expectancy of Fabry patients is significantly shorter compared to the general population. Untreated male
Fabry patients may experience shortened lifespans to approximately 50 years, and 70 years for untreated female patients
with Fabry disease. This represents a 20- and 10-year reduction of their respective lifespans.
On November 9, 2022, we, together with Chiesi, resubmitted to the FDA a BLA for PRX-102 for the potential treatment of
adult patients with Fabry disease. The initial BLA for PRX-102 was submitted to the FDA on May 27, 2020 under the
FDA’s Accelerated Approval pathway, and the submission was subsequently accepted by the FDA and granted Priority
Review designation. However, in April 2021, the FDA issued a CRL in response to the initial BLA. In preparation for the
BLA resubmission, we and Chiesi participated in a Type A (End of Review) meeting with the FDA on September 9, 2021.
As part of the meeting minutes provided by the FDA, which included the preliminary comments and meeting discussion,
the FDA, in principle, agreed that the data package proposed to the FDA for a BLA resubmission has the potential to
support a traditional approval of PRX-102 for the treatment of Fabry disease. The data package in the BLA resubmission,
given the change in the regulatory landscape in the United States, includes the final two-year analyses of
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our BALANCE study, which were completed in July 2022, and long-term data from our open-label extension study of PRX-
102 in adult patients treated with a 2 mg/kg every four weeks dosage of PRX-102. The initial BLA included a
comprehensive set of preclinical, clinical and manufacturing data compiled from our completed phase I/II clinical trial of
PRX-102, including the related extension study, interim clinical data from our BRIDGE study and safety data from our on-
going clinical studies of PRX-102 in adult patients receiving 1 mg/kg every two weeks.
The CRL did not report any concerns relating to the potential safety or efficacy of PRX-102 in the submitted data package.
In the CRL, the FDA noted that an inspection of our manufacturing facility in Carmiel, Israel, including the FDA’s
subsequent assessment of any related FDA findings, is required before the FDA can approve a new drug. Due to travel
restrictions during the COVID-19 pandemic, the FDA was unable to conduct the required inspection during the review
cycle. The FDA explained in the letter that it will continue to monitor the public health situation as well as travel
restrictions, and is actively working to define an approach for scheduling outstanding inspections. With respect to the third-
party facility in Europe at which fill and finish processes are performed for PRX-102, due to COVID-19, the FDA
reviewed records under Section 704(a)(4) of the U.S. Federal Food, Drug, and Cosmetic Act, or the FFDCA, in lieu of a
pre-licensing inspection. In the CRL, the FDA stated that it will communicate remaining issues to the facility in order to
seek prompt resolution of any pending items. In addition to the foregoing, in the CRL, the FDA noted that agalsidase beta,
a therapy used to treat Fabry patients, was recently converted to full approval and is now an “available therapy,” which
must be addressed in the context of any potential resubmission of a BLA for PRX-102.
On February 7, 2022, the PRX-102 MAA was submitted to, and subsequently validated by, the EMA. The submission was
made after the October 8, 2021 meeting we held, together with Chiesi, with the Rapporteur and Co-Rapporteur of the EMA
regarding PRX-102. At the meeting, we and Chiesi discussed the scope of the anticipated MAA submission for the
European Union, and the Rapporteur and Co-Rapporteur were generally supportive of the planned MAA submission. The
MAA submission includes a comprehensive set of preclinical, clinical and manufacturing data compiled from our
completed and ongoing clinical studies evaluating PRX-102 as a potential alternative treatment for adult patients with
Fabry disease. The submission was supported by the 12–month interim data analysis generated from our BALANCE study,
which was released in June 2021. Data generated from the completed BRIDGE study, the phase I/II clinical trial in naive or
untreated patients, and from the extension studies with 1 mg/kg every two weeks were also included in the submission. In
addition, the MAA includes data from the completed 12–month switch–over BRIGHT study adult patients with Fabry
disease treated with the 2 mg/kg every four weeks dosage to support an additional potential treatment regimen for patients
with Fabry disease. As part of the EMA review process, we and Chiesi received the Day 120 list of questions in June 2022,
and the full response package thereto was submitted to the EMA in September 2022 (following a 3-month clock-stop
period). An essential portion of the response included the submission of the final analysis of the two-year BALANCE study
(the final Clinical Study Report), and an interim analysis of the long-term, open-label extension study of PRX-102 in adult
patients with Fabry disease treated with the 2 mg/kg every four weeks dosage.
On February 24, 2023, we, together with Chiesi, announced that the CHMP has adopted a positive opinion,
recommending marketing authorization for PRX-102. The CHMP opinion is now referred for final action to the EC. A
final EC decision on the MAA is expected in the beginning of May 2023.
In January 2018, the FDA granted Fast Track designation to PRX-102. Fast Track designation is a process designed to
facilitate the development and expedite the review of drugs and vaccines for serious conditions that fill an unmet medical
need.
In December 2017, the European Commission granted Orphan Drug Designation for PRX-102 for the treatment of Fabry
disease. Orphan Drug Designation for PRX-102 qualifies Chiesi for access to a centralized marketing authorization
procedure, including applications for inspections and for protocol assistance. If the orphan drug designation is maintained
at the time PRX-102 is approved for marketing in the European Union, if at all, we expect that PRX-102 will benefit from
10 years of market exclusivity within the European Union. The market exclusivity will not have any effect on Fabry
disease treatments already approved at that time.
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Key Trials and Design
Our clinical development program is designed to show that PRX-102 has a potential clinical benefit in all adult Fabry
patient populations when compared to currently marketed Fabry disease enzymes, agalsidase beta and agalsidase alfa. In
preclinical studies, PRX 102 showed significantly longer half-life due to higher enzyme stability, enhanced activity in
Fabry disease affected organs leading to reduction of the accumulated substrate and reduced immunogenicity, which
together can potentially lead to improved efficacy through increased substrate clearance and significantly lower formation
of anti-drug antibodies, or ADAs. Providing a meaningful improvement in the health and quality of life for Fabry patients
being treated with PRX-102 represents a significant potential market opportunity.
Our phase III clinical program of PRX-102 for the treatment of Fabry disease includes three individual studies; the
BALANCE study, the BRIDGE study and the BRIGHT study, all of which have been completed. In 2016, we completed a
phase I/II clinical trial of PRX-102, which was a dose range finding study in ERT-naïve adult Fabry patients. In the phase
III clinical program overall, two potential dosing regimens for PRX-102 were analyzed; 1 mg/kg every two weeks, with the
potential for improved efficacy and safety offering a potential alternative to existing enzyme replacement therapies, and
2 mg/kg every four weeks, which has the potential to lower treatment burden versus existing treatments and potentially
provide a better quality of life for a subset of Fabry patients.
Patients who completed the BALANCE, BRIDGE and BRIGHT studies, and the extension of the phase I/II study, were
offered the opportunity to continue PRX-102 treatment in one of two long-term open-label extension studies. Currently,
126 subjects who participated in our PRX-102 clinical program have opted, with the advice of the treating physician, to
continue PRX-102 treatment in one of our long-term, open label, extension studies. Such extension studies include 97
patients in the 1 mg/kg every two weeks extension study (PB-102-F60) with a total cumulative exposure of approximately
400 patient years (10 subjects who completed an extension study from the phase I/II study, 18 subjects who completed the
BRIDGE study; 69 subjects who completed the BALANCE study), and 29 subjects who completed the BRIGHT study, in
the 2 mg/kg every four weeks extension study (PB-102-F51) with a total cumulative exposure of approximately 110 patient
years. Two of such subjects are being treated with 1 mg/kg every two weeks.
In February 2020, we, together with Chiesi, announced an agreement with the FDA for the Initial Pediatric Study Plan
(iPSP) for PRX-102. The joint announcement was made after completion of discussions with the FDA and receipt of
confirmation from the FDA in an official “Agreement Letter” which outlines an agreed-upon approach to evaluate the
safety and efficacy of PRX-102 in pediatric Fabry patients in a clinical trial to be performed by Chiesi with our
collaborative efforts.
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Phase III BALANCE Study
The pivotal BALANCE study was a 24-month, randomized, double blind, active control study of PRX-102 in adult Fabry
patients with deteriorating renal function that was designed to evaluate the safety and efficacy of 1 mg/kg of PRX-102
administered every two weeks compared to agalsidase beta. Topline results from the completed study were announced in
April 2022 and the Clinical Study Report for the BALANCE study was completed in July 2022. The final analysis
confirmed the positive topline results and favorable tolerability profile. A total of 78 patients who were previously treated
with agalsidase beta for at least one year with an estimated glomerular filtration rate (eGFR) slope at screening worse than
-2 mL/min/1.73m2/year were enrolled in the study. Patients were randomized on a 2:1 ratio for switching to PRX-102 or
continuing on agalsidase beta. A total of 77 patients were treated; 52 with PRX-102 and 25 with agalsidase beta.
Approximately 40% of the enrolled patients were female.
The primary endpoint of the BALANCE study is the comparison in the annualized rate of decline of estimated Glomerular
Filtration Rate, or eGFR, slope between the agalsidase beta and PRX-102 treatment arms. eGFR is considered a reliable
and accepted test to measure kidney function and stage of kidney disease. Additional parameters evaluated include: cardiac
assessment, Lyso-Gb3 (a biomarker for monitoring Fabry patients during therapy), pain, quality of life, immunogenicity,
Fabry Clinical Events, pharmacokinetics and other parameters.
Given the changed regulatory landscape in the United States with the full approval of agalsidase beta in March 2021 based
on clinical endpoints, we changed the primary analysis of the BALANCE study from superiority to non-inferiority, as
demonstrating superiority is no longer required under FDA guidelines. As part of the September 2021 Type A End of
Review meeting, the FDA, in principle, agreed that the proposed analysis of the BALANCE study demonstrating non-
inferiority to agalsidase beta to be included in the data package for the PRX-102 BLA resubmission has the potential to
support the approval of PRX-102 for the treatment of Fabry disease. The primary endpoint of the BALANCE study
compared the eGFR annualized changes (slope) between the two treatment arms in the intent-to-treat (ITT) analysis set (77
patients). The study met its pre-specified primary endpoint and demonstrated that PRX-102 was statistically non-inferior to
agalsidase beta.
The median (95% confidence interval) of the eGFR slope in the PRX-102 arm was -2.514 mL/min/1.73m2/year (-3.788,
-1.240) and -2.155 mL/min/1.73m2/year (-3.805, -0.505) in the agalsidase beta arm, demonstrating a large overlap in the
confidence intervals of the two arms. The difference in medians (95% confidence interval) is -0.359 mL/min/1.73m2/year
(-2.444, 1.726). The prespecified non-inferiority margin was met. The final results of the per-protocol analysis set (72
patients) are consistent with the ITT results, with an even smaller difference in medians (95% confidence interval);
-0.118 mL/min/1.73m2/year (-2.450, 2.213). Additional sensitivity and supportive analyses investigated mean eGFR slopes
using other statistical models. These models yielded results similar to the primary analysis and confirming non-inferiority
of PRX-102 to agalsidase beta. These results supported the robustness of the methodology used for comparisons of
treatment effects in the BALANCE study.
The study population (ITT analysis set) was composed of 47 males (61.0%) and 30 females (39.0%), with a mean (range)
age of 44.3 (18-60) years. The mean duration of prior treatment with agalsidase beta was approximately six years. At
baseline, mean (SD) eGFR was 73.69 ml/min/1.73m2 (20.32) and median eGFR was 74.51 ml/min/1.73m2; mean (SD)
eGFR slope was -8.10 mL/min/1.73m2/year (5.92) and median eGFR slope was -7.25 ml/min/1.73m2/year.
A consistent efficacy response was also observed across biomarkers and functional systems relevant to Fabry disease, as
demonstrated via secondary endpoints, where in some cases the trend was in favor of PRX-102 and in some in favor of
agalsidase beta, but the actual difference between the two arms is always clinically small, supporting the comparability of
the two treatments.
Key secondary endpoints included Urine protein creatinine ratio (UPCR) as indicator of proteinuria, plasma levels of lyso –
Gb3, imaging marker of cardiac remodeling (Left Ventricular Mass Index, LVMI, by cardiac MRI), disease severity (by
Mainz Severity Score Index, MSSI), pain severity (Short Form Brief Pain Inventory, BPI) and quality of life (EQ-5D-5L).
Both treatments showed either a stabilization of clinical parameters (e.g., for eGFR, eGFR slope and UPCR) or prevention
of further progression of Fabry disease (e.g., LVMI, MSSI).
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●
Secondary measures of kidney function. In addition to eGFR levels and slope, the proportion of patients
categorized as having severe proteinuria (UPCR ≥ 1 gr/gr) in the PRX-102 arm remained stable during the study (at
baseline, 7/52 [13.5%] and 6/45 [13.3%] 24-month), while in the agalsidase beta arm, the proportion increased slightly
with 3/25 (12.0%) and 4/24 (16.7%), respectively. Mean (SE) UPCR data (post-hoc analysis) for the entire study
population remained stable throughout the study with a slight advantage for PRX-102 at 24-months compared to agalsidase
beta (Table 1).
●
Biomarkers of Fabry disease. Mean (SE) and median (range) plasma lyso-Gb3 change from baseline to
24 months of treatment in the PRX-102 arm were 3.30 (1.38) and 1.15 (-32.2 to 32.7) nM for PRX-102, and -8.74 (4.85)
and -1.50 (-102.3 to 2.4) nM for agalsidase beta. As expected, a gender difference was noted, with female Fabry patients
exhibiting lower values at baseline and no remarkable changes during the study. Overall, the absolute changes of the Fabry
biomarkers were minor in both treatment arms and were considered not clinically significant since there was no indication
of Gb3 re-accumulation nor of disease progression.
●
Measures of cardiac disease. LVMi was centrally evaluated based on cardiac MRI. An increase in LVMi
is indicative of progressing cardiomyopathy, hence preventing an increase in LVMI represents a therapeutic goal in Fabry
patients. In the BALANCE study, the change from baseline in both treatment arms was analyzed by absence/presence of
hypertrophy at baseline (defined as a LVMI above 91 g/m2 for males and LVMI above 77 g/m2 for females at baseline) and
by gender [Kawel-Boehm 2015]. Similar results were achieved in the two treatment arms after 24 months, with a slight
reduction in the mean (SE) LVMi values in the PRX-102 arm -4.238 (5.731)) and a small increase in the agalsidase beta
arm 2.417 (9.620) for patients with hypertrophy at baseline. Small differences were observed also in those patients without
hypertrophy at baseline in both treatment arms.
●
Measures of systemic disease burden (MSSI). Further evidence of the stabilization of the disease is
provided by the MSSI overall scores, which remained stable throughout the BALANCE study in both arms, with the
baseline score in both groups at the low end of the moderate range (means of 23.18 points in the PRX-102 arm and
25.16 points in the agalsidase beta arm), that slightly decreased (improvement by -2.1 points) in the PRX-102 arm and
slightly increased in the agalsidase beta arm (+2.0 points). In this case, the CI of the difference in mean changes did not
contain 0, suggesting a difference between the two arms in favor of PRX-102.
●
Patient reported outcomes. With regards to the patient-reported outcomes (BPI and EQ-5D-5L), the two
treatments showed very similar results, with the majority of patients reporting an improvement or no change in both
groups, for each domain.
For an overview of primary and secondary endpoints collected in the BALANCE study, please refer to the Table 1 below.
Table 1: Summary Table of Comparison of Treatment Benefit Data in the BALANCE Study, (Mean (SE) [median]),
Efficacy Population
Parameter
eGFR
(ml/min/1.73m2)
eGFR slope
(ml/min/1.73m2/yr)
Reaching kidney therapeutic
goala
UPCR
Baseline
Month 24
Change from Baseline
Baseline
Month 24
Month 24
Baseline
Month 24
PRX-102 (N = 52)
n
52
47
47
52
73.46 (2.80) [73.45]
70.53 (3.19) [69.35]
-3.60 (1.58) [-2.39]
-8.03 (0.92) [-6.70]
Range: -30.5 ; 6.3
-2.38 (1.25) [-2.51]
95%CI: -4.8; 0.8
41 patients (80.4%)
Agalsidase beta (N = 25)
n
25
24
24
25
74.16 (4.19) [74.85]
72.05 (4.69) [74.48]
-1.97 (1.51) [-3.20]
-8.25 (4.27) [-7.84]
Range: -20.3 ; -2.8
-2.31 (0.71) [-2.16]
95%CI: -4.6; -0.5
20 patients (80.0%)
0.441 (0.084)
0.480 (0.118)
0.284 (0.097)
0.489 (0.162)
25
25
25
24
51
52
52
45
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Plasma lyso-Gb3 (nM)
LVMI (g/m2)
MSSI (overall score)a
BPI (score for pain at its
worst)b
Change from Baseline
Baseline
Month 24
Change from Baseline
Baseline
Month 24
Change from Baseline
Baseline
Month 24
Change from Baseline
Baseline
Month 24
Change from Baseline
45
52
46
46
40
35
28
49
46
44
52
45
45
0.088 (0.067)
26.22 (3.78) [15.20]
29.22 (4.48) [18.80]
3.30 (1.38) [1.15]
75.97 (5.13)
71.56 (5.20)
-0.64 (2.69)
23.18 (1.42)
22.11 (1.80)
-2.07 (0.77)
3.5 (0.4)
3.3 (0.5)
-0.1 (0.5)
24
25
22
22
22
20
19
25
23
23
25
22
22
0.197 (0.085)
32.14 (7.08) [17.60]
19.65 (3.60) [15.30]
-8.74 (4.85) [-1.50]
82.22 (6.34)
82.43 (8.39)
0.29 (3.73)
25.16 (2.14)
27.09 (2.30)
2.04 (1.10)
2.6 (0.6)
3.0 (0.7)
0.6 (0.6)
BPI=brief pain inventory; eGFR=estimated glomerular filtration rate; lyso-Gb3=globotriaosylsphingosine; LVMI=Left Ventricular Mass Index;
MSSI=Mainz Severity Score Index; UPCR=Urine Protein Creatinine Ratio.
a Wanner 2018; bHigher scores indicate higher symptom severity.
Forty-seven (90.4%) patients in the PRX-102 arm experienced at least one treatment-emergent adverse event (TEAE)
compared to 24 (96.0%) in the agalsidase beta arm. The number of events adjusted to 100 years of exposure is 572.36
events for the PRX-102 arm and 816.85 events for the agalsidase beta arm.
Treatment-related adverse events were reported for 21 (40.4%) patients in the PRX-102 arm compared to 11 (44.0%) in the
agalsidase beta arm. The number of treatment-related events adjusted to 100 years of exposure is 42.85 events for the PRX-
102 arm and 152.91 events for the agalsidase beta arm.
Usage of infusion pre-medication was tapered down during the study, if possible, for all patients. At baseline, 21 (40.4%)
patients in the PRX-102 arm used infusion premedication compared to 16 (64.0%) in the agalsidase beta arm. At the end of
the study, only three out of 47 (6.4%) patients in the PRX-102 arm used infusion premedication compared to three out of
24 (12.5%) in the agalsidase beta arm. Even with this reduction in use of premedication, there were fewer reported
infusion-related reactions with PRX-102: 11 (21.2%) patients in the PRX-102 arm experienced a total of 13 events
compared to six (24.0%) patients experiencing a total of 51 events in the agalsidase beta arm. The number of infusion-
related reactions adjusted to 100 infusions is 0.5 for the PRX-102 arm and 3.9 for agalsidase beta arm.
Assessment of immunogenicity, that is, the existence and development of anti PRX-102 antibodies or anti-agalsidase beta
antibodies, in the study indicated that for the PRX-102 arm, 18 (34.6%) patients were ADA positive at baseline, of which
17 (94.4%) had neutralizing antibody activity. For the agalsidase beta arm, eight (32.0%) patients were ADA positive at
baseline, of which seven (87.5%) had neutralizing antibody activity. Only a small number of patients showed treatment-
emergent ADA. At the end of the two-year study, 11 (23.4%) patients that received PRX-102 were ADA positive, of which
seven (63.6%) had neutralizing antibody activity, while in the agalsidase beta arm six (26.1%) were ADA-positive and all
six (100%) had neutralizing antibody activity. There was little change in the percentage of patients who were ADA
positive, with a trend of reduction observed in the PRX-102 arm and stability in the agalsidase beta arm. The proportion of
patients with neutralizing ADA decreased in the PRX-102 arm while it remained stable in the agalsidase beta arm.
Out of the 78 randomized patients, six patients discontinued the study: out of the five (9.4%) from the PRX-102 arm, one
patient withdrew consent prior to the first infusion, two discontinued due to personal reasons, and two due to adverse
events (one due to an unrelated adverse event and one due to a treatment related adverse event); one (4%) patient from the
agalsidase beta arm discontinued for personal reasons. There were no deaths in this study.
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Considering that in the trial, patients in the PRX-102 arm were exposed for the first time to the novel enzyme, tolerability
data appear favorable for PRX-102 and in line with what was observed in the previous clinical studies of PRX-102.
Of the patients that completed the trial from both the PRX-102 and agalsidase beta treatment arms, 69 have opted, with the
advice of the treating physician, to receive PRX-102 1 mg/kg every two weeks in the long-term open-label extension study
(PB-102-F60, NCT03566017).
The results of the direct, blinded comparison of PRX-102 to agalsidase beta, for the primary efficacy renal endpoints (i.e.,
eGFR change, eGFR slope) and for the main secondary endpoints (e.g., urine protein to creatinine ratio [UPCR] LVMI,
MSSI, BPI) strongly suggest comparability in treatment effects between the two treatments.
At the same time a potentially favorable safety profile was identified based on lower rates of IRR, lower ADA positivity,
and less premedication use in the PRX-102 arm compared to agalsidase beta. Overall, a positive benefit-risk balance was
confirmed.
Phase III BRIDGE Study
The BRIDGE study was a 12-month open-label, single arm switch-over study evaluating the safety and efficacy of
pegunigalsidase alfa, 1 mg/kg infused every two weeks, in up to 22 Fabry patients previously treated with agalsidase alfa
for at least two years and on a stable dose for at least six months. The trial was completed in December 2019. Patients were
screened and evaluated over three months while continuing agalsidase alfa treatment.
Final results of the data generated in the BRIDGE study showed substantial improvement in renal function as measured by
mean annualized eGFR slope in both male and female patients. Twenty of 22 patients completed the 12-month treatment
duration. Eighteen of the patients who completed the study opted to roll over to a long-term extension study and continue
to be treated with PRX-102. In the study, the mean annualized eGFR slope of the study participants improved from
-5.90 mL/min/1.73m2/year while on agalsidase alfa to -1.19 mL/min/1.73m2/year on PRX-102 in all patients. Male patients
improved from -6.36 mL/min/1.73m2/year to -1.73mL/min/1.73m2/year and female patients improved from
-5.03 mL/min/1.73m2/year to -0.21 mL/min/1.73m2/year. Following the switch to PRX-102, there was a decrease in
patients with progressing or fast progressing kidney disease which is consistent with the therapeutic goals for Fabry
disease, as identified by Christoph Wanner, et. al., in 2019, and most patients achieved a stable status post-switch.
PRX-102 was well-tolerated in the BRIDGE study, with all adverse events being transient in nature without sequelae. Of
the 22 patients enrolled in the BRIDGE study, the majority of TEAEs were mild or moderate in severity, with two patients
(9.1%) withdrawing from the therapy due to hypersensitivity reaction that was resolved. The most common moderate
TEAEs were nasopharyngitis, headache and dyspnea.
An immunogenicity assessment indicated that four out of 20 patients (20%) developed persistent ADAs over the course of
the study, of which two had neutralizing activity.
Baseline characteristics of the 20 patients that completed the study, ranging from ages 28 to 60 years, were as follows:
mean eGFR 75.87 mL/min/1.73m2 in males, and 86.14 mL/min/1.73m2 in females and plasma lyso-Gb3 were 51.81 nM
and 13.81 nM in males and females, respectively. While lyso-Gb3 levels remain slightly high, particularly within the male
cohort, continuous reduction in lyso-Gb3 levels was observed of 19.55 nM (32.35%) in males and 4.57 nM (29.81%) in
females.
Of the patients that completed the trial, 18 have opted, with the advice of the treating physician, to continue receiving
PRX-102 1 mg/kg every two weeks in a long-term open-label extension study (PB-102-F60, NCT03566017).
Phase III BRIGHT Study
The BRIGHT study was a multicenter, multinational open-label, switch-over study designed to evaluate the safety, efficacy
and pharmacokinetics of treatment with 2 mg/kg of PRX-102 administered every four weeks for 52 weeks (a total of 14
infusions). The trial, which was completed in June 2020, enrolled 30 adult patients (24 males and 6 females) with mean
(SD) age of 40.5 (11.3) years, ranging from 19 to 58 years previously treated with a commercially available
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ERT (agalsidase beta or agalsidase alfa), for at least three years and on a stable dose administered every two weeks. To
determine eligibility for participation in the study, candidates were screened to identify and select Fabry patients with
clinically stable kidney disease. The most common Fabry disease symptoms at baseline were acroparesthesia, heat
intolerance, angiokeratomas and hypohydrosis. Patients who matched the criteria were enrolled in the study and switched
from their current treatment of IV infusions every two weeks to 2 mg/kg of PRX-102 every four weeks for 12 months.
Patients participating in the study were evaluated, among other disease parameters, to determine if their kidney disease had
not further deteriorated while being treated with the four-week dosing regimen as measured by eGFR and for lyso-Gb3
levels as a Fabry biomarker, as well as other parameters. In addition, participating patients were evaluated to assess the
safety and tolerability of PRX-102.
We announced final results from the BRIGHT study in March 2022. The results indicate that 2 mg/kg of PRX-102
administered by intravenous infusion every four weeks was well tolerated, and Fabry disease assessed by eGFR slope and
plasma lyso-Gb3 was stable throughout PRX-102 treatment in adult Fabry patients. None of the patients without ADAs at
screening developed treatment-induced ADAs following the switch to PRX-102 treatment.
All 30 patients received at least one dose of PRX-102, and 29 patients completed the one-year study. Of these 29 patients,
28 received the intended regimen of 2 mg/kg every four weeks throughout the entire study, while one patient was switched
to 1 mg/kg PRX-102 every two weeks per protocol at the 11th infusion. One patient withdrew from the study after the first
infusion due to a traffic accident.
First infusions of PRX-102 were administered under controlled conditions at the investigation site. Based on the protocol-
specified criteria, patients were able to receive their PRX-102 infusions at a home care setup once the applicable
Investigator and Sponsor Medical Monitor agreed that it was safe to do so. Safety and efficacy exploratory endpoints were
assessed throughout the 52-week study.
Overall, 33 of 183 total TEAEs reported in nine (30.0%) of the patients were considered treatment related; all were mild or
moderate in severity and the majority were resolved at the end of the study. There were no serious or severe treatment-
related TEAEs and no TEAEs led to death or study withdrawal. Of the treatment-related TEAEs, 27 were infusion-related
reactions (IRRs) and the remainder were single events of diarrhea, erythema, fatigue, influenza-like illness, increases urine
protein/creatinine ratio, and urine positive for white blood cells. The 27 IRRs were reported in five (16.7%) patients, all
male. All IRRs occurred during the infusion or within two hours post-infusion; no events were recorded between two and
24 hours post-infusion.
Study outcome measures show that plasma lyso-Gb3 concentrations remained stable during the study with a mean change
(±SE) of 3.01 nM (0.94) from baseline (19.36 nM ±3.35) to Week 52 (22.23 ±3.60 nM). Mean absolute eGFR values were
stable during the 52-week treatment period, with a mean change from baseline of -1.27 mL/min/1.73m2 (1.39). Mean (SE)
eGFR slope, at the end of the study, for the overall population, was -2.92 (1.05) mL/min/1.73m2/year indicating stability.
The study suggests that Fabry patients who are currently receiving ERT every two weeks may be successfully transitioned
to PRX-102 2 mg/kg every four weeks as an effective and tolerable alternative treatment option. Additional long term data
is being collected as part of the ongoing long term extension study (PB-102-F51, NCT03614234) of the 2 mg/kg PRX-102
every four weeks dose.
Following a survey of participants using the Quality of Life EQ-5D-5L questionnaire, responses indicate that patient
perception of their own health remained high and stable throughout the 52-week study duration, with overall health mean
(SE) scores of 78.3 (3.1) and 82.1 (2.9) at baseline and Week 52, respectively, in a 0 to 100 scale. Using the short-form
Brief Pain Inventory, or, questionnaire, approximately 75% of study participants had an improvement or no change in
average pain severity at Week 52 (compared to baseline). The short-form BPI interference items also remained stable
during the study. Pain-related results indicate that there was no increase and/or relapse in pain. No Fabry clinical events
were reported during the study.
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COVID-19 Impact on PRX-102 Clinical Trials
To date, the COVID-19 pandemic has had a minimal effect on the performance of the PRX-102 phase III clinical trials as
many of the patients were already treated in home care settings. We were able to complete all three studies. In a minimal
amount of cases, patients who completed a trial were not able to be transferred into an extension study due to the pandemic
restrictions, and, accordingly, the main trial was prolonged for the patients to permit the continuation of treatment.
Phase I/II Study
Our phase I/II clinical trial of PRX-102, which we completed in 2015, was a worldwide, multi-center, open-label, dose
ranging study designed to evaluate the safety, tolerability, pharmacokinetics, immunogenicity and efficacy parameters of
PRX-102 in adult patients with Fabry disease. Sixteen adult, naïve Fabry patients (9 male and 7 female) completed the
trial, each in one of three dosing groups, 0.2 mg/kg, 1 mg/kg and 2 mg/kg. Each patient received IV infusions of PRX-102
every two weeks for 12 weeks, with efficacy follow-up after six-month and twelve-month periods. A majority of the
patients who completed the trial opted to continue receiving PRX-102 in an open-label, 60-month extension study under
which all patients were switched to receive 1 mg/kg of the drug, the selected dose for our BALANCE and BRIDGE studies.
The adult symptomatic, ERT-naïve Fabry disease patients enrolled in the phase I/II study were evaluated for Gb3 levels in
kidney biopsies and for plasma Lyso-Gb3 concentration by the quantitative BLISS methodology. Biopsies were available
from 14 patients. The outcome of ≥ 50% reduction in the average number of Gb3 inclusions per kidney PTC from baseline
to Month 6 was demonstrated in 11 of 14 (78.6%) of the patients treated with PRX-102. The overall results demonstrate
that PRX-102 reaches the affected tissue and reduces kidney Gb3 inclusions burden and Lyso-Gb3 in the circulation. A high
correlation was found between the two Fabry disease biomarkers, reduction of kidney Gb3 inclusions and the reduction of
plasma Lyso-Gb3 over six months of treatment.
Data was recorded at 24 months from 11 patients who completed 12 months of the long-term open-label extension trial that
succeeded the phase I/II study. Patients who did not continue in the extension trial included: female patients who became or
planned to become pregnant and therefore were unable to continue in accordance with the study protocol; and patients who
relocated to a location where treatment was not available under the clinical study.
Results show that Lyso-Gb3 levels decreased approximately 90% from baseline. Renal function remained stable with mean
eGFR levels of 108.02 and 107.20 at baseline and 24 months, respectively, with a modest annual eGFR slope of -2.1. An
improvement across all the gastrointestinal symptoms evaluated, including severity and frequency of abdominal pain and
frequency of diarrhea, was noted. Cardiac parameters, including LVM, LVMI and EF, remained stable with no cardiac
fibrosis development detected. In conclusion, an improvement of over 40% in disease severity was shown as measured by
the Mainz Severity Score Index, or MSSI, a score compiling the different elements of the disease severity including
neurological, renal and cardiovascular parameters. In addition, an improvement was noted in each of the individual
parameters of the MSSI.
The majority of adverse events were mild-to-moderate in severity, and transient in nature. During the first 12 months of
treatment, only three of 16 patients (less than 19%) formed ADAs of which two of these patients (less than 13%) had
neutralizing antibodies. Importantly, however, the ADAs turned negative for all three of these patients following 12 months
of treatment. The ADA positivity effect had no observed impact on the safety, efficacy or continuous biomarker reduction
of PRX-102.
PRX-115
PRX-115 is our plant cell-expressed recombinant PEGylated uricase (urate oxidase) – a chemically modified enzyme under
development for the potential treatment of severe gout. Gout is the most common inflammatory arthritis in the United
States, affecting an estimated 9.2 million
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adults. Gout is caused by factors that elevate serum uric acid, or sUA, levels, which may include diet or genetic
predisposition and environmental factors leading to hyperuricemia and tissue deposition of monosodium urate crystals,
tophi, in joints and soft tissues, causing acute and chronic inflammation, and is characterized by recurrent flares. Gout
flares lead to substantial morbidity by causing severe pain, reduced quality of life, decreased physical function, increased
healthcare costs, and lost economic productivity. Furthermore, gout is strongly associated with metabolic syndrome, and
may contribute to myocardial infarction, type 2 diabetes mellitus, chronic kidney disease, or CKD, and premature
mortality.
Severe gout is generally described as a state of gout in which there is a presence of monosodium urate crystals with any of
the following: frequent recurrent gout flares, chronic gouty arthritis, subcutaneous tophi or disease elements of gout seen
via imaging. It is estimated that approximately 2% of the gout patient population is considered to have chronic refractory
disease, and we believe the incidence of severe gout is higher.
Currently available urate-lowering therapies, or ULTs, can be effective in treating gout. However, we believe that new
effective, safe therapies are needed to treat severe gout and chronic refractory gout regardless of treatment history. One
treatment option may be a therapeutic use of the uricase enzyme which converts uric acid to allantoin, which is easily
eliminated through urine. The uricase enzyme does not exist naturally in humans. To date, two variants of recombinant
uricases are approved for marketing: (i) Krystexxa® (pegloticase) for treatment of chronic gout refractory to conventional
therapy (gout patients that have contraindication/failure of other lowering uric acid treatments) and (ii) Elitek®, indicated
for the treatment of tumor lysis syndrome but not gout. Both have a black box warning for anaphylaxis and other major
side-effects. In particular, 89% of patients treated with Krystexxa developed an immunogenic response associated with a
failure to maintain normalization of serum uric acid levels over a 6-month therapy cycle. In addition, a recent phase IV
study demonstrates that co-treatment with Krystexxa and methotrexate prolongs efficacy and increases tolerability in
patients with uncontrolled gout. Krystexxa is no longer marketed in the European Union. The European Commission
withdrew the marketing authorization for Krystexxa in 2016 at the request of the marketing authorization holder which
notified the European Commission of its decision not to market the product in the European Union for commercial reasons.
We use ProCellEx to express an optimized recombinant uricase enzyme under development for the potential treatment of
severe gout which we are designing to lower uric acid levels while having low immunogenicity and increased half-life in
the circulation. Pre-clinical data demonstrates stable PK profile and long half-life, low immunogenic risk and high specific
activity which supports the potential of PRX-115 to be a safe and effective treatment for severe gout. Preliminary results of
the first stage of one-month multiple dosing toxicity studies of PRX-115 in two species show no indication of safety
concerns and our current development plan goal is to initiate a phase I clinical trial during the first quarter of 2023.
PRX-119
PRX-119 is our plant cell-expressed PEGylated recombinant human DNase I product candidate being designed to elongate
half-life in the circulation for NETs-related diseases. NETs, Neutrophil extracellular traps, are web-like structures, released
by activated neutrophils that trap and kill a variety of microorganisms. NETs are composed of DNA, histones,
antimicrobial and pro-inflammatory proteins. Excessive formation or ineffective clearance of NETs can cause different
pathological effects. NETs formation has been observed in various autoimmune, inflammatory and fibrotic conditions,
diverse forms of thrombosis, cancer and metastasis. According to scientific literature, animal studies have demonstrated
that DNase treatment reduces NETs toxicity. Our proprietary modified DNase I design for long and customized
systemically circulating in the bloodstream, may potentially enable effective treatment of acute and chronic conditions.
Intellectual Property
We have a robust patent portfolio, which is a key element of our overall strategy. We work to continually enhance,
strengthen, and protect our intellectual property and now hold a broad portfolio of more than 80 patents globally, including
in Europe, the United States, Israel and additional countries worldwide. Our patents are designed to protect our proprietary
technology, proprietary products and product candidates, and their methods of use. Additionally, we have more than 30
pending patent applications.
During 2022, we received a patent in Brazil for the patent family named “Stabilized Alpha-galactosidase and uses thereof,”
adding to the 15 previously granted patents in such family. In addition, we received a patent in each of the United States,
Australia and Mexico for the patent family named “Modified DNase and uses thereof.” Finally, we
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received a patent in South Africa for the patent family named “Therapeutic Regimen for the Treatment of Fabry Using
Stabilized Alpha-Galactosidase.”
Our competitive position and future success depend, in part, on our ability, and that of our licensees, to obtain and leverage
the intellectual property rights covering our product candidates, know-how, methods, processes and other technologies, to
protect our trade secrets, to prevent others from using our intellectual property and to operate without infringing on the
intellectual property rights of third parties. We seek to protect our competitive position by filing United States, European
Union, Israeli and other foreign patent applications covering our technology, including both new technology and
improvements to existing technology. Our patent strategy includes obtaining patents on methods of production,
compositions of matter and methods of use. We also rely on know-how, continuing technological innovation, licensing and
partnership opportunities to develop and maintain our competitive position.
Our outstanding 7.50% Senior Secured Convertible Notes due 2024, or the 2024 Notes, are guaranteed by our subsidiaries
and secured by perfected liens on all of our material assets, primarily consisting of our intellectual property assets,
including a stock pledge of our foreign subsidiaries in favor of the holders of outstanding 2024 Notes.
As of December 31, 2022, our patent portfolio consisted of several patent families (consisting of patents and/or patent
applications) covering our technology, protein expression methodologies and system and product candidates, as follows:
Patent Name/Int. App. No.
Production of High Mannose
Proteins in Plant Culture/PCT/
Il2004 000181
Global Pending
Jurisdictions
N/A
Cell/Tissue Culturing Device,
System and Method/PCT/Il2005/
000228
Large Scale Disposable
Bioreactor/PCT/Il2008/000614
N/A
N/A
Stabilized Alpha-galactosidase and
uses thereof/PCT/Il2011/ 000209
Brazil
Nominal
Expiry
2024(1)
Granted Jurisdictions
Japan, Israel, Canada, Russian
Federation, Mexico, India,
Australia, South Africa, Republic of
Korea, Singapore, Europe, Hong
Kong, Ukraine, China, USA, Brazil
Israel
2025
2028(2)
2031
Australia, Canada, China, Europe,
Hong Kong, India, Israel, Republic
of Korea, Russian Federation,
Singapore, South Africa, USA,
Brazil
Canada, South Africa, Russian
Federation, Singapore, Israel, India,
New Zealand,
Republic of Korea, Australia,
China, Japan, USA, Europe,
Hong Kong, India, Brazil
Nucleic Acid Construct for
Expression of Alpha-galactosidase
in Plants and Plant Cells/PCT/
Il2011/000719
Therapeutic Regimen For The
Treatment of Fabry Using
Stabilized Alpha-galactosidase/
PCT/Il2018/050018
Brazil
India, China, Republic of Korea,
Japan, Israel, Europe, Hong Kong,
USA
2024(2)
South Africa
2038
USA, Europe, Brazil, Japan,
Canada, Australia, Chile,
Israel, Republic of Korea,
China, New Zealand, Russian
Federation, Mexico, Hong
Kong
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Dry Powder Formulations of
DNase 1/PCT/Il2013/050094
DNase I Polypeptides,
Polynucleotides Encoding Same,
Methods of Producing DNase I
and uses thereof in Therapy/PCT/
Il2013/050097
Inhalable Liquid Formulations of
DNase I/PCT/Il2013/050096
Modified DNase and uses thereof/
PCT/Il2016/050003
Use of Plant Cells Expressing a
TNF Alpha Polypeptide Inhibitor
in Therapy/PCT/IL2014/050231
Removal of Constructs from
Transformed Cells/PCT/IL2019/
051266
Long-Acting
DNase/PCT/IL2021/051207
Dicer-Like Knock-Out Plant Cells/
PCT/IL2021/051194
Modified Uricase and Uses
Thereof/PCT/IL2021/051305
N/A
Brazil
Israel, USA
Europe, Israel
2033
2033
N/A
Israel, USA
2033
Europe, Canada, China, New
Zealand, Israel,
Hong Kong, South Africa
USA, Australia, Mexico
2036
N/A
Israel
2034
USA, Israel, Japan, New
Zealand, Australia
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(1) Patent granted in Australia expires in 2029.
(2) Patent granted in the United States expires in 2032.
We are aware of U.S. patents, and corresponding international counterparts of such patents, owned by third parties that
contain claims covering methods of producing glucocerebrosidase. We do not believe that, if any claim of infringement
were to be asserted against us based upon such patents, taliglucerase alfa would be found to infringe any valid claim under
such patents. However, there can be no assurance that a court would find in our favor or that, if we choose or are required
to seek a license to any one or more of such patents, a license would be available to us on acceptable terms or at all.
In April 2005, Protalix Ltd. entered into a license agreement with Icon Genetics AG, or Icon, pursuant to which we
received an exclusive worldwide license to develop, test, use and commercialize Icon’s technology to express certain
proteins in our ProCellEx protein expression system. We are also entitled to a non-exclusive worldwide license to make
and have made other proteins expressed by using Icon’s technology. As consideration for the license, we are obligated to
make royalty payments equal to varying low, single-digit percentages of net sales of products by us, our affiliates, or any
sublicensees under the agreement. In addition, we are obligated to make milestone payments equal to $350,000, in the
aggregate, for each product developed under the license, upon the achievement of certain milestones.
Our license agreement with Icon remains in effect until the earlier of the expiration of the last patent under the agreement
or, if all of the patents under the agreement expire, 20 years after the first commercial sale of any product under the
agreement. Icon may terminate the agreement upon written notice to us that we are in material breach of our obligations
under the agreement and we are unable to remedy such material breach within 30 days after we receive such notice.
Further, Icon may terminate the agreement in connection with certain events relating to a wind up or bankruptcy,
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if we make a general assignment for the benefit of our creditors, or if we cease to conduct operations for a certain period.
Icon may also terminate the exclusivity granted to us by written notice if we fail to reach certain milestones within a
designated period of time. Notwithstanding the termination date of the agreement, our obligation to pay royalties to Icon
under the agreement may expire prior to the termination of the agreement, subject to certain conditions.
Competition
The biotechnology and pharmaceutical industries are characterized by rapidly evolving technology and significant
competition. Competition from numerous existing companies and others entering the fields in which we operate is intense
and expected to increase. Most of these companies have substantially greater research and development, manufacturing,
marketing, financial, technological personnel and managerial resources than we do. In addition, many specialized
biotechnology companies have formed collaborations with large, established companies to support research, development
and commercialization of products that may be competitive with our current and future product candidates and
technologies. Acquisitions of competing companies by large pharmaceutical or biotechnology companies could further
enhance such competitors’ financial, marketing and other resources. Academic institutions, governmental agencies and
other public and private research organizations are also conducting research activities and seeking patent protection and
may commercialize competitive products or technologies on their own through collaborations with pharmaceutical and
biotechnology companies.
With respect to Gaucher disease, we face competition from two ERTs, Sanofi Genzyme’s Cerezyme and Takeda’s (Shire)
Vpriv. In addition, Actelion markets a small molecule drug for the treatment of mild to moderate Type 1 Gaucher disease
(Zavesca or miglustat), an oral treatment approved by the FDA only for patients for whom ERT is not a therapeutic option.
In addition, Sanofi Genzyme markets a small molecule oral drug, Cerdelga®, approved for Gaucher patients with certain
CYP2D6 metabolizer status.
With respect to Fabry disease, we face competition from Sanofi Genzyme (Fabrazyme), Takeda (Replagal) and Amicus
(Galafold®). In addition, we are aware of other late clinical stage, early clinical stage and experimental drugs that are being
developed by other companies for the treatment of Fabry disease. For example, eleva GmbH (formerly, Greenovation
Biotech GmbH) is developing an ERT for Fabry disease which has completed a phase I clinical trial.
With respect to severe gout, we face competition from Horizon Therapeutics Public Limited Company (Krsytexxa), which
is indicated for treatment of chronic gout in adult patients refractory to conventional therapy. In addition, we are aware of
other clinical stage, early clinical stage and experimental refractory or chronic gout treatments. For example, we are aware
of a product candidate that is the subject of a phase III clinical trial for chronic refractory gout and another product
candidate that is the subject of a phase II clinical trial for hyperuricemia in gout patients with advanced CKD.
We also face potential competition to our ProCellEx system from companies that are developing other platforms for the
expression of recombinant therapeutic pharmaceuticals. We are aware of companies that are developing alternative
technologies to develop and produce therapeutic proteins in anticipation of the expiration of certain patent claims covering
marketed proteins. A number of companies have developed or are developing alternative expression technologies.
Examples include Crucell N.V.’s (acquired by Johnson & Johnson) expression system based on human-cell technology,
Dyadic International Inc.’s expression system based on a fungus, Pfenex Inc.’s (acquired by Ligand Pharmaceuticals
Incorporated) bacteria-based expression system, and others. Companies developing alternate plant-based technologies
include iBio, Inc., Medicago, Inc., and eleva. Unlike ProCellEx, these alternate technologies are not cell-based. These
companies base their product development on transgenic plants or whole plants.
Agreements and Partnerships
Elelyso – Pfizer
We have licensed to Pfizer the global rights to Elelyso in all markets, excluding Brazil, pursuant to an Amended and
Restated Exclusive License and Supply Agreement, or the Amended Pfizer Agreement, which we entered into with Pfizer
in October 2015 to amend and restate our initial Exclusive License and Supply Agreement with Pfizer, or the Pfizer
Agreement. Pursuant to the Amended Pfizer Agreement, Pfizer retains 100% of revenue and reimburses 100% of direct
costs. For the first 10-year period after the execution of the Amended Pfizer Agreement, we have agreed to sell
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drug substance to Pfizer for the production of Elelyso, subject to certain terms and conditions, and Pfizer maintains the
right to extend the supply period for up to two additional 30-month periods, subject to certain terms and conditions. In a
subsequent amendment, we agreed that after the completion of the first 10-year supply period, the supply term would
automatically extend for a five-year period. Any failure to comply with our supply commitments may subject us to
substantial financial penalties. The Amended Pfizer Agreement includes customary provisions regarding cooperation for
regulatory matters, patent enforcement, termination, indemnification and insurance requirements. We retain distribution
rights to taliglucerase alfa in Brazil.
Elelyso – Fundação Oswaldo Cruz (Fiocruz)
Elelyso, marketed as BioManguinhos alfataliglicerase in Brazil, is commercialized in Brazil through the Brazil Agreement
with Fiocruz, which became effective in January 2014. Gaucher patients in Brazil are entitled to receive ERT paid for by
the Brazilian MoH. The Brazilian MoH clinical treatment guidelines state that BioManguinhos alfataliglicerase is the
therapy of choice for newly diagnosed patients. BioManguinhos alfataliglicerase is currently estimated to be used by
approximately 25% of Gaucher patients in Brazil.
The Brazil Agreement provides for a staged technology transfer which is intended to transfer to Fiocruz the capacity and
skills required for the Brazilian government to construct its own manufacturing facility, at its sole expense, and to produce
a sustainable, high-quality, and cost-effective supply of BioManguinhos alfataliglicerase. Fiocruz has not satisfied certain
purchase commitments under the Brazil Agreement. Accordingly, we and Fiocruz discuss on a continuous basis, potential
steps to maximize sales of BioManguinhos alfataliglicerase sales to the Brazilian MoH.
PRX-102 – Chiesi Farmaceutici
We have entered into two exclusive global licensing and supply agreements for PRX-102 for the treatment of Fabry disease
with Chiesi. The agreements have significant revenue potential for Protalix. Under the agreements, Protalix Ltd. has
received $50.0 million in upfront payments and development cost reimbursements of $45 million, and is entitled to more
than $1.0 billion in potential milestone payments and tiered royalties of 15% - 35% (ex-US) and 15% - 40% (US).
On October 19, 2017, Protalix Ltd. and Chiesi entered into the Chiesi Ex-US Agreement pursuant to which Chiesi was
granted an exclusive license for all markets outside of the United States to commercialize PRX-102. Under the Chiesi Ex-
US Agreement, Chiesi made an upfront payment to Protalix Ltd. of $25.0 million in connection with the execution of the
agreement, and Protalix Ltd. was entitled to additional payments of up to $25.0 million in development costs in the
aggregate, capped at $10.0 million per year. Protalix Ltd. is also eligible to receive additional payments of up to a
maximum of $320.0 million in regulatory and commercial milestone payments. Protalix Ltd. agreed to manufacture all of
the PRX-102 needed for all purposes under the agreement, subject to certain exceptions, and Chiesi will purchase PRX-102
from Protalix Ltd., subject to certain terms and conditions. Chiesi is required to make tiered payments of 15% to 35% of its
net sales, depending on the amount of annual sales, as consideration for the supply of PRX-102.
On July 23, 2018, Protalix Ltd. entered into the Chiesi US Agreement with respect to the development and
commercialization of PRX-102 in the United States. Protalix Ltd. received an upfront, non-refundable, non-creditable
payment of $25.0 million from Chiesi and was entitled to additional payments of up to a maximum of $20.0 million to
cover development costs for PRX-102, capped at $7.5 million per year. Protalix Ltd. is also eligible to receive additional
payments of up to a maximum of $760.0 million, in the aggregate, in regulatory and commercial milestone payments.
Chiesi agreed to make tiered payments of 15% to 40% of its net sales under the Chiesi US Agreement to Protalix Ltd.,
depending on the amount of annual sales, subject to certain terms and conditions, as consideration for product supply.
On May 13, 2021, we signed a binding term sheet with Chiesi amending the Chiesi Agreements in order to provide our
company with near-term capital. Chiesi agreed to make a $10.0 million payment to us before the end of the second quarter
of 2021 in exchange for a $25.0 million reduction in a longer term regulatory milestone payment provided in the Chiesi
EX-US Agreement. All other regulatory and commercial milestone payments remain unchanged. We received the payment
in June 2021. We also agreed to negotiate certain manufacturing related matters.
On August 29, 2022, we entered into the F/F Agreement and the Letter Agreement. Under the F/F Agreement, we agreed to
supply Chiesi with drug substance for PRX-102 and, following relevant technology and technical information transfer
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activities, Chiesi has agreed, among other things, to provide us with commercial fill/finish services for PRX-102, including
to support the anticipated global launch of PRX-102. The F/F Agreement will expite December 31, 2025, unless terminated
earlier in accordance with its terms and may be extended by mutual agreement in writing for an additional period of seven
years. The Letter Agreement changed the obligations of both us and Chiesi under the License Agreements with respect to,
among other things, the evaluation, selection and establishment of an initial alternate source of commercial fill/finish
services for PRX-102. In addition, the Letter Agreement amended certain provisions of the License Agreements to reflect
the appointment of Chiesi as a supplier to our company of commercial fill/finish services and the potential establishment of
an initial alternate source of commercial fill/finish services.
Manufacturing
We use our current manufacturing facility in Carmiel, Israel, which has approximately 14,700 sq/ft of clean rooms built
according to industry standards, to manufacture drug substance for Elelyso, pegunigalsidase alfa and other recombinant
proteins for commercial use and phase III clinical trials. We maintain an approximately 3,400 sq/ft pilot plant for protein
development and to manufacture supplies for clinical trials (phase I and phase II). Elelyso, pegunigalsidase alfa and our
other drug product candidates must be manufactured in a sterile environment and in compliance with cGMPs set by the
FDA and other relevant foreign regulatory authorities. We are currently producing PRX-102 drug substance for our
phase III and other clinical trials, as well as the manufacturing of the Elelyso we need in the near future, including the
Elelyso to be purchased by Pfizer under the Amended Pfizer Agreement. In addition, we intend to use our manufacturing
space to produce all of the drug substance needed in connection with the clinical trials for our other product candidates.
In 2017, the FDA approved the supplemental New Drug Application, sNDA, we submitted to allow us to convert our
manufacturing facility from a single dedicated product facility to a multi-product facility. This conversion allows us to
realize potentially significant operational savings. Our facility’s current capacity can serve all of our current and expected
commercial and clinical needs, and we believe it will be sufficient to serve our production needs for the anticipated
commercialization of PRX-102.
Our manufacturing facilities are subject to inspections by various regulatory authorities from time to time. We have
undergone successful inspections by the FDA, the Irish Medicines Board (under the EMA’s centralized marketing
authorization procedure), the Brazilian National Health Surveillance Agency (ANVISA), the Israeli Ministry of Health, the
Turkish Ministry of Health, the Australian Therapeutic Goods Administration (TGA) and Health Canada.
Our current facility in Israel was granted “Approved Enterprise” status, and we have elected to participate in the alternative
benefits program. Our facility is located in a top priority location, or “Zone A,” location, and, therefore, our income from
the Approved Enterprise will be tax exempt in Israel for a 10-year period, commencing with the year in which we first
generate taxable income from the relevant Approved Enterprise and after we use our net operating loss carryforwards, or
NOLs. We expect to be entitled to similar tax benefits for a number of years thereafter. To remain eligible for these tax
benefits, we must continue to meet certain conditions, and if we increase our activities outside of Israel, for example, by
future acquisitions, such increased activities generally may not be eligible for inclusion in Israeli tax benefit programs. In
addition, our technology is subject to certain restrictions with respect to the transfer of technology and manufacturing
rights.
Raw Materials and Suppliers
We believe that the raw materials that we require throughout the manufacturing process of Elelyso and our other current
and potential drug product candidates are widely available from numerous suppliers and are generally considered to be
generic industrial biological supplies. We rely on a single, approved supplier for certain materials relating to the current
expression of our proprietary biotherapeutic proteins through ProCellEx. We have identified additional suppliers for most
of the materials required for the production of our product candidates.
Development and regulatory approval of our pharmaceutical products are dependent upon our ability to procure active
ingredients and certain packaging materials from sources approved by the FDA and other regulatory authorities. The FDA
and other regulatory approval processes require manufacturers to specify their proposed suppliers of active ingredients and
certain packaging materials in their applications. From time to time, we intend to continue to identify alternative approved
suppliers to ensure the uninterrupted supply of necessary raw materials.
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Government Regulations
U.S. Drug Development Process
The FDA regulates drugs under the FFDCA and its implementing regulations. Drugs are also subject to other federal, state
and local statutes and regulations. Biologics are subject to regulation by the FDA under the FDCA, the Public Health
Service Act, and related regulations and other federal, state and local laws and regulations. Biological products include a
wide variety of products including vaccines, blood and blood components, gene therapies, tissue and proteins. Unlike most
prescription products made through chemical processes, biological products generally are made from human and/or animal
materials. To be lawfully marketed in interstate commerce, a biologic product must be the subject of a BLA issued by the
FDA on the basis of a demonstration that the product is safe, pure and potent, and that the facility in which the product is
manufactured meets standards to assure that the product continues to be safe, pure and potent. The FDA has developed, and
is continuously updating, the requirements with respect to cell and gene therapy products and has issued documents
concerning the regulation of cellular and tissue-based products. Manufacturers of cell and tissue-based products must
comply with the FDA’s current good tissue practices, or cGTP, which are FDA regulations that govern the methods used in,
and the facilities and controls used for, the manufacture of such products. The primary intent of the cGTP requirements is
to ensure that cell and tissue-based products are manufactured in a manner designed to prevent the introduction,
transmission and spread of communicable disease.
The process of obtaining regulatory approvals and ensuring compliance with appropriate federal, state and local statutes
and regulations in the United States, 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 administrative or judicial sanctions. These
sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,
warning letters, product recalls, product seizures, product detention, total or partial suspension of production or
distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.
The process required by the FDA before a biological product or drug may be marketed in the United States generally
involves the following:
● Completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory
Practices or other regulations;
● Submission to the FDA of an investigational new drug application, or IND, which must become effective before
human clinical trials may begin;
● Performance of adequate and well-controlled clinical trials according to Good Clinical Practices, or GCP, to
establish the safety and efficacy of the proposed biological product or drug for its intended use;
● Submission to the FDA of a BLA for a new biological product or a new drug application, or NDA, for a new
drug;
● Satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is
produced to assess compliance with cGMP to assure that the facilities, methods and controls are adequate to
preserve the drug’s or biologic’s identity, strength, quality and purity; and
● FDA review and approval of the BLA or NDA.
All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP
regulations. These regulations include the requirement that all subjects participating in the clinical trial provide their
informed consent regarding the trial. Further, an institutional review board, or IRB, must review and approve the plan for
any clinical trial before it commences at any institution. An IRB considers, among other things, whether the risks to
individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits. The IRB also
approves the information regarding the clinical trial and the consent form that must be provided to each clinical trial
subject, or his or her legal representative, and must monitor the clinical trial until completed. Once an IND is in
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effect, each new clinical protocol and any amendments to the protocol must be submitted to the FDA for review, and to the
IRBs for approval.
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
● Phase I. The product is initially introduced into healthy human subjects and tested for safety, dosage tolerance,
absorption, metabolism, distribution and excretion. In the case of some products for severe or life-threatening
diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers,
the initial human testing may be conducted in patients having the specific disease.
● Phase II. Phase II clinical trials involve investigations in 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 the optimal dosage and schedule.
● Phase III. Phase III clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an
expanded patient population at geographically dispersed clinical trial sites. These trials are intended to establish
the overall risk/benefit ratio of the product and provide an adequate basis for regulatory approval and product
labeling.
Post-approval studies, also called Phase IV trials, may be conducted after initial marketing approvals. These studies are
used to obtain additional experience from the treatment of patients in the intended therapeutic indication and may be
required by the FDA as part of the approval process.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and safety reports
must be submitted to the FDA and the investigators for serious and unexpected side effects. Phase I, Phase II and Phase III
testing may not be completed successfully within any specified period, if at all. The FDA or the trial sponsor may suspend
or terminate a clinical trial at any time on various grounds, including a finding that the study subjects or patients are being
exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its
institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate
has been associated with unexpected serious harm to patients.
Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional
information about the chemistry and physical characteristics of the product and finalize a process for manufacturing the
product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of
consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop
methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must
be selected and tested and stability studies must be conducted to demonstrate that the applicable product candidate does not
undergo unacceptable deterioration over its shelf life.
The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing
process, analytical tests conducted on the product candidate, proposed labeling and other relevant information, are
submitted to the FDA as part of an NDA or BLA, requesting approval to market the product. The submission of an NDA or
BLA is subject to the payment of substantial user fees which may be waived under certain limited circumstances.
The testing and approval processes require substantial time and effort, and may not result in an approval on a timely basis,
if at all. The FDA may refuse to approve a BLA or NDA if the applicable regulatory criteria are not satisfied or may
require additional clinical data or other data and information. Generally, it takes one to three years to obtain approval. If
questions arise during the FDA review process, approval may take a significantly longer period of time.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the
indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA
may require that certain contraindications, warnings or precautions be included in the product labeling. In addition, the
FDA may require Phase IV testing which involves clinical trials designed to further assess a drug’s or biologic’s safety and
effectiveness after BLA or NDA approval and may require testing and surveillance programs to monitor the safety of
approved products that have been commercialized.
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Orphan Drug Designation
Under the Orphan Drug Act of 1983, the FDA may grant orphan drug designation to drugs and biological products
intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000
individuals in the United States or that affects more than 200,000 persons in the United States but that sales in the United
States are not expected to recover the costs of developing and marketing a treatment drug. Orphan product designation
does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. Among the
benefits of orphan drug designation are possible funding and tax savings to support clinical trials, other financial incentives
and a waiver of the marketing application user fee.
If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which
it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve
any other applications to market the same treatment for the same indication for seven years, except in limited
circumstances, such as (i) the drug’s orphan designation is revoked; (ii) its marketing approval is withdrawn; (iii) the
orphan exclusivity holder consents to the approval of another applicant’s product; (iv) the orphan exclusivity holder is
unable to assure the availability of a sufficient quantity of drug; or (v) a showing of clinical superiority to the product with
orphan exclusivity by a competitor product. Competitors, however, may receive approval of different products for the
indication for which the orphan product has exclusivity or obtain approval for the same product but for a different
indication for which the orphan product has exclusivity. Orphan drug status in the European Union has similar but not
identical benefits in the European Union.
In December 2017, the European Commission granted Orphan Drug Designation to PRX-102 for the treatment of Fabry
disease.
Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of FDA marketing approval of our product candidates, some of our U.S.
patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration
Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent
restoration term of up to five years as compensation for patent term lost during product development and the FDA
regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of
14 years from the product’s approval date. The patent term restoration period is generally one-half the time between (a) the
effective date of an IND and the submission date of a BLA or an NDA plus (b) the time between the submission date of a
BLA or an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the
extension and the extension must be requested prior to expiration of the patent. The U.S. Patent and Trademark Office, or
USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.
We anticipate that we will apply for restorations of the patent term for certain of patents covering our product candidates.
Fast Track Designation
The FDA has a fast track program that is designed to facilitate the development and expedite the review of drugs to treat
serious conditions and fill an unmet medical need, the purpose being to make important new drugs available to patients
earlier. A drug candidate that receives Fast Track designation from the FDA is eligible for some or all of the following:
more frequent meetings with the FDA to discuss the drug’s development plan and ensure collection of appropriate data
needed to support drug approval; more frequent written communication from the FDA about such things as the design of
the proposed clinical trials; eligibility for the FDA’s Accelerated Approval and Priority Review, if relevant criteria are met;
and eligibility for Rolling Review, which allows a drug company to submit completed sections of its BLA or NDA for
review by the FDA, rather than waiting until every section of the BLA or NDA is completed before the entire application
can be reviewed. BLA or NDA review usually does not begin until the drug company has submitted the entire application
to the FDA. We used the Rolling Review option for our taliglucerase alfa NDA, which we completed in April 2010.
In January 2018, the FDA granted Fast Track designation to PRX-102.
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Accelerated Approval
Section 901 of the U.S. Food and Drug Administration Safety Innovations Act amends the FFDCA to allow the FDA to
base Accelerated Approval for drugs for serious conditions that fill an unmet medical need on whether the drug has an
effect on a surrogate or an intermediate clinical endpoint. A surrogate endpoint used for Accelerated Approval is a marker;
that is, a laboratory measurement, radiographic image, physical sign or other measure, that is thought to predict clinical
benefit, but is not itself a measure of clinical benefit. An intermediate clinical endpoint is a measure of a therapeutic effect
that is considered reasonably likely to predict the clinical benefit of a drug, such as an effect on irreversible morbidity and
mortality. The FDA bases its decision on whether to accept the proposed surrogate or intermediate clinical endpoint on the
scientific support for that endpoint. Studies that demonstrate a drug’s effect on a surrogate or intermediate clinical endpoint
must be “adequate and well controlled” as required by the FFDCA.
The Accelerated Approval pathway is most often used in settings in which the course of a disease is long and an extended
period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate or
intermediate clinical endpoint occurs rapidly. Under subpart H of the Accelerated Approval pathway, the FDA may grant
marketing approval for a new drug product on the basis of adequate and well-controlled clinical trials establishing that the
drug product has an effect on a surrogate endpoint that is reasonably likely, based on epidemiologic, therapeutic,
pathophysiologic, or other evidence, to predict clinical benefit or on the basis of an effect on a clinical endpoint other than
survival or irreversible morbidity. The Accelerated Approval pathway is usually contingent on a sponsor’s agreement to
conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s clinical
benefit. As a result, a drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements,
including the completion of Phase IV or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure
to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the
FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved
under accelerated regulations are subject to prior review by the FDA.
Post-Approval Requirements
Any drugs for which we receive FDA approval are subject to continuing regulation by the FDA, including, among other
things, record-keeping requirements, reporting of adverse effects with the product, reporting of changes in distributed
products which would require field alert reports (FARs), drugs and biological product deviation reports (BPDRs) providing
the FDA with updated safety and efficacy information, product sampling and distribution requirements, complying with
certain electronic records and signature requirements and complying with FDA promotion and advertising requirements. In
September 2007, the Food and Drug Administration Amendments Act of 2007 was enacted, giving the FDA enhanced
post-marketing authority, including the authority to require post marketing studies and clinical trials (PMRs and PMCs),
labeling changes based on new safety information, and compliance with risk evaluations and mitigation strategies (REMS),
approved by the FDA. The FDA strictly regulates labeling, advertising, promotion and other types of information on
products that are placed on the market. Drugs and biologics may be promoted only for the approved indications and in
accordance with the provisions of the approved label. Further, manufacturers of drugs and biologics must continue to
comply with cGMP requirements, which are extensive and require considerable time, resources and ongoing investment to
ensure compliance. In addition, changes to the manufacturing process generally require prior FDA approval before being
implemented and 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.
Drug and biologic manufacturers and other entities involved in the manufacturing and distribution of approved drugs and
biologics are required to register their establishments with the FDA and certain state agencies, and are subject to periodic
unannounced inspections by the FDA and certain state agencies for compliance with cGMP, GTP applicable to biologics,
and other laws. The cGMP requirements apply to all stages of the manufacturing process, including the production,
processing, sterilization, packaging, labeling, storage and shipment of the drug. Manufacturers must establish validated
systems to ensure that products meet specifications and regulatory standards, and test each product batch or lot prior to its
release.
The FDA may withdraw a product approval if compliance with regulatory standards is not maintained or if problems occur
after the product reaches the market. Discovery of previously unknown problems with a product subsequent to its approval
may result in restrictions on the product or even complete withdrawal of the product from the market. Further,
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the failure to maintain compliance with regulatory requirements may result in administrative or judicial actions, such as
fines, warning letters, holds on clinical trials, product recalls or seizures, product detention or refusal to permit the import
or export of products, refusal to approve pending applications or supplements, restrictions on marketing or manufacturing,
injunctions or civil or criminal penalties.
From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory
provisions governing the approval, manufacturing and marketing of products regulated by the FDA. In addition to new
legislation, the FDA regulations and policies are often revised or reinterpreted by the agency in ways that may significantly
affect our business and our development efforts. It is impossible to predict whether further legislative or FDA regulation or
policy changes will be enacted or implemented and what the impact of such changes, if any, may be.
Foreign Regulation
We are subject to regulations and product registration requirements in many foreign countries in which we may sell our
products, including in the areas of product standards, packaging requirements, labeling requirements, import and export
restrictions and tariff regulations, duties and tax requirements. The time required to obtain clearance required by foreign
countries may be longer or shorter than that required for FDA clearance, and requirements for licensing a product in a
foreign country may differ significantly from FDA requirements.
Pharmaceutical products may not be imported into, or manufactured or marketed in, the State of Israel absent drug
registration. The three basic criteria for the registration of pharmaceuticals in Israel is quality, safety and efficacy of the
pharmaceutical product and the Israeli Ministry of Health requires pharmaceutical companies to conform to international
developments and standards. Regulatory requirements are constantly changing in accordance with scientific advances as
well as social and ethical values.
The relevant legislation of the European Union requires that medicinal products, including generic versions of previously
approved products, and new strengths, dosage forms and formulations, of previously approved products, shall have a
marketing authorization before they are placed on the market in the European Union. Authorizations are granted after the
assessment of quality, safety and efficacy by the respective health authorities. In order to obtain an authorization, an
application must be made to the competent authority of the member state concerned or in a centralized procedure to the
EMA. Besides various formal requirements, the application must contain the results of pharmaceutical (physico-chemical,
biological or microbiological) tests, of preclinical (toxicological and pharmacological) tests as well as of clinical trials. All
of these tests must have been conducted in accordance with relevant EU regulations and must allow the reviewer to
evaluate the quality, safety and efficacy of the medicinal product. Orphan drug designation in the European Union is
granted to medicinal products intended for the diagnosis, prevention and treatment of life-threatening diseases and very
serious conditions that affect not more than five in 10,000 people in the European Union. Orphan drug designation is
generally given to medicinal products that treat conditions for which no current therapy exists or are expected to bring a
significant benefit to patients over existing therapies.
Third Party Payor Coverage and Reimbursement
Coverage and reimbursement status of any approved therapy carries uncertainty and risk. In both the United States and
foreign markets, our ability to commercialize our product and product candidates successfully, and to attract
commercialization partners, depends in significant part on the availability of adequate financial coverage and
reimbursement from third party payors, including, in the United States, governmental payors such as Medicare, Medicaid
and the Veterans Affairs Health programs, and private health insurers. Medicare is a federally funded program managed by
the Centers for Medicare and Medicaid Services, or CMS, through local fiscal intermediaries and carriers that administer
coverage and reimbursement for certain healthcare items and services furnished to the elderly and disabled. Medicaid is an
insurance program for certain categories of patients whose income and assets fall below state defined levels and who are
otherwise uninsured that is both federally and state funded and managed by each state. The federal government sets general
guidelines for Medicaid and each state creates specific regulations that govern its individual program. Each payor has its
own process and standards for determining whether it will cover and reimburse a procedure or particular product. Private
payors often rely on the lead of the governmental payors in rendering coverage and reimbursement determinations.
Therefore, achieving favorable CMS coverage and reimbursement is usually a significant gating issue for successful
introduction of a new product. The competitive position of some of our products
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will depend, in part, upon the extent of coverage and adequate reimbursement for such products and for the procedures in
which such products are used. Prices at which we or our customers seek reimbursement for our product candidates can be
subject to challenge, reduction or denial by the government and other payors.
Possible legislation at the federal and state levels in the United States focused on cost containment and price transparency
may impact our ability to sell our product and product candidates for maximum profitably. It appears likely that the
pressure on pharmaceutical pricing will continue, especially under the Medicare program, which may also increase our
regulatory burdens and operating costs. Moreover, additional changes could be made to governmental healthcare programs
that could significantly impact the success of our product and product candidates.
Some third party payors also require pre-approval of coverage for new or innovative devices, biologics or drug therapies
before they will reimburse healthcare providers that use such therapies. While we cannot predict whether any proposed
cost-containment measures will be adopted or otherwise implemented in the future, the announcement or adoption of these
proposals could have a material adverse effect on our ability to obtain adequate prices for our product candidates and
operate profitably.
Different pricing and reimbursement schemes exist in other countries. In the European Union, governments influence the
price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems
that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list
systems under which products may only be marketed once a reimbursement price has been agreed. To obtain
reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the
cost-effectiveness of a particular product candidate to currently available therapies. Other member states allow companies
to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care
costs in general, particularly prescription drugs and biologics, has become very intense. As a result, increasingly high
barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-
priced markets exert a commercial pressure on pricing within a country.
Other Healthcare Laws and Compliance Requirements
In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in
addition to the FDA, including the Centers for Medicare and Medicaid Services, other divisions of the U.S. Department of
Health and Human Services (e.g., the Office of Inspector General), the U.S. Department of Justice and individual
U.S. Attorney General offices within the Department of Justice, and state and local governments. These regulations
include:
● the federal healthcare program anti-kickback law, which prohibits, among other things, persons from
soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an
individual, for an item or service or the purchasing or ordering of a good or service, for which payment may
be made under federal healthcare programs such as the Medicare and Medicaid programs;
● federal false claims laws which prohibit, among other things, individuals or entities from knowingly
presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other government
reimbursement programs that are false or fraudulent;
● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibits
executing a scheme to defraud any healthcare benefit program or making false statements relating to
healthcare matters and which also imposes certain requirements relating to the privacy, security and
transmission of individually identifiable health information;
● the federal transparency requirements under the Health Care Reform Law requires manufacturers of drugs,
devices, biologics, and medical supplies to report to the Department of Health and Human Services
information related to physician payments and other transfers of value and physician ownership and
investment interests;
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● the FDCA, which among other things, strictly regulates drug and biologic product marketing, prohibits
manufacturers from marketing drug products for off-label use and regulates the distribution of drug samples;
and
● state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which
may apply to items or services reimbursed by any third-party payor, including commercial insurers, and state
laws governing the privacy and security of health information in certain circumstances, many of which differ
from each other in significant ways and often are not preempted by federal laws, thus complicating
compliance efforts.
Compliance with Environmental, Health and Safety Laws
In addition to FDA regulations, we are also subject to evolving federal, state and local environmental, health and safety
laws and regulations. In the past, compliance with environmental, health and safety laws and regulations has not had a
material effect on our capital expenditures. Compliance with environmental, health and safety laws and regulations in the
future may require additional capital expenditures.
Israeli Government Programs
The following is a brief summary of the current principal Israeli tax laws applicable to us and Protalix Ltd., and of the
Israeli Government programs from which Protalix Ltd. benefits. Some parts of this discussion are based on new tax
legislation that has not been subject to judicial or administrative interpretation. Therefore, the views expressed in the
discussion may not be accepted by the tax authorities in question. This summary is based on laws and regulations in effect
as of the date hereof, and should not be construed as legal or professional tax advice and does not cover all possible tax
considerations.
General Corporate Tax Structure in Israel
The income of Protalix Ltd., other than income from “Approved Enterprises,” is taxed in Israel at regular rates. Pursuant to
the Economic Efficiency Law (Legislative Amendments for Implementing the Economic Policy for the 2017 and 2018
Budget Year), 2016, the corporate tax rate in 2018 and thereafter is 23%. Capital gains on the sale of assets are subject to
capital gains tax according to the corporate tax rate in effect in the year which the assets are sold.
Law for the Encouragement of Capital Investments, 1959
The Law for the Encouragement of Capital Investments, 1959, as amended, or the Investment Law, provides certain
incentives for capital investments in a production facility (or other eligible assets). Generally, an investment program that is
implemented in accordance with the provisions of the Investment Law, referred to as an “Approved Enterprise,” is entitled
to benefits. These benefits may include cash grants from the Israeli government and tax benefits, based upon, among other
things, the location within Israel of the facility in which the investment is made and specific elections made by the grantee.
In order to qualify for these incentives, an Approved Enterprise is required to comply with the requirements of the
Investment Law, and Letter of approval received by Protalix Ltd.
Protalix Ltd. will continue to enjoy the tax benefits under the pre-revision provisions of the Investment Law. If any new
benefits are granted to Protalix Ltd. in the future, Protalix Ltd. will be subject to the provisions of the amended Investment
Law with respect to these new benefits. Therefore, the following discussion is a summary of the Investment Law prior to
its amendment as well as the relevant changes contained in the new legislation.
Under the Investment Law prior to its amendment, a company that wished to receive benefits had to receive approval from
the Authority for the Investment and Development of the Industry and Economy, or the Investment Center. Each certificate
of approval for an Approved Enterprise relates to a specific investment program in the Approved Enterprise, delineated
both by the financial scope of the investment and by the physical characteristics of the facility or the asset, e.g., the
equipment to be purchased and utilized pursuant to the program.
An Approved Enterprise may elect to forego any entitlement to the grants otherwise available under the Investment Law
and, instead, participate in an alternative benefits program under which the undistributed income (after deductions and
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offsets) from the Approved Enterprise is exempt from corporate tax for a defined period of time. Under the alternative
package of benefits, a company’s undistributed income derived from an Approved Enterprise will be exempt from
corporate tax for a period of between two and 10 years from the first year of taxable income, depending upon the
geographic location within Israel of the Approved Enterprise. Upon expiration of the exemption period, the Approved
Enterprise is eligible for the reduced tax rates otherwise applicable under the Investment Law for any remainder of the
otherwise applicable benefits period (up to an aggregate benefits period of either seven or 10 years, depending on the
location of the company or its definition as a foreign investors’ company). If a company has more than one Approved
Enterprise program or if only a portion of its capital investments are approved, its effective tax rate is the result of a
weighted combination of the applicable rates. The tax benefits from any certificate of approval relate only to taxable profits
attributable to the specific Approved Enterprise and are contingent upon meeting the criteria set out in the certificate of
approval. Income derived from activity that is not integral to the activity of the Approved Enterprises (including capital
gain) does not enjoy these tax benefits.
A company that has an Approved Enterprise program is eligible for further tax benefits, as an alternative to exemption, if it
qualifies as a foreign investors’ company. A foreign investors’ company eligible for benefits is essentially a company in
which more than 25% of the share capital (in terms of shares, rights to profit, voting and appointment of directors) is
owned (measured by both share capital and combined share and loan capital) by non-Israeli residents. A company that
qualifies as a foreign investors’ company and has an Approved Enterprise program is eligible for tax benefits for a 10-year
benefit period and may enjoy a reduced corporate tax rate of 10% to 23%, depending on the amount of the company’s
shares held by non-Israeli shareholders.
If a company that has an Approved Enterprise program is a wholly-owned subsidiary of another company, the percentage
of foreign investments is determined based on the percentage of foreign investment in the parent company. The tax rates
and related levels of foreign investments with respect to a foreign investor’s company that has an Approved Enterprise
program are set forth in the following table:
Percent of Foreign Ownership
Over 25% but less than 49%
49% or more but less than 74%
74% or more but less than 90%
90% or more
Rate of Reduced Tax
23%
20%
15%
10%
Our original facility in Israel has been granted “Approved Enterprise” status, and it has elected to participate in the
alternative benefits program. Under the terms of its Approved Enterprise program, the facility is located in a Zone A area
and, therefore, the undistributed income from that Approved Enterprise will be tax exempt in Israel for a period of
10 years, commencing with the year in which taxable income is first generated from the relevant Approved Enterprise. The
current benefits program may not continue to be available and Protalix Ltd. may not continue to qualify for its benefits.
A company that has elected to participate in the alternative benefits program and that subsequently pays a dividend out of
the income derived from the portion of its facilities that have been granted Approved Enterprise status during the tax
exemption period will be subject to corporate tax in respect of the amount of dividend distributed at the rate that would
have been applicable had the company not elected the alternative benefits program (generally 10% to 23%, depending on
the extent to which non-Israeli shareholders hold such company’s shares). If the dividend is distributed within 12 years
after the end of the benefits period (or, in the case of a foreign investor’s company, without time limitation), the dividend
recipient is taxed at the reduced withholding tax rate of 20% applicable to dividends from approved enterprises, or at the
lower rate under an applicable tax treaty. After this period, the withholding tax rate is 25% to 30%, or at the lower rate
under an applicable tax treaty. In the case of a company with a foreign investment level (as defined by the Investment Law)
of 25% or more, the 12-year limitation on reduced withholding tax on dividends does not apply. The company must
withhold this tax at its source, regardless of whether the dividend is converted into foreign currency.
The Investment Law also provides that an Approved Enterprise is entitled to accelerated depreciation on its property and
equipment that are included in an approved investment program. This benefit is an incentive granted by the Israeli
government regardless of whether the alternative benefits program is elected.
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The benefits available to an Approved Enterprise are conditioned upon terms stipulated in the Investment Law and its
regulations and the criteria set forth in the applicable certificate of approval. If Protalix Ltd. does not fulfill these
conditions in whole or in part, the benefits can be canceled and Protalix Ltd. may be required to refund the benefits
received, linked to the Israeli consumer price index with interest. We believe that Protalix Ltd. currently operates in
compliance with all applicable conditions and criteria.
Amendment No. 60 to the Investment Law introduced a tax benefits regime referred to as “Benefitted Enterprises.” Under
the Investment Law, the approval of the Investment Center is required only for Benefitted Enterprises that receive cash
grants. Benefitted Enterprises that do not receive benefits in the form of governmental cash grants, but only tax benefits,
are no longer required to obtain this approval. Instead, these Benefitted Enterprises are required to make certain
investments as specified in the Investment Law.
The amended Investment Law specifies certain conditions for a Benefitted Enterprise to be entitled to benefits. These
conditions include, inter alia, the following:
● the Benefitted Enterprise’s revenues from any single country or a separate customs territory may not exceed
75% of the Benefitted Enterprise’s total revenues; or
● at least 25% of the Benefitted Enterprise’s revenues during the benefits period must be derived from sales
into a single country or a separate customs territory with a population of at least 14 million people (starting
from January 1, 2012, 1.4% must be added for each year).
There can be no assurance that Protalix Ltd. will comply with the above conditions in the future or that Protalix Ltd. will be
entitled to any additional benefits under the Investment Law. In addition, it is possible that Protalix Ltd. may not be able to
operate in a manner that maximizes utilization of the potential benefits available under the Investment Law.
In the future there may be changes in the law, subject to the preservation of benefits, which may affect the benefits
available to companies under the Investment Law. The termination or substantial reduction of any of the benefits available
under the Investment Law could impact our tax expenses.
Amendment of the Law for the Encouragement of Capital Investments, 1959
In recent years, several amendments have been made to the Investments Law which have enabled new alternative benefit
tracks, subject to certain conditions. The Investments Law was amended as part of the Economic Policy Law for the years
2011-2012 (amendment 68 to the Encouragement of Capital Investments Law), which was passed by the Israeli Knesset on
December 29, 2010. The amendment sets alternative benefit tracks to those currently in effect under the provisions of the
Investments Law. On December 29, 2016, Amendment 73 to the Investments Law, or the Investments Law Amendment,
was published. This amendment sets new benefit tracks, inter alia, “Preferred Technological Enterprise” and “Special
Preferred Technological Enterprise.” To date, we have elected not to have the Investments Law Amendment apply to our
company.
Encouragement of Industrial Research, Development and Technology Innovation Law, 1984
To date, Protalix Ltd. has received grants from the Office of the Chief Scientist of the Israeli Department of Labor, or the
OCS under the Israeli Law for the Encouragement of Industrial Research, Development and Technology Innovation, 1984,
and related regulations, or the Research Law. On January 1, 2016, the Israeli government established the National
Authority for Technological Innovation, or NATI, which replaced many of the functions of the OCS. For purposes of
clarity, references to NATI will include the OCS. NATI grants are made available to finance of a portion of Protalix Ltd.’s
research and development expenditures in Israel. As of December 31, 2022, NATI approved grants in respect of
Protalix Ltd.’s continuing operations totaling approximately $53.2 million (before interest, as described below), measured
from inception. Protalix Ltd. is required to repay up to 100% of grants actually received (plus interest at the LIBOR rate
applied to the grants received on or after January 1, 1999) to NATI through payments of royalties at a rate of 3% to 6% of
the revenues generated from NATI-funded project, depending on the period in which revenues were generated. As of
December 31, 2022, Protalix Ltd. either paid or accrued royalties payable of $15.8 million, and Protalix Ltd.’s contingent
liability to NATI with respect to grants received was approximately $37.4 million.
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Under the Research Law, recipients of grants from NATI are prohibited from manufacturing products developed using
these grants outside of the State of Israel without special approvals, although the Research Law does enable companies to
seek prior approval for conducting manufacturing activities outside of Israel without being subject to increased royalties. If
Protalix Ltd. receives approval to manufacture the products developed with government grants outside of Israel, it will be
required to pay an increased total amount of royalties (possibly up to 300% of the grant amounts plus interest), depending
on the manufacturing volume that is performed outside of Israel, as well as at a possibly increased royalty rate.
Additionally, under the Research Law, Protalix Ltd. is prohibited from transferring NATI-financed technologies and related
intellectual property rights outside of the State of Israel, except under limited circumstances and only with the approval of
NATI Council or the Research Committee. Protalix Ltd. may not receive the required approvals for any proposed transfer
and, if received, Protalix Ltd. may be required to pay NATI a portion of the consideration that it receives upon any sale of
such technology by a non-Israeli entity. The scope of the support received, the royalties that Protalix Ltd. has already paid
to NATI, the amount of time that has elapsed between the date on which the know-how was transferred and the date on
which NATI grants were received and the sale price and the form of transaction will be taken into account in order to
calculate the amount of the payment to NATI. Approval of the transfer of technology to residents of the State of Israel is
required, and may be granted in specific circumstances only if the recipient abides by the provisions of applicable laws,
including the restrictions on the transfer of know-how and the obligation to pay royalties. No assurance can be made that
approval to any such transfer, if requested, will be granted.
Under the Research Law and the regulations promulgated thereunder, NATI Council may allow the transfer outside of
Israel of know-how derived from an approved program and the related manufacturing rights in limited circumstances
which are currently as follows:
● in the event of a sale of know-how itself to a non-affiliated third party, provided that upon such sale the
owner of the know-how pays to NATI an amount, in cash, as set forth in the Research Law (and the
regulations promulgated thereunder). In addition, the amendment provides that if the purchaser of the know-
how gives the selling Israeli company the right to exploit the know-how by way of an exclusive, irrevocable
and unlimited license, the research committee may approve such transfer in special cases without requiring a
cash payment.
● in the event of a sale of a company which is the owner of know-how, pursuant to which the company ceases
to be an Israeli company, provided that upon such sale, the owner of the know-how makes a cash payment to
NATI as set forth in the Research Law (and the regulations promulgated thereunder).
● in the event of an exchange of know-how such that in exchange for the transfer of know-how outside of
Israel, the recipient of the know-how transfers other know-how to the company in Israel in a manner in
which NATI is convinced that the Israeli economy realizes a greater, overall benefit from the exchange of
know-how.
The Research Committee may, in special cases, approve the transfer of manufacture or of manufacturing rights of a product
developed within the framework of the approved program or which results therefrom, outside of Israel.
The State of Israel does not own intellectual property rights in technology developed with NATI funding and there is no
restriction on the export of products manufactured using technology developed with NATI funding. The technology is,
however, subject to transfer of technology and manufacturing rights restrictions as described above. For a description of
such restrictions, please see “Risk Factors—Risks Relating to Our Operations in Israel.” NATI approval is not required for
the export of any products resulting from the research or development or for the licensing of any technology in the ordinary
course of business.
Law for the Encouragement of Industry (Taxes), 1969
We believe that Protalix Ltd. currently qualifies as an “Industrial Company” within the meaning of the Law for the
Encouragement of Industry (Taxes), 1969, or the Industry Encouragement Law. The Industry Encouragement Law defines
“Industrial Company” as a company resident in Israel and incorporated in Israel, that derives 90% or more of its
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income in any tax year (other than specified kinds of passive income such as capital gains, interest and dividends) from an
“Industrial Enterprise” operating in Israel (including Judea & Samaria territories and the Gaza strip), that it owns. An
“Industrial Enterprise” is defined as an enterprise whose major activity in a given tax year is industrial production.
The following corporate tax benefits, among others, are available to Industrial Companies:
● amortization of the cost of purchased know-how and patents over an eight-year period for tax purposes;
● accelerated depreciation rates on equipment and buildings;
● under specified conditions, an election to file consolidated tax returns with other related Israeli Industrial
Companies; and
● expenses related to a public offering are deductible in equal amounts over three years.
Eligibility for the benefits under the Industry Encouragement Law is not subject to receipt of prior approval from any
governmental authority. It is possible that Protalix Ltd. may fail to qualify or may not continue to qualify as an “Industrial
Company” or that the benefits described above will not be available in the future.
Tax Benefits for Research and Development
Under specified conditions, Israeli tax laws allow a tax deduction by a company for research and development
expenditures, including capital expenditures, for the year in which such expenditures are incurred. These expenditures must
relate to scientific research and development projects and must be approved by NATI. Furthermore, the research and
development projects must be for the promotion of the company and carried out by or on behalf of the company seeking
such tax deduction. However, the amount of such deductible expenditures is reduced by the sum of any funds received
through government grants for the finance of such scientific research and development projects. Research and development
expenses which were not approved shall be deductible over a period of three years.
Employees
As of December 31, 2022, we had 197 employees of whom 193 are full time employees and 17 have a Ph.D. or an M.D. in
their respective scientific fields. We believe that our relations with our employees are good. We believe that our success
will greatly depend on our ability to identify, attract and retain capable employees. The Israeli Ministry of Labor and
Welfare is authorized to make certain industry-wide collective bargaining agreements, or Expansion Orders, that apply to
types of industries or employees including ours. These agreements affect matters such as cost of living adjustments to
salaries, length of working hours and week, recuperation, travel expenses, and pension rights. Otherwise, our employees
are not represented by a labor union or represented under a collective bargaining agreement. See “Risk Factors—We
depend upon key employees and consultants in a competitive market for skilled personnel. If we are unable to attract and
retain key personnel, it could adversely affect our ability to develop and market our products.”
Company Background
We were originally incorporated in the State of Florida in April 1992, and reincorporated in the State of Delaware in
March 2016. Protalix Ltd., our wholly-owned subsidiary and sole operating unit, is an Israeli company and was
incorporated in Israel in 1993.
ProCellEx® is our registered trademark. Each of the other trademarks, trade names or service marks appearing in this
Annual Report on Form 10-K belongs to its respective holder.
Available Information
Our main corporate website address is http://www.protalix.com. We make available on our website, free of charge, our
Commission filings, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K and any amendments to these reports, as soon as reasonably practicable after we electronically file these
documents with, or furnish them to, the Commission. The Commission maintains an Internet site that contains reports,
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proxy and information statements and other information regarding issuers that file electronically with the Commission at
www.sec.gov. Additionally, from time to time, we provide notifications of material news including press releases and
conferences on our website. Webcasts of presentations made by our company at certain conferences may also be available
from time to time on our website, to the extent the webcasts are available. The content of our website is not intended to be
incorporated by reference into this report or in any other report or document we file and any references to these websites
are intended to be inactive textual references only. Interested persons may sign up on our website to automatically receive
e-mail alerts when we post financial information and issue press releases, and to receive information about upcoming
events.
We are listed on the TASE until March 22, 2023 and, accordingly, we submit copies of all our filings with the Commission
to the Israeli Securities Authority (the “ISA”) and the TASE. Such copies can be retrieved electronically through the
TASE’s internet messaging system (www.maya.tase.co.il) and through the MAGNA distribution site of the ISA
(www.magna.isa.gov.il) for as long as we remain listed on the TASE.
Our website also includes printable versions of our Code of Business Conduct and Ethics and the charters for each of the
Audit, Compensation and Nominating Committees of our Board of Directors. Each of these documents is also available in
print, free of charge, to any stockholder who requests a copy by addressing a request to:
Protalix BioTherapeutics, Inc.
2 University Plaza, Suite 100
Hackensack, NJ 07601
Attn: Mr. Eyal Rubin, Sr. Vice President and Chief Financial Officer
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Item 1A. Risk Factors
You should carefully consider the risks described below together with the other information included in this Annual Report
on Form 10-K. Our business, financial condition or results of operations could be adversely affected by any of these risks.
If any of these risks occur, the value of our common stock could decline. For a summary of the risk factors included in this
Item 1A and for further details on our forward-looking statements, see “Forward-Looking Statements and Summary of Risk
Factors” on page 1.
Risks Related to Clinical Trials and Regulatory Matters
We may not obtain the necessary U.S., EMA or other worldwide regulatory approvals to commercialize our drug
candidates in a timely manner, if at all, which would have a material adverse effect on our business, results of
operations and financial condition.
To commercialize our drug candidates worldwide, we need FDA approval, EMA approval and approvals from other
countries’ regulators to commercialize our drug candidates elsewhere, as applicable. In order to obtain FDA approval of
any of our drug candidates, we must submit to the FDA a BLA or an NDA demonstrating that the drug candidate is safe
and effective for its intended use. This demonstration requires significant research and animal tests, which are referred to as
preclinical studies, as well as human tests, which are referred to as clinical trials. In the European Union, we must submit
an MAA to the EMA. Satisfaction of the regulatory requirements of the FDA, EMA and other countries’ regulatory
authorities typically takes many years, depends upon the type, complexity and novelty of the drug candidate and requires
substantial resources for research, development and testing.
We cannot assure you that the FDA will approve the BLA submitted for pegunigalsidase alfa by the PDUFA date or at all,
or that the EMA will approve the MAA in a timely manner or at all. We also cannot assure you that the results of clinical
trials of our other product candidates will demonstrate that the candidates are safe and effective for their intended uses.
Companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced or late-stage
clinical trials, even after obtaining promising earlier trial results or in preliminary findings or other comparable authorities
for such clinical trials. Further, even if favorable testing data is generated by the clinical trials of a drug candidate, the
applicable regulatory authority may not accept or approve a marketing application we file for the drug candidate or may
require us to conduct additional clinical testing or perform post-marketing studies which would cause us to incur additional
costs.
Failure to obtain approval of the FDA, EMA or comparable foreign authorities of pegunigalsidase alfa or any of our other
drug candidates in a timely manner, if at all, will severely undermine our business, financial condition and results of
operation by reducing our potential marketable products and our ability to generate corresponding product revenues.
In light of our receipt of a CRL from the FDA regarding our BLA for pegunigalsidase alfa, the U.S. regulatory
requirements and timing for pegunigalsidase alfa approval are uncertain; we are substantially dependent on receipt
of regulatory approvals for pegunigalsidase alfa, our most advanced product candidate.
The CRL issued by the FDA in response to the pegunigalsidase alfa BLA did not report any concerns relating to the
potential safety or efficacy of pegunigalsidase alfa in the submitted data package. Although the FDA, at the Type A
meeting held on September 9, 2021, in principle, agreed that the data package that was subsequently included in the BLA
resubmission has the potential to support a traditional approval of pegunigalsidase alfa for the treatment of Fabry disease,
we cannot guarantee when, or if, we will be successful in receiving regulatory approval for pegunigalsidase alfa. If we do
not obtain approval for pegunigalsidase alfa or are delayed in obtaining such approval, it would have a material and
adverse effect on our operations and financial condition.
The FDA may request additional data or impose other conditions in connection with an approval of the BLA. We cannot
assure you that the FDA will eventually approve pegunigalsidase alfa on a resubmission.
In addition, we may incur significant additional expenditures in order to obtain or maintain FDA approval. If the
resubmitted BLA is approved, the FDA may subject pegunigalsidase alfa to post-marketing commitments or
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requirements, and we may need to develop and/or improve certain antibody or additional assays as post-marketing
requirements or commitments. Even if we comply with all the requests of regulatory authorities, the FDA and other
authorities may ultimately reject the BLA or any other marketing application that we file for a product candidate in the
future, if any, or we might not obtain regulatory clearance in a timely manner.
We are subject to extensive governmental regulation including the requirements of the FDA and other comparable
regulatory authorities before our drug candidates may be marketed.
Both before and after marketing approval of our drug candidates, if at all, we, our drug candidates, our suppliers, our
contract manufacturers and our contract testing laboratories are subject to extensive regulation by the FDA and comparable
foreign regulatory authorities. Failure to comply with applicable requirements of the FDA or comparable foreign regulatory
authorities could result in, among other things, any of the following actions:
● warning letters;
● fines and other monetary penalties;
● unanticipated expenditures;
● delays in the FDA’s or other foreign regulatory authorities’ approving, or the refusal of any regulatory
authority to approve, any drug candidate;
● product recall or seizure;
● interruption of manufacturing or clinical trials;
● operating restrictions;
● injunctions; and
● criminal prosecutions.
In addition to the approval requirements, other numerous and pervasive regulatory requirements apply, both before and
after approval, to us, our drug candidates, our suppliers, contract manufacturers, and contract testing laboratories. These
include requirements related to:
● testing;
● manufacturing;
● quality control;
● labeling;
● advertising;
● promotion;
● distribution;
● export;
● reporting to the FDA certain adverse experiences associated with use of the drug candidate; and
● obtaining additional approvals for certain modifications to the drug candidate or its labeling or claims.
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We also are subject to inspection by the FDA and comparable foreign regulatory authorities, to determine our compliance
with regulatory requirements, as are our suppliers, contract manufacturers, and contract testing laboratories, and there can
be no assurance that the FDA, or any other comparable foreign regulatory authority, will not identify compliance issues
that may disrupt production or distribution, or require substantial resources to correct. We may be required to make
modifications to our manufacturing operations in response to these inspections which may require significant resources and
may have a material adverse effect upon our business, results of operations and financial condition.
The approval process for any drug candidate may also be delayed by changes in government regulation, future legislation
or administrative action or changes in policy of the FDA and comparable foreign authorities that occur prior to or during
their respective regulatory reviews of such drug candidate.
Delays in obtaining regulatory approvals with respect to any drug candidate will materially and adversely affect our
prospects, business, results of operations and financial condition.
Delays in obtaining regulatory approvals with respect to any drug candidate may:
● delay commercialization of, and our ability to derive product revenues from, such drug candidate;
● delay any regulatory-related milestone payments payable under outstanding collaboration agreements;
● require us to perform costly procedures with respect to such drug candidate; or
● otherwise diminish any competitive advantages that we may have with respect to such drug candidate.
Delays in the approval process for any drug candidate will have a material adverse effect upon our prospects, business,
results of operations and financial condition.
Clinical trials are very expensive, time-consuming and difficult to design and implement and may result in
unforeseen costs, which may have a material adverse effect on our business, results of operations and financial
condition.
Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous
regulatory requirements. Preliminary and initial results from a clinical trial do not necessarily predict final results, and
failure can occur at any stage of the trial. We may encounter problems that could cause us to abandon or repeat preclinical
studies or clinical trials. The clinical trial process is also time-consuming. Failure or delay in the commencement or
completion of our clinical trials may be caused by several factors, including:
● slower than expected rates of patient recruitment, particularly with respect to trials of rare diseases;
● determination of dosing issues;
● unforeseen safety issues;
● lack of effectiveness during clinical trials;
● disagreement by applicable regulatory bodies over our trial protocols, the interpretation of data from
preclinical studies or clinical trials or conduct and control of clinical trials;
● determination that the patient population participating in a clinical trial may not be sufficiently broad or
representative to assess efficacy and safety for our target population;
● inability to monitor patients adequately during or after treatment;
● inability or unwillingness of medical investigators and institutional review boards to follow our clinical
protocols; and
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● lack of sufficient funding to finance the clinical trials.
Any failure or delay in commencement or completion of any clinical trials of our product candidates will have a material
adverse effect on our business, results of operations and financial condition. In addition, we, the FDA or other regulatory
authorities may suspend any clinical trial at any time if it appears that we are exposing participants in the trial to
unacceptable safety or health risks or if the FDA or such other regulatory authorities, as applicable, find deficiencies in our
IND submissions or the conduct of the trial. Any suspension of a clinical trial may have a material adverse effect on our
business, results of operations and financial condition.
If the results of our clinical trials do not support our claims relating to a drug candidate, or if serious side effects are
identified, the completion of development of such drug candidate may be significantly delayed or we may be forced
to abandon development altogether, which will significantly impair our ability to generate product revenues.
The results of our clinical trials with respect to any drug candidate might not support our claims of safety or efficacy, the
results of our clinical trials may fail to conclusively show superiority over other commercially available treatments for the
same or similar indications, the effects of our drug candidates may not be the desired effects or may include undesirable
side effects or the drug candidates may have other unexpected characteristics. Data obtained from tests are susceptible to
varying interpretations which may delay, limit or prevent regulatory approval. The clinical trial process may fail to
demonstrate that our drug candidates are safe for humans and effective for indicated uses. In addition, our clinical trials,
may involve specific and small patient populations. Results of early clinical trials conducted on a small patient population
may not be indicative of future results. Adverse or inconclusive results may cause us to abandon a drug candidate and may
delay development of other drug candidates. Any delay in, or termination of, our clinical trials will delay the filing of
BLAs and NDAs with the FDA, or other filings with other foreign regulatory authorities, and, ultimately, significantly
impair our ability to commercialize our drug candidates and generate product revenues which would have a material
adverse effect on our business, results of operations and financial condition.
Interim, topline or preliminary data from clinical trials that we announce or publish may change as more patient
data becomes available and are subject to audit and verification procedures that could result in material changes in
the final data.
We may publicly disclose interim, topline or preliminary data from our clinical trials, which is based on a preliminary
analysis of then-available data. The results and related findings and conclusions are subject to change following a full
analysis of all data related to the particular trial. We also may make assumptions, estimations, calculations and conclusions
as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data.
As a result, any interim, topline or preliminary results that we report may differ from future results of the same trials, or
different conclusions or considerations may qualify such results once additional data have been received and fully
evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being
materially different than the preliminary data we previously published. As a result, any topline data should be viewed with
caution until final data are available. Interim data from clinical trials that we may complete are subject to the risk that one
or more of the clinical outcomes may materially change as patient enrollment continues and more data becomes available.
Further, regulatory agencies may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses,
or may interpret or ascribe different weight to the data, which may impact the value of the clinical trial and may affect the
particular clinical program and the approvability or commercialization of the particular product candidate and our business
in general. If regulatory authorities disagree with the conclusions we reach, we may not be able to obtain approval for and
commercialize our product candidates, which will have a material adverse effect on our business, results of operations and
financial condition.
We may find it difficult to enroll patients in our clinical trials, or patients may discontinue their participation in our
clinical trials, which could cause significant delays in the completion of such trials or may negatively impact the
results of these studies and extend the timeline for completion of our development programs or cause us to abandon
one or more clinical trials.
Some of the diseases or disorders that our drug candidates are intended to treat are relatively rare and we expect only a
subset of the patients with these diseases to be eligible for our clinical trials. Our clinical trials generally mandate that a
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patient cannot be involved in another clinical trial for the same indication. Therefore, subjects that participate in ongoing
clinical trials for products that are competitive with our drug candidates are not available for our clinical trials. An inability
to enroll a sufficient number of patients for any of our clinical trials would result in significant delays or may require us to
abandon one or more clinical trials altogether. In addition, patients who enroll in our clinical trials may discontinue their
participation at any time during the study as a result of a number of factors, including withdrawing their consent,
experiencing adverse clinical events, which may or may not be judged related to our drug candidates under evaluation, or
due to planned or actual pregnancies. The discontinuation of patients in any one of our studies may delay the completion of
the study or cause the results from the study not to be positive or to not support a filing for regulatory approval of the
applicable drug candidate. Any failure to enroll a sufficient number of patients in our clinical trials in a timely manner, if at
all, may have a material adverse effect on our business, results of operations and financial condition.
Because our clinical trials depend upon third-party researchers, the results of our clinical trials and such research
activities are subject to delays and other risks which are, to a certain extent, beyond our control, which could impair
our clinical development programs and our competitive position.
We depend upon independent investigators and collaborators, such as universities and medical institutions, to conduct our
preclinical and clinical trials. These collaborators are not our employees, and we cannot control the amount or timing of
resources that they devote to our clinical development programs. The investigators may not prioritize to our clinical
development programs or pursue them as diligently as we would if we were undertaking such programs directly. If outside
collaborators fail to devote sufficient time and resources to our clinical development programs, or if their performance is
substandard, the approval of anticipated NDAs, BLAs and other marketing applications, and our introduction of new drugs,
if any, may be delayed which could impair our clinical development programs and would have a material adverse effect on
our business, results of operations and financial condition. Our collaborators may also have relationships with other
commercial entities, some of whom may compete with us. If our collaborators also assist our competitors, our competitive
position could be harmed.
We have only limited experience in regulatory affairs, and some of our drug candidates may be based on new
technologies. These factors may affect our ability or the time we require to obtain necessary regulatory approvals.
We have only limited experience in filing and prosecuting the applications necessary to gain regulatory approvals for
medical devices and drug candidates. Moreover, some of the drug candidates that are likely to result from our development
programs may be based on new technologies that have not been extensively tested in humans. The regulatory requirements
governing these types of drug candidates may not be well defined or more rigorous than for conventional products. As a
result, we may experience a longer regulatory process in obtaining regulatory approvals of any products that we develop,
which may have a material adverse effect on our business, results of operations and financial condition.
We may seek orphan drug designation for some or all of our product candidates across various indications, but we
may be unable to obtain such designations or to maintain the benefits associated with orphan drug designation,
including market exclusivity, which may cause our revenue, if any, to be reduced.
We may seek orphan drug designation for our product candidates in specific orphan indications in which there is a
medically plausible basis for the use of these products. Even if we obtain orphan drug designation, exclusive marketing
rights in the United States may be limited if we seek approval for an indication broader than the orphan designated
indication, and may be lost if the FDA later determines that the request for designation was materially defective, if we are
unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition, or if a
subsequent applicant demonstrates clinical superiority over our products, if approved. In addition, more than one drug can
have orphan designation for the same indication. Although we may seek orphan drug designation for other product
candidates, we might not receive such designations.
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Risks Related to the COVID-19 Pandemic
The COVID-19 pandemic, or any other pandemic, epidemic or outbreak of an infectious disease, could adversely
impact our business, including our clinical trials, and financial condition.
In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China. Since then,
the COVID-19 coronavirus and its variants have spread to multiple countries, including the United States, Australia and
European and Asia-Pacific countries, including countries where we have planned or active clinical trial sites. As the
COVID-19 coronavirus and its variants continue to spread around the globe, we may experience disruptions that could
potentially impact our business and clinical trials. While the extent of the impact of the current COVID 19 pandemic on
our business and financial results depends on future developments that are highly uncertain and cannot be predicted,
including new information which may emerge concerning the severity of the coronavirus and its variants and the actions to
contain them or treat their impact, among others, a continued and prolonged public health crisis such as the COVID 19
pandemic may adversely affect our business, results of operations and financial condition.
Risks Related to Our Business
We have a limited operating history which may limit the ability of investors to make an informed investment
decision.
Taliglucerase alfa is our only commercial product. The successful commercialization of our other drug candidates will
require us to perform a variety of functions, including:
● continuing to perform preclinical development and clinical trials;
● participating in regulatory approval processes;
● formulating and manufacturing products; and
● conducting sales and marketing activities.
Our operations have been limited to organizing and staffing our company, acquiring, developing and securing our
proprietary technology and undertaking, through third parties, preclinical trials and clinical trials of our principal drug
candidates. These operations provide a limited basis for investors to assess our ability to commercialize our drug
candidates and whether to invest in our company.
We currently depend heavily on the success of pegunigalsidase alfa. Any failure to commercialize pegunigalsidase
alfa, or the experience of significant delays in doing so, will have a material adverse effect on our business, results of
operations and financial condition.
We are investing a significant portion of our efforts and financial resources in the development of pegunigalsidase alfa and
our ability to generate significant product revenues in the future, will depend heavily on the successful development and
commercialization of pegunigalsidase alfa. The successful commercialization of pegunigalsidase alfa will depend on
several factors, including the following:
● Chiesi’s efforts under the Chiesi Agreements;
● obtaining marketing approvals from the FDA, EMA and other foreign regulatory authorities;
● maintaining the cGMP compliance of our manufacturing facility or establishing manufacturing arrangements
with third parties;
● the successful inspection of our facilities by the FDA and other foreign regulatory authorities;
● Chiesi’s development of successful sales and marketing organizations for pegunigalsidase alfa;
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● the availability of coverage or reimbursement to patients from healthcare payors for pegunigalsidase alfa, if
approved;
● a continued acceptable safety and efficacy profile of pegunigalsidase alfa following approval; and
● other risks described in these Risk Factors.
Any failure to commercialize pegunigalsidase alfa or the experience of significant delays in doing so will have a material
adverse effect on our business, results of operations and financial condition.
Any failure by us to supply drug substance to Pfizer may have a material adverse effect on our business, results of
operations and financial condition.
We have agreed to sell drug substance to Pfizer for the production of Elelyso for a 20-year period after the execution of the
Amended Pfizer Agreement, subject to certain terms and conditions. As part of that obligation, we agreed to substantial
financial penalties if we fail to comply with the supply commitments, or are delayed in doing so. The amounts of the
penalties depend on when any such failure occurs and for how long it persists, if at all, and other considerations. Any
failure to comply with the supply commitments under the Amended Pfizer Agreement may have a material adverse effect
on our business, results of operations and financial condition.
Our strategy, in certain cases, is to enter into collaboration agreements with third parties to leverage our ProCellEx
system to develop product candidates. Failure to enter into such agreements, or non-compliance by us or our
collaborators with such agreements, may have a material adverse effect on our business, results of operations and
financial condition.
Our strategy, in certain cases, is to enter into arrangements with pharmaceutical companies to leverage our ProCellEx
system to develop additional product candidates. Under these arrangements, we may grant to our partners rights to license
and commercialize pharmaceutical products developed under the applicable agreements, as we have done with Elelyso and
pegunigalsidase alfa. Our partners may control key decisions relating to the development of the products and we may
depend on our partners’ expertise and dedication of sufficient resources to develop and commercialize our product
candidates. The rights of our partners limit our flexibility in considering alternatives for the commercialization of our
product candidates. If we or any of our current or future partners breach or terminate the agreements that make up such
arrangements, our partners otherwise fail to conduct their obligations under such arrangements in a timely manner, there is
a dispute about their obligations or if either party terminates the applicable agreement or elects not to continue the
arrangement, we may not enjoy the benefits of the agreements or receive a sufficient amount of royalty or milestone
payments from them, if any, which may have a material adverse effect on our business, results of operations and financial
condition.
If we are unable to develop and commercialize our product candidates, our business will be adversely affected.
A key element of our business strategy is to develop and commercialize a portfolio of new products in addition to
taliglucerase alfa. We seek to do so through our internal research programs and strategic collaborations for the development
of new products. Research programs to identify new product candidates require substantial technical, financial and human
resources, whether or not any product candidates are ultimately identified. Our research programs may initially show
promise in identifying potential product candidates, yet fail to immediately yield product candidates for clinical
development for many reasons, including the following:
● a product candidate is not capable of being produced in commercial quantities at an acceptable cost, or at all;
● a product candidate may not be accepted by patients, the medical community or third-party payors;
● competitors may develop alternatives that render our product candidates obsolete;
● the research methodology used may not be successful in identifying potential product candidates; or
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● a product candidate may, on further study, be shown to have harmful side effects or other characteristics that
indicate it is unlikely to be effective or otherwise does not meet applicable regulatory approval.
Any failure to develop or commercialize any of our other product candidates may have a material adverse effect on our
business, results of operations and financial condition.
The manufacture of our products is an exacting and complex process, and any manufacturing problems
encountered by us or certain of our suppliers may have a material adverse effect on our business, results of
operations and financial condition.
The FDA and foreign regulators require manufacturers to register manufacturing facilities. The FDA and foreign regulators
also inspect these facilities to confirm compliance with cGMP or similar requirements that the FDA or foreign regulators
establish. We or certain of our materials suppliers may face manufacturing or quality control problems causing product
production and shipment delays or a situation where we or the supplier may not be able to maintain compliance with the
FDA’s cGMP requirements, or those of foreign regulators, necessary to continue manufacturing. To date, our current
facility has passed audits by the FDA and a number of other regulatory authorities but remains subject to audit by other
foreign regulatory authorities. There can be no assurance that we will be able to comply, or continue to comply, with FDA
or foreign regulatory manufacturing requirements for our current facility or any facility we may establish in the future, and
the failure to so comply, or continue to comply, will have a material adverse effect on our business, results of operations
and financial condition.
We rely on third parties for final processing of taliglucerase alfa, pegunigalsidase alfa and our other product
candidates, which exposes us to a number of risks that may delay development, regulatory approval and
commercialization of taliglucerase alfa and our other product candidates or result in higher product costs.
We have no experience in the final filling and freeze drying steps of the drug manufacturing process. We rely on third
parties in the United States and Europe to perform fill and finish activities for taliglucerase alfa and pegunigalsidase alfa,
and have engaged other parties for our other product candidates. We may be unable to identify manufacturers and/or
replacement manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and the
FDA and other regulatory authorities, as applicable, must approve any manufacturer and/or replacement manufacturer,
including us, and we or any such third party manufacturer might be unable to formulate and manufacture our drug products
in the volume and of the quality required to meet our clinical and commercial needs. If we engage any contract
manufacturers, such manufacturers may not perform as agreed or may not remain in the contract manufacturing business
for the time required to supply our clinical or commercial needs. In addition, contract manufacturers are subject to the
rules and regulations of the FDA and comparable foreign regulatory authorities and face the risk that any of those
authorities may find that they are not in compliance with applicable regulations. Each of these risks, if realized, could delay
our clinical trials, the approval, if any, of our potential drug candidates by the FDA and other regulatory authorities, or the
commercialization of our drug candidates or could result in higher product costs or otherwise deprive us of potential
product revenues.
Developments by competitors may render our products or technologies obsolete or non-competitive which would
have a material adverse effect on our business, results of operations and financial condition.
We compete against fully integrated pharmaceutical companies and smaller companies that are collaborating with larger
pharmaceutical companies, academic institutions, government agencies and other public and private research organizations.
Our drug candidates will have to compete with existing therapies and therapies under development by our competitors. Our
commercial opportunities may be reduced or eliminated if our competitors develop and market products that are less
expensive, more effective or safer than our drug products. Other companies have drug candidates in various stages of
preclinical or clinical development to treat diseases for which we are also seeking to develop drug products. Some of these
potential competing drugs are further advanced in development than our drug candidates and may be commercialized
earlier. See “Business – Competition.”
Most of our competitors, either alone or together with their collaborative partners, operate larger research and development
programs, staff and facilities and have substantially greater financial resources than we do, as well as significantly greater
experience in:
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● developing drugs;
● undertaking preclinical testing and human clinical trials;
● obtaining marketing approvals from the FDA and other regulatory authorities;
● formulating and manufacturing drugs; and
● launching, marketing and selling drugs.
These organizations also compete with us to attract qualified personnel, acquisitions and joint ventures candidates and for
other collaborations. Activities of our competitors may impose unanticipated costs on our business or adversely affect the
market for our drug products which would have a material adverse effect on our business, results of operations and
financial condition.
If we in-license drug candidates, we may delay or otherwise adversely affect the development of our existing drug
candidates, which may negatively impact our business, results of operations and financial condition.
In addition to our own internally developed drug candidates, we proactively seek opportunities to in-license and advance
other drug candidates that are strategic and have value-creating potential to take advantage of our development know-how
and technology. In-licensing additional drug candidates may significantly increase our capital requirements, and place a
strain on the time of our existing personnel, which may delay or otherwise adversely affect the development of our existing
drug candidates or cause us to re-prioritize our drug pipeline if we do not have the necessary capital resources to develop
all of our drug candidates, which may have a material adverse impact on our business, results of operations and financial
condition.
If we acquire companies, products or technologies, we may face integration risks and costs associated with those
acquisitions that could potentially negatively impact our business, results of operations and financial condition.
If we are presented with appropriate opportunities, we may acquire or make investments in complementary companies,
products or technologies. If we acquire companies or technologies, we will face risks, uncertainties and disruptions
associated with the integration process, including difficulties in the integration of the operations of an acquired company,
integration of acquired technology with our products, diversion of our management’s attention from other business
concerns, the potential loss of key employees or customers of the acquired business and impairment charges if future
acquisitions are not as successful as we originally anticipate. In addition, our operating results may suffer because of
acquisition-related costs or amortization expenses or charges relating to acquired intangible assets. Any failure to
successfully integrate other companies, products or technologies that we may acquire may have a material adverse effect
on our business and results of operations.
We depend upon key employees and consultants in a competitive market for skilled personnel. If we are unable to
attract and retain key personnel, it could adversely affect our ability to develop and market our products.
We are highly dependent upon the principal members of our management team, especially our President and Chief
Executive Officer, Dror Bashan, as well as the Chairman of our Board of Directors, Zeev Bronfeld, our other directors,
consultants and collaborating scientists. Many of these people have been involved with us for many years and have played
integral roles in our progress, and we believe that they will continue to provide value to us. A loss of any of these personnel
may have a material adverse effect on aspects of our business, clinical development and regulatory programs. We have
employment agreements with Mr. Bashan and our other executive officers that may be terminated by us or the applicable
officer at any time with varying notice periods of 30 to 180 days. The loss of any of these persons’ services may adversely
affect our ability to develop and market our products and obtain necessary regulatory approvals. Further, we do not
maintain key-man life insurance.
We also depend in part on the continued service of our key scientific personnel and our ability to identify, hire and retain
additional personnel. We experience intense competition for qualified personnel, and the existence of non-competition
agreements between prospective employees and their former employers may prevent us from hiring those individuals or
subject us to suit from their former employers. While we attempt to provide competitive compensation packages to
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attract and retain key personnel, many of our competitors are likely to have greater resources and more experience than we
have, making it difficult for us to compete successfully for key personnel.
Under current U.S. and Israeli laws, we may not be able to enforce employees’ covenants not to compete and
therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former
employees.
We have entered into non-competition agreements with substantially all of our employees. These agreements prohibit our
employees, if they cease working for us, from competing directly with us or working for our competitors for a limited
period. Under current U.S. and Israeli laws, we may be unable to enforce these agreements against most of our employees
and it may be difficult for us to restrict our competitors from gaining the expertise our former employees acquired while
working for us. If we cannot enforce our employees’ non-compete agreements, we may be unable to prevent our
competitors from benefiting from the expertise of our former employees, which may have a material adverse effect on our
business, results of operations and financial condition.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to
accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our
financial and other public reporting, which would harm our business and the trading price of our common stock.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports. Any failure to
implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to
meet our reporting obligations. While our assessment of our internal control over financial reporting resulted in our
conclusion that as of December 31, 2022, our internal control over financial reporting was effective, we cannot predict the
outcome of our testing or any subsequent testing by our auditor in future periods. Any testing by us conducted in
connection with Section 404 of the Sarbanes-Oxley Act, or Section 404, or any subsequent testing by our independent
registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed
to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify
other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in
our reported financial information and affect our reputation, which could have an adverse effect on the trading price of our
common stock.
Our management is required to assess the effectiveness of our internal controls and procedures and disclose changes in
these controls on an annual basis. However, for as long as we are a non-accelerated filer, our independent registered public
accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to
Section 404. An independent assessment of the effectiveness of our internal control could identify deficiencies in internal
control over financial reporting that our management’s assessment might not. Undetected material weaknesses in our
internal controls could lead to financial statement restatements and require us to incur the expense of remediation.
Our internal computer systems, or those used by our third-party contractors or consultants, may fail or suffer
security breaches.
Despite the implementation of security measures, our internal computer systems and those of our present and future
contractors and consultants are vulnerable to damage from computer viruses and unauthorized access. Although to our
knowledge we have not experienced any material system failure 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. For example, the loss of clinical trial data from completed or future clinical trials could result in delays
in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on
our third-party research institution collaborators for research and development of our product candidates and other third
parties for the manufacture of our product candidates and to conduct clinical trials, and similar events relating to their
computer systems could also have a material adverse effect on our business. We have a cybersecurity insurance policy to
protect us from such risks. However, to the extent that any disruption or security breach were to result in a loss of, or
damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur
liability despite our insurance policy, and the further development and commercialization of our product candidates could
be delayed.
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We could be subject to securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market
price of its securities. This risk is especially relevant for us because biotechnology companies have experienced significant
stock price volatility in recent years. If we face such litigation, it could result in substantial costs and divert management’s
attention and resources, which could have a material adverse effect on our business, results of operation and financial
condition.
If product liability claims are brought against us, it may result in reduced demand for our products and product
candidates or damages that exceed our insurance coverage.
The clinical testing, marketing and use of our products and product candidates exposes us to product liability claims if the
use or misuse of those products or product candidates cause injury or disease, or results in adverse effects. Use of our
products or product candidates, whether in clinical trials or post approval, could result in product liability claims. We
presently carry clinical trial liability insurance with coverages of up to $10.0 million per occurrence and $10.0 million in
the aggregate, an amount we consider reasonable and customary. However, this insurance coverage includes various
deductibles, limitations and exclusions from coverage, and in any event might not fully cover any potential claims. We may
need to obtain additional clinical trial liability coverage prior to initiating additional clinical trials. We expect to obtain
product liability insurance coverage before commercialization of our product candidates; however, such insurance is
expensive and insurance companies may not issue this type of insurance when we need it. We may not be able to obtain
adequate insurance in the future at an acceptable cost. Any product liability claim, even one that was not in excess of our
insurance coverage or one that is meritless and/or unsuccessful, may adversely affect our cash available for other purposes,
such as research and development, which may have a material adverse effect on our business, results of operations and
financial condition. Product liability claims, even if without merit, may result in reduced demand for our products, if
approved, or result in adverse market reactions, which would have a material adverse effect on our business, results of
operations and financial condition.
The enactment of proposed or future tax legislation may adversely impact our financial condition and results of
operations.
On August 16, 2022, President Biden signed the Inflation Reduction Act, or the IRA. The IRA contains a number of tax
related provisions including a 15% minimum corporate income tax on certain large corporations as well as an exercise tax
on stock repurchases, both provisions are effective for tax years beginning after December 31, 2022. We are in the process
of evaluating the IRA, but do not expect it to have a material impact on our financial statements.
Governments outside the United States tend to impose strict price controls and reimbursement approval policies,
which may adversely affect our prospects for generating revenue.
In some countries, particularly European Union member states, the pricing of prescription pharmaceuticals is subject to
governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time (six
to 12 months or longer) after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval
in some countries with respect to any product candidate that achieves regulatory approval, we may be required to conduct a
clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. Any unavailability
or limitation on the reimbursement of our products upon approval, if at all, or the determination of unsatisfactory
reimbursement prices, may have a material adverse effect on our business, results of operations and financial condition.
Further, if we achieve regulatory approval of any product, we must successfully negotiate product pricing for such product
in individual countries. As a result, the pricing of our product candidates, if approved, in different countries may vary
widely, thus creating the potential for third-party trade in our products in an attempt to exploit price differences between
countries. This third-party trade of our products could undermine our sales in markets with higher prices which could have
a material adverse effect on our business, results of operations and financial condition.
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Our ability to utilize net operating loss carryforwards may be limited.
Our NOL carryforwards as of December 31, 2022, are equal to approximately $247.4 million, of which approximately
$26.7 million may be restricted under Section 382 of the Internal Revenue Code, or the IRC. IRC Section 382 applies
whenever a corporation with NOLs experiences an ownership change. As a result of IRC Section 382, the taxable income
for any post-change year that may be offset by a pre-change NOL may not exceed the fair market value of the pre-change
entity multiplied by the IRC long-term tax exempt rate. Significant judgment is required in determining any valuation
allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we considered all available
evidence, including past operating results, the most recent projections for taxable income and prudent and feasible tax
planning strategies. We reassess our valuation allowance periodically and if future evidence allows for a partial or full
release of the valuation allowance, a tax benefit will be recorded accordingly. Any ownership change (including as a result
of conversion of our outstanding convertible notes into shares of our common stock), or any other limitation on our
utilization of NOLs, could have a material adverse effect on our business, results of operations and financial condition.
Our corporate structure may create U.S. federal income tax inefficiencies.
Protalix Ltd. is our wholly-owned subsidiary and thus a controlled foreign corporation of our company for U.S. federal
income tax purposes. This organizational structure may create inefficiencies, as certain types of income and investments of
Protalix Ltd. that otherwise would not be currently taxable under general U.S. federal income tax principles may become
taxable. These inefficiencies may require us to use more of our NOLs than we otherwise might and may result in a tax
liability without a corresponding distribution from our subsidiary which could have a material adverse effect on our
business, results of operations and financial condition.
In addition, on December 22, 2017, the Tax Cuts and Jobs Act, or the TCJA, that significantly reforms the IRC was
enacted. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional
limitations on the deductibility of certain expenses and adds certain limitations to the use of net operating loss
carryforwards arising after December 31, 2017. Effective in 2022, the TCJA requires all U.S. companies to capitalize and
subsequently amortize R&D expenses that fall within the scope of Section 174 over five years for research activities
conducted in the United States and over 15 years for research activities conducted outside of the United States, rather than
deducting such costs in the year incurred for tax purposes. Although Congress may defer, modify or repeal this provision,
potentially with retroactive effect, we have no assurance that Congress will take any action with respect to this provision.
As of the fourth quarter of 2022, we have accounted for an estimate of the effects of the R&D capitalization, based on
interpretation of the law as currently enacted. To the extent that this provision is not deferred, modified or repealed, and
once our available NOLs are fully utilized, we would incur an increase in our tax expenses and a decrease in our cash flows
provided by operations.
We are a holding company with no operations of our own.
We are a holding company with no operations of our own. Accordingly, our ability to conduct our operations, service any
debt that we may incur in the future and pay dividends, if any, is dependent upon the earnings from the business conducted
by Protalix Ltd. The distribution of those earnings or advances or other distributions of funds by our subsidiary to us, as
well as our receipt of such funds, are contingent upon the earnings of Protalix Ltd. and are subject to various business
considerations and U.S. and Israeli laws. If Protalix Ltd. is unable to make sufficient distributions or advances to us, or if
there are limitations on our ability to receive such distributions or advances, we may not have the cash resources necessary
to conduct our corporate operations or service our debt which would have a material adverse effect on our business, results
of operations and financial condition.
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Risks Related to our Financial Condition and Capital Requirements
Servicing our debt and settling conversion requests may require a significant amount of cash, and we may not have
sufficient cash flow from our business to pay our debt. Furthermore, restrictive covenants governing our
indebtedness may restrict our ability to raise additional capital.
We currently have outstanding $28.75 million aggregate principal amount of our 2024 Notes which are secured with a
perfected lien on all of our assets. Under the terms of the indenture governing the 2024 Notes, or the 2024 Indenture, we
are required to maintain a minimum cash balance of at least $7.5 million. Our ability to make payments with respect to the
2024 Notes and to satisfy any other debt obligations depends on our future operating performance and our ability to
generate significant cash flow in the future, which will be affected by prevailing economic conditions and financial,
business, competitive, legislative and regulatory factors as well as other factors affecting our company and industry, many
of which are beyond our control. If, when required, we are unable to comply with the terms of the 2024 Notes, we may be
required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital
on terms that may be onerous or highly dilutive. In addition, certain terms of the 2024 Notes regarding the security interest
or future indebtedness may restrict us from adopting any of these alternatives. We may be unable to obtain amendments
and waivers of such restrictions. If there is a default of such notes, the note holders could, among other things, elect to
declare all amounts owed immediately due and payable, which could cause all or a large portion of our available cash flow
to be used to pay such amounts and thereby reduce the amount of cash available to pursue our business plans or force us
into bankruptcy or liquidation, or, with respect to our indebtedness that is secured, result in the foreclosure on the assets
that secure the debt, which would force us to relinquish rights to assets that we may believe are critical to our business.
Any default on our debt will have a material adverse effect on our business, results of operations and financial condition.
Our significant level of indebtedness could adversely affect our business, results of operations and financial
condition and prevent us from fulfilling our obligations under our convertible notes and our other indebtedness.
Our 2024 Notes represent a significant amount of indebtedness with substantial debt service requirements. We may also
incur additional indebtedness to meet future financing needs. Our substantial indebtedness could have material adverse
effects on our business, results of operations and financial condition. For example, it could:
● make it more difficult for us to satisfy our financial obligations, including with respect to the 2024 Notes;
● result in an event of default under our outstanding convertible notes if we fail to comply with the financial
and other restrictive covenants contained in agreements governing any future indebtedness, which event of
default could result in all of our debt becoming immediately due and payable;
● increase our vulnerability to general adverse economic, industry and competitive conditions;
● reduce the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other
general corporate purposes because we will be required to dedicate a substantial portion of our cash flow
from operations to the payment of principal and interest on our indebtedness;
● limit our flexibility in planning for, or reacting to, and increasing our vulnerability to changes in our
business, the industry in which we operate and the general economy;
● prevent us from raising funds necessary to purchase 2024 Notes surrendered to us by holders upon a
fundamental change (as described in the 2024 Indenture governing the notes), which failure would result in
an event of default with respect to the 2024 Notes;
● place us at a competitive disadvantage compared to our competitors that have less indebtedness or are less
highly leveraged and that, therefore, may be able to take advantage of opportunities that our debt levels or
leverage prevent us from exploiting; and
● limit our ability to obtain additional financing.
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Each of these factors may have a material and adverse effect on our business, results of operations and financial condition
and our ability to meet our payment obligations under the 2024 Notes and our other indebtedness.
We are required to comply with a number of covenants under the 2024 Indenture governing our outstanding 2024
Notes that could hinder our growth.
The 2024 Indenture contains a number of restrictive affirmative and negative covenants, which limit our ability to incur
additional debt; exceed certain limits; pay dividends or distributions; or merge, consolidate or dispose of substantially all of
our assets, including all of our intellectual property assets and other material assets securing the 2024 Notes. A breach of
these covenants could result in default, and if such default is not cured or waived, the holders of the indebtedness could,
among other things, elect to declare all amounts owed immediately due and payable, which could cause all or a large
portion of our available cash flow to be used to pay such amounts and thereby reduce the amount of cash available to
pursue our business plans or force us into bankruptcy or liquidation, or, result in the foreclosure on the assets that secure
the debt, including all of our intellectual property assets, which would force us to relinquish rights to such assets that we
may believe are critical to our business. We may not be able to engage in any of these activities or engage in these activities
on desirable terms, which could result in a default on our debt obligations. Any default on our debt will have a material
adverse effect on our business, results of operations and financial condition.
Any conversion of our outstanding 2024 Notes into common stock will dilute the ownership interest of our existing
stockholders, including holders who had previously converted their notes.
The conversion of some or all of our 2024 Notes into shares of our common stock will dilute the ownership interests of our
existing stockholders. Any sales in the public market of our common stock issuable upon such conversion could adversely
affect prevailing market prices of our common stock. In addition, the existence of our outstanding 2024 Notes may
encourage short selling by market participants because the conversion of 2024 Notes could depress the market price of our
common stock.
The fundamental change purchase feature of our outstanding 2024 Notes may delay or prevent an otherwise
beneficial attempt to take over our company.
The terms of our outstanding 2024 Notes require us to offer to purchase the notes for cash in the event of a fundamental
change. A non-stock takeover of our company may trigger the requirement that we purchase the notes. This feature may
have the effect of delaying or preventing a takeover of our company that would otherwise be beneficial to our stockholders.
We may fail to meet the continued market capitalization-based listing requirement or other continued listing
requirements of the NYSE American.
The stock market in general, and the market for pharmaceutical companies in particular, have experienced extreme price
and volume fluctuations that may have been unrelated or disproportionate to the operating performance of the listed
companies. The trading price of our common stock has been volatile and has been subject to wide price fluctuations in
response to various factors, many of which are beyond our control. The volatility of our stock price has from time to time
in recent periods affected our market capitalization. Adverse fluctuations in the price per share of our common stock or our
market capitalization may result in our failure to meet the continued listing requirements of the NYSE American, which
would require us to take steps to gain compliance with alternate listing standards or take remedial steps to bring us into
compliance. A failure to maintain or regain compliance with applicable listing standards could adversely affect the liquidity
of our common stock and could result in an event of default under the 2024 Indenture, which would have a material
adverse effect on our business, results of operations and financial condition.
We currently have no significant product revenues and need to raise additional capital to operate our business,
which may not be available on favorable terms, or at all, and which will have a dilutive effect on our stockholders.
To date, we have not generated significant revenues from product sales and only minimal revenues from research and
development services and other fees, other than the milestone and other payments we have received in connection with our
agreements with Pfizer and Chiesi. For the years ended December 31, 2022, 2021 and 2020, we had net losses from
continuing operations of $14.9 million, $27.6 million and $6.5 million, respectively, primarily as a result of expenses
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incurred through a combination of research and development activities and expenses supporting those activities, which
includes share-based compensation expense. Drug development and commercialization is very capital intensive. We fund
all of our operations and capital expenditures from the revenues we generate from licensing fees and grants, the net
proceeds of equity and debt offerings and other sources. In addition, changes may occur that could consume our existing
capital at a faster rate than projected, including, among others, the cost and timing of regulatory approvals, changes in the
progress of our research and development efforts and the costs of protecting our intellectual property rights.
We will need to finance our future cash needs through corporate collaboration, licensing or similar arrangements, public or
private equity offerings or debt financings. If we are unable to secure additional financing in the future on acceptable terms,
or at all, we may be unable to commence or complete planned preclinical and clinical trials or obtain approval of our drug
candidates from the FDA and other regulatory authorities. In addition, we may be forced to reduce or discontinue product
development or product licensing, reduce or forego sales and marketing efforts and other commercialization activities or
forego attractive business opportunities in order to improve our liquidity and to enable us to continue operations which
would have a material adverse effect on our business and results of operations. Furthermore, any additional source of
financing will likely involve the issuance of our equity securities, which will have a dilutive effect on our stockholders.
We are not currently profitable and delays in achieving profitability, if at all, will have a material adverse effect on
our business and results of operations and could negatively impact the value of our common stock.
We may incur losses for the foreseeable future. We expect to continue to incur significant operating expenditures, and we
anticipate that our expenses will increase in the foreseeable future as we:
● continue to undertake preclinical development and clinical trials for our current and new drug candidates;
● seek regulatory approvals for our drug candidates; and
● seek to in-license additional technologies.
We also may continue to experience negative cash flow for the foreseeable future as we fund our operating losses and
capital expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain
profitability. We may not be able to generate these revenues or achieve profitability in the foreseeable future, if at all.
Delays in achieving profitability, or subsequent failures to maintain profitability, will have a material adverse effect on our
business and results of operations and could negatively impact the value of our common stock.
Risks Related to the Commercialization of Drug Products
There has been continued non-compliance with the terms and conditions of the Brazil Agreement.
We do not control and may not be able to effectively influence Fiocruz’s ability to distribute BioManguinhos
alfataliglicerase in Brazil. Any failure by Fiocruz to comply with the purchase requirements of the Brazil Agreement, or
any other material breach by Fiocruz of the agreement, may have a material adverse effect on our business, results of
operations and financial condition.
We face the risk of lower than anticipated purchases of BioManguinhos alfataliglicerase by the Brazilian MoH. In addition,
we may fail to supply the intended amounts on time, if at all. We also cannot accurately predict the amount of revenues we
will generate under the Brazil Agreement in future periods, if any. Any failure by the Brazilian MoH to purchase
BioManguinhos alfataliglicerase, by us to supply BioManguinhos alfataliglicerase for purchase or by Fiocruz to distribute
BioManguinhos alfataliglicerase in Brazil, or the experience of significant delays in any of the foregoing, may have a
material adverse effect on our business, results of operations and financial condition.
We have limited experience in selling, marketing or distributing products and limited internal capability to do so.
We currently have very limited sales, marketing or distribution capabilities and no experience in building a sales force and
distribution capabilities. Under our arrangements with Pfizer and Chiesi, we have out-licensed the marketing rights to
Elelyso and pegunigalsidase alfa, except that we retained the marketing rights to BioManguinhos alfataliglicerase in
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Brazil. We have not licensed the marketing or commercialization rights to any of our other product candidates to any party.
The commercialization of a drug product requires that we commit significant financial and managerial resources to develop
a marketing and sales force with technical expertise and with supporting distribution capabilities. We may elect to pursue
arrangements regarding the sales and marketing and distribution of one or more of our other product candidates. Our future
revenues may depend, in part, on our ability to enter into and maintain arrangements with our existing partners and other
companies having sales, marketing and distribution capabilities and the ability of such companies to successfully market
and pharmaceutical products on a global scale. Commercialization, marketing, distribution and other similar alliances with
respect to our product and product candidate will subject us to a number of risks, including the following:
● we may be required to relinquish important rights to our products or product candidates;
● we may not be able to control the amount and timing of resources that our distributors or collaborators may
devote to the commercialization of our product candidates;
● our distributors or collaborators may experience financial difficulties;
● our distributors or collaborators may not devote sufficient time to the marketing and sales of our products;
and
● business combinations or significant changes in a collaborator’s business strategy may adversely affect a
collaborator’s willingness or ability to complete its obligations under any arrangement.
Factors that may inhibit our efforts to commercialize our products directly and without strategic partners include:
● the inability to recruit and retain adequate numbers of effective sales and marketing personnel;
● the inability of sales personnel to obtain access to an adequate number of physicians or to pursuade them to
prescribe our products;
● the lack of complementary products to be offered by sales personnel; and
● unforeseen costs and expenses.
We may not be successful in recruiting or retaining the sales and marketing personnel necessary to sell BioManguinhos
alfataliglicerase in Brazil or any of our products upon approval, if at all, which would have a material adverse effect on our
business, results of operations and financial condition.
If physicians, patients, third party payors and others in the medical community do not accept and use taliglucerase
alfa, pegunigalsidase alfa or any of our other product candidates, if approved, our ability to generate revenue from
product sales will be materially impaired.
Physicians and patients, and other healthcare providers, may not accept and use any of our products or any product
candidates, if approved for marketing. Future acceptance and use of any of our products or any product candidates, if
approved, will depend upon a number of factors including:
● perceptions by physicians, patients, third party payors and others in the medical community about the safety
and effectiveness of taliglucerase alfa, pegunigalsidase alfa or our other drug candidates;
● the willingness of the target patient population to try new therapies and of physicians to prescribe these
therapies;
● the prevalence and severity of any side effects, including any limitations or warnings contained in our
products’ approved labeling;
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● pharmacological benefits of taliglucerase alfa, pegunigalsidase alfa or our other drug candidates relative to
competing products and products under development;
● the efficacy and potential advantages relative to competing products and products under development;
● relative convenience and ease of administration;
● effectiveness of education, marketing and distribution efforts by us and our licensees and distributors, if any;
● publicity concerning taliglucerase alfa, pegunigalsidase alfa or our other drug candidates or competing
products and treatments;
● coverage and reimbursement of our products by third party payors; and
● the price for our products and competing products.
A lack of market acceptance of BioManguinhos alfataliglicerase in Brazil, or globally for any of our other products
candidates, if approved, would have a material adverse effect on our business, results of operations and financial condition.
If the market opportunities for other product candidates, and for BioManguinhos alfataliglicerase in Brazil, are
smaller than we believe they are, our revenues may be adversely affected and our business may suffer.
To date, our development efforts have focused mainly on relatively rare disorders with small patient populations, in
particular Gaucher disease and Fabry disease. Currently, most reported estimates of the prevalence of these diseases are
based on studies of small subsets of the population of specific geographic areas, which are then extrapolated to estimate the
prevalence of the diseases in the broader world population. As new studies are performed, the estimated prevalence of
these diseases may change. There can be no assurance that the prevalence of Gaucher disease or Fabry disease in the study
populations, particularly in these newer studies, accurately reflect the prevalence of these diseases in the broader world
population. If the market opportunities for our current product candidates are smaller than we believe they are, our
revenues may be adversely affected and our business may suffer.
Coverage and reimbursement may not be available for one or more of our product candidates, if approved, in all
territories, which could diminish our sales or affect our ability to sell any such products profitably.
Market acceptance and sales of any one or more of our product candidates, if approved, will depend on coverage and
reimbursement policies in the countries in which they are approved for sale. Government authorities and third-party payors,
such as private health insurers and health maintenance organizations, decide which drugs they will pay for and establish
reimbursement levels. Obtaining reimbursement approval for an approved product from governments and other third party
payors is a time consuming and costly process that requires our collaborators or us, as the case may be, to provide
supporting scientific, clinical and cost-effectiveness data for the use of our products, if and when approved, to every payor.
We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement or we might
need to conduct post-marketing studies in order to demonstrate the cost-effectiveness of approved products, if any, to such
payors’ satisfaction. Such studies might require our collaborators or us to commit a significant amount of management time
and financial and other resources. Even if a payor determines that an approved product is eligible for reimbursement, the
payor may impose coverage limitations that preclude payment for some uses that are approved by the FDA or other
regulatory authorities. In addition, full reimbursement may not be available for high priced products. Moreover, eligibility
for coverage does not imply that any approved product will be reimbursed in all cases or at a rate that allows us to make a
profit or even cover our costs. Limited reimbursement amounts may reduce the demand for, or the price of, our product
candidates. If coverage and reimbursement are not available or are available only to limited levels, the sales of our
products, if approved, may be diminished or we may not be able to sell such products profitably.
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We and our collaborating partners may be subject, directly or indirectly, to federal and state healthcare fraud and
abuse and false claims laws and regulations. If we or our collaborating partners are unable to comply, or have not
fully complied, with such laws, we could face substantial penalties.
All marketing activities associated with drug products that are approved for sale in the United States, if any, will be,
directly or indirectly through our customers, subject to numerous federal and state laws governing the marketing and
promotion of pharmaceutical products in the United States, including, without limitation, the federal Anti-Kickback Law,
the federal False Claims Act and HIPAA. These laws may adversely impact, among other things, our proposed sales,
marketing and education programs.
The federal Anti-Kickback Law prohibits persons from knowingly and willfully soliciting, receiving, offering or paying
remuneration, directly or indirectly, to induce either the referral of an individual, or the furnishing, recommending, or
arranging for a good or service, for which payment may be made under a federal healthcare program, such as the Medicare
and Medicaid programs. The term “remuneration” has been broadly interpreted to include anything of value, including for
example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of co-
payments and deductibles, ownership interests and providing anything at less than its fair market value. Despite a series of
narrow safe harbors, the federal Anti-Kickback Law prohibits many arrangements and practices that are lawful in
businesses outside of the healthcare industry. Penalties for violations of the federal Anti-Kickback Law include criminal
penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other state
or federal healthcare programs. Many states have also adopted laws similar to the federal Anti-Kickback Law, some of
which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and
Medicaid programs, and do not contain identical safe harbors.
The federal False Claims Act imposes liability on any person who, among other things, knowingly presents, or causes to be
presented, a false or fraudulent claim for payment by a federal healthcare program. In addition, various states have enacted
false claims laws analogous to the False Claims Act. Many of these state laws apply where a claim is submitted to any
third-party payer and not merely a federal healthcare program. Violations of the federal False Claims Act and the analogous
state laws may result in substantial financial penalties, some as much as three times the actual damages sustained by the
government.
HIPAA created several new federal crimes, including health care fraud, and false statements relating to health care matters.
The health care fraud statute prohibits knowingly and willfully executing a scheme to defraud any health care benefit
program, including private third-party payers. The false statements statute prohibits 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 health care benefits, items or services.
We are unable to predict whether we could be subject to actions under any of these or other fraud and abuse laws, or the
impact of such actions. Moreover, to the extent that taliglucerase alfa, pegunigalsidase alfa or any of our product
candidates, if approved for marketing, will be sold in a foreign country, we and our future collaborators may be subject to
similar foreign laws and regulations. If we or any of our future collaborators are found to be in violation of any of the laws
described above and other applicable state and federal fraud and abuse laws, we may be subject to penalties, including civil
and criminal penalties, damages, fines, exclusion from government healthcare reimbursement programs and the curtailment
or restructuring or our operations, any of which could have a material adverse effect on our business, results of operations
and financial condition.
Risks Related to Intellectual Property Matters
The intellectual property and assets owned by our subsidiaries are subject to security agreements that secure our
payment and other obligations under our convertible notes, and our subsidiaries have guaranteed all of those
obligations.
In connection with the issuance of our 2024 Notes, we entered into new security agreements pursuant to which our
subsidiaries provided first priority security interests in all of their assets, which consist of all of our intellectual property
and other material assets. The security agreements secure certain payment, indemnification and other obligations under the
2024 Notes. If we were to default on certain of our obligations, or in certain other circumstances generally related to
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a bankruptcy or insolvency, holders of our outstanding 2024 Notes could seek to foreclose on the collateral under the
security agreements to obtain satisfaction of our obligations, and our business could be materially and adversely impacted,
which would in turn have a material adverse effect on our results of operations and financial condition.
Furthermore, in connection with the issuance of the 2024 Notes, our subsidiaries guaranteed all of our obligations under the
2024 Indenture. If we were to default on our obligations under the 2024 Indenture, the holders could require our
subsidiaries to satisfy all of those obligations under the guarantees.
If we fail to adequately protect or enforce our intellectual property rights or secure rights to third party patents, the
value of our intellectual property rights would diminish and our business, competitive position and results of
operations would suffer.
As of December 31, 2022, we had more than 30 pending patent applications. However, the filing of a patent application
does not mean that we will be issued a patent, or that any patent eventually issued will be as broad as requested in the
patent application or sufficient to protect our technology. Any modification required to a current patent application may
delay the approval of such patent application which would have a material adverse effect on our business, results of
operations and financial condition. In addition, there are a number of factors that could cause our patents, if granted, to
become invalid or unenforceable or that could cause our patent applications to not be granted, including known or
unknown prior art, deficiencies in the patent application or the lack of originality of the technology. Our competitive
position and future revenues will depend in part on our ability and the ability of our licensors and collaborators to obtain
and maintain patent protection for our products, methods, processes and other technologies, to preserve our trade secrets, to
prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of
third parties. We have filed U.S. and international patent applications for process patents, as well as composition of matter
patents, for taliglucerase alfa, pegunigalsidase alfa and our product candidates. However, we cannot predict:
● the degree and range of protection any patents will afford us against competitors and those who infringe upon
our patents, including whether third parties will find ways to invalidate or otherwise circumvent our licensed
patents;
● if and when patents will issue;
● whether or not others will obtain patents claiming aspects similar to those covered by our licensed patents
and patent applications; or
● whether we will need to initiate litigation or administrative proceedings, which may be costly, whether we
win or lose.
As of December 31, 2022, we held, or had license rights to, more than 80 patents. If patent rights covering our products or
technologies are not sufficiently broad, they may not provide us with sufficient proprietary protection or competitive
advantages against competitors with similar products and technologies. Furthermore, if the USPTO or foreign patent
offices issue patents to us or our licensors, others may challenge the patents or circumvent the patents, or the patent office
or the courts may invalidate the patents. Thus, any patents we own or license from or to third parties may not provide any
protection against our competitors and those who infringe upon our patents.
Furthermore, the life of our patents is limited. The patents we hold, and the patents that may be issued in the future based
on patent applications from the patent families, relating to our ProCellEx protein expression system are expected to expire
by 2025.
We rely on confidentiality agreements that could be breached and may be difficult to enforce which could have a
material adverse effect on our business and competitive position.
Our policy is to enter agreements relating to the non-disclosure of confidential information with third parties, including our
contractors, consultants, advisors and research collaborators, as well as agreements that purport to require the disclosure
and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees and consultants
while we employ them. However, these agreements can be difficult and costly to enforce. Moreover, to
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the extent that our contractors, consultants, advisors and research collaborators apply or independently develop intellectual
property in connection with any of our projects, disputes may arise as to the proprietary rights to the intellectual property. If
a dispute arises, a court may determine that the right belongs to a third party, and enforcement of our rights can be costly
and unpredictable. In addition, we rely on trade secrets and proprietary know-how that we seek to protect in part by
confidentiality agreements with our employees, contractors, consultants, advisors and others. Despite the protective
measures we employ, we still face the risk that:
● these agreements may be breached;
● these agreements may not provide adequate remedies for the applicable type of breach; or
● our trade secrets or proprietary know-how will otherwise become known.
Any breach of our confidentiality agreements or our failure to effectively enforce such agreements may have a material
adverse effect on our business and competitive position.
If we infringe the rights of third parties we could be prevented from selling products, forced to pay damages and
required to defend against litigation which could result in substantial costs and may have a material adverse effect
on our business, results of operations and financial condition.
We have not received to date any claims of infringement by any third parties. However, as our drug candidates progress
into clinical trials and commercialization, if at all, our public profile and that of our drug candidates may be raised and
generate such claims. Defending against such claims, and occurrence of a judgment adverse to us, could result in
unanticipated costs and may have a material adverse effect on our business and competitive position. If our products,
methods, processes and other technologies infringe the proprietary rights of other parties, we may incur substantial costs
and we may have to:
● obtain licenses, which may not be available on commercially reasonable terms, if at all;
● redesign our products or processes to avoid infringement;
● stop using the subject matter claimed in the patents held by others, which could cause us to lose the use of
one or more of our drug candidates;
● defend litigation or administrative proceedings that may be costly whether we win or lose, and which could
result in a substantial diversion of management resources; or
● pay damages.
Any costs incurred in connection with such events or the inability to sell our products may have a material adverse effect
on our business, results of operations and financial condition.
If we cannot meet requirements under our license agreements, we could lose the rights to our products, which could
have a material adverse effect on our business.
We depend on licensing agreements with third parties to maintain the intellectual property rights to certain of our product
candidates. Our license agreements require us to make payments and satisfy performance obligations in order to maintain
our rights under these agreements. All of these agreements last either throughout the life of the patents that are the subject
of the agreements, or with respect to other licensed technology, for a number of years after the first commercial sale of the
relevant product.
In addition, we are responsible for the cost of filing and prosecuting certain patent applications and maintaining certain
issued patents licensed to us. If we do not meet our obligations under our license agreements in a timely manner, we could
lose the rights to our proprietary technology which could have a material adverse effect on our business, results of
operations and financial condition.
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Risks Relating to our Operations in Israel
Significant parts of our operations are located in Israel and, therefore, our results may be adversely affected by
political, economic and military conditions in Israel.
Our executive office and operations are located in the State of Israel. Accordingly, political, economic and military
conditions in Israel directly affect our business. Any armed conflicts, political instability, terrorism, cyberattacks or any
other hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners
could affect adversely our operations. For example, our facilities in northern Israel are in range of rockets that were fired
from Lebanon into Israel during a 2006 war with the Hizbollah in Lebanon, and suffered minimal damages during one of
the rocket attacks. Our insurance policies do not cover damages incurred in connection with these conflicts or for any
resulting disruption in our operations. The Israeli government, as a matter of law, provides coverage for the reinstatement
value of direct damages that are caused by terrorist attacks or acts of war; however, the government may cease providing
such coverage or the coverage might not be enough to cover potential damages. If our facilities are damaged as a result of
hostile action, our operations may be materially adversely affected.
Ongoing and revived hostilities or other Israeli political or economic factors, could prevent or delay shipments of our
products, harm our operations and product development and cause any future sales to decrease. In the event that hostilities
disrupt the ongoing operation of our facilities or the airports and seaports on which we depend to import and export our
supplies, materials, drug substance and other products, our operations may be materially adverse affected.
Our operations may be disrupted by the obligations of our personnel to perform military service which could have a
material adverse effect on our business.
Many of our male employees in Israel, including members of senior management, are obligated to perform up to
one month (in some cases more) of annual military reserve duty until they reach the age of 45 and, in the event of a
military conflict, could be called to active duty. Our operations could be disrupted by the absence of a significant number
of our employees related to military service or the absence for extended periods of military service of one or more of our
key employees. A disruption may have a material adverse effect on our business, results of operations and financial
condition.
Because a certain portion of our expenses is incurred in New Israeli Shekels, our results of operations may be
seriously harmed by currency fluctuations and inflation.
We report our financial statements in U.S. dollars, our functional currency. Although most of our expenses are incurred in
U.S. dollars, we pay a portion of our expenses in New Israeli Shekels, or NIS, and as a result, we are exposed to risk to the
extent that the inflation rate in Israel exceeds the rate of devaluation of the NIS in relation to the U.S. dollar or if the timing
of these devaluations lags behind inflation in Israel. In that event, the U.S. dollar cost of our operations in Israel will
increase and our U.S. dollar-measured results of operations will be adversely affected. To the extent that the value of the
NIS increases against the U.S. dollar, our expenses on a dollar cost basis increase. Our operations also could be adversely
affected if we are unable to guard against currency fluctuations in the future. To date, we have not engaged in hedging
transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financial exposure from
fluctuations in the exchange rate of the U.S dollar against the NIS. These measures, however, may not adequately protect
us from material adverse effects.
The tax benefits available to us require that we meet several conditions and may be terminated or reduced in the
future, which would increase our taxes.
We are able to take advantage of tax exemptions and reductions resulting from the “Approved Enterprise” status of our
facilities in Israel. To remain eligible for these tax benefits, we must continue to meet certain conditions, including making
specified investments in property and equipment, and financing at least 30% of such investments with share capital. If we
fail to meet these conditions in the future, the tax benefits would be canceled and we may be required to refund any tax
benefits we already have enjoyed. These tax benefits are subject to investment policy by the Investment Center and may
not be continued in the future at their current levels or at any level. In recent years the Israeli government has reduced the
benefits available and has indicated that it may further reduce or eliminate some of these
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benefits in the future. The termination or reduction of these tax benefits or our inability to qualify for additional “Approved
Enterprise” approvals may increase our tax expenses in the future, which would reduce our expected profits and adversely
affect our business and results of operations. Additionally, if we increase our activities outside of Israel, for example, by
future acquisitions, such increased activities generally may not be eligible for inclusion in Israeli tax benefit programs.
The Israeli government grants we have received for certain research and development expenditures restrict our
ability to manufacture products and transfer technologies outside of Israel and require us to satisfy specified
conditions. If we fail to satisfy these conditions, we may be required to refund grants previously received together
with interest and penalties which could have a material adverse effect on our business and results of operations.
In the past, our research and development efforts have been financed, in part, through grants that we have received from
NATI. We, therefore, must comply with the requirements of the Research Law. Under the Research Law we are prohibited
from manufacturing products developed using these grants outside of the State of Israel without special approvals, although
the Research Law does enable companies to seek prior approval for conducting manufacturing activities outside of Israel
without being subject to increased royalties. We may not receive the required approvals for any proposed transfer of
manufacturing activities. Even if we do receive approval to manufacture products developed with government grants
outside of Israel, we may be required to pay an increased total amount of royalties (possibly up to 300% of the grant
amounts plus interest), depending on the manufacturing volume that is performed outside of Israel, as well as at a possibly
increased royalty rate. This restriction may impair our ability to outsource manufacturing or engage in similar
arrangements for those products or technologies.
Additionally, under the Research Law, Protalix Ltd. is prohibited from transferring NATI-financed technologies and related
intellectual property rights outside of the State of Israel, except under limited circumstances and only with the approval of
NATI Council or the Research Committee. Protalix Ltd. may not receive the required approvals for any proposed transfer
and, if received, Protalix Ltd. may be required to pay NATI a portion of the consideration that it receives upon any sale of
such technology by a non-Israeli entity. The scope of the support received, the royalties that Protalix Ltd. has already paid
to NATI, the amount of time that has elapsed between the date on which the know-how was transferred and the date on
which NATI grants were received and the sale price and the form of transaction will be taken into account in order to
calculate the amount of the payment to NATI. Approval of the transfer of technology to residents of the State of Israel is
required, and may be granted in specific circumstances only if the recipient abides by the provisions of applicable laws,
including the restrictions on the transfer of know-how and the obligation to pay royalties. No assurance can be made that
approval to any such transfer, if requested, will be granted.
These restrictions may impair our ability to sell our technology assets or to outsource manufacturing outside of Israel. The
restrictions will continue to apply for a certain period of time even after we have repaid the full amount of royalties payable
for the grants. If we fail to satisfy the conditions of the Research Law, we may be required to refund certain grants
previously received together with interest and penalties, and may become subject to criminal charges, any of which could
have a material adverse effect on our business, results of operations and financial condition.
Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability
provisions of the U.S. federal securities laws against us, our executive officers and most of our directors or asserting
U.S. securities laws claims in Israel.
Most of our directors and all of our executive officers are residents of Israel, and accordingly, most of their assets and our
assets are located outside the United States. Service of process upon us or our non-U.S. resident directors and officers and
enforcement of judgments obtained in the United States against us or our non-U.S. resident directors and executive officers
may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be
difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the
civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of
U.S. securities laws against us or our non-U.S. resident officers and directors because Israel may not be the most
appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that
Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S.
law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be
governed by Israeli law. There is little binding case law in Israel addressing the matters
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described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect
on judgments rendered against us or our non-U.S. resident officers and directors.
Moreover, among other reasons, including but not limited to, fraud or absence of due process, or the existence of a
judgment which is at variance with another judgment that was given in the same matter if a suit in the same matter between
the same parties was pending before a court or tribunal in Israel, an Israeli court will not enforce a non-Israeli judgment if
it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional
cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.
Risks Related to Investing in our Common Stock
The market price of our common stock may fluctuate significantly.
The market price of our common stock has experienced significant volatility. The securities of life sciences companies
often experience significant volatility in connection with clinical trial and regulatory announcements.
We anticipate that the market price of our common stock is likely to continue to fluctuate significantly in response to
numerous factors, some of which are beyond our control, such as:
● the timing of and any delays in anticipated marketing approvals for pegunigalsidase alfa;
● sales of pegunigalsidase alfa, if approved for marketing;
● our sale of shares of our common stock under our ATM program, or market expectations that such sales are
to be executed;
● purchases of BioManguinhos alfataliglicerase in Brazil;
● the progress and results of the studies of our other product candidates;
● developments concerning intellectual property rights and regulatory approvals;
● the announcement of new products or product enhancements by us or our competitors;
● variations in our and our competitors’ results of operations;
● changes in earnings estimates or recommendations by securities analysts;
● developments in the biotechnology industry; and
● general market conditions and other factors, including factors unrelated to our operating performance.
Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a
decline in the value of our common stock. Price volatility of our common stock may be worse when the trading volume of
our common stock is low. We have not paid, and do not expect to pay, any cash dividends on our common stock as any
earnings generated from future operations will be used to finance our operations. As a result, investors will not realize any
income from an investment in our common stock until and unless their shares are sold at a profit.
Future sales of our common stock could reduce our stock price.
If our stockholders sell substantial amounts of our common stock, including shares of our common stock issuable upon
conversion of our outstanding convertible notes or warrants, or if we sell a substantial amount of our common stock under
our ATM program, the market price of our common stock could decrease significantly. The perception in the public market
that our existing stockholders might sell shares of common stock could also depress the trading price of our common stock.
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A substantial majority of our outstanding shares of our common stock are freely tradable without restriction or further
registration under the federal securities laws. In addition, we may sell additional shares of our common stock in the future
to raise capital. A substantial number of shares of our common stock are reserved for issuance upon the exercise of stock
options, upon conversion of our outstanding convertible notes and upon the exercise of our outstanding warrants. At
December 31, 2022, there were outstanding options to purchase common stock issued covering approximately 5.5 million
shares of our common stock with a weighted average exercise price of $2.28 per share. Also at December 31, 2022, there
were 136,738 shares of common stock available for future for issuance in connection with future grants of incentives under
our Amended and Restated Pro BioTherapeutics, Inc. 2006 Stock Incentive Plan, as amended, approximately 21.5 million
shares of common stock reserved for issuance upon conversion of our outstanding 2024 Notes and approximately
14.6 million shares of common stock reserved for issuance upon the exercise of our outstanding warrants. The issuance and
sale of substantial amounts of common stock, or the perception that such issuances and sales may occur, could adversely
affect the market price of our common stock and impair our ability to raise capital through the sale of additional equity
securities.
If securities analysts stop publishing research or reports about us or our business or if they downgrade our common
stock, the market price of our common stock could decline.
The market for our common stock relies in part on the research and reports that industry or financial analysts publish about
us or our business. We do not control these analysts. If any analyst who covers us downgrades our stock or lowers its future
stock price targets or estimates of our operating results, the market price for our common stock could decline rapidly.
Furthermore, if any analyst ceases to cover us, we could lose visibility in the market, which in turn could cause the market
price of our common stock to decline.
Our common stock is listed to trade on more than one stock exchange, and this may result in price variations.
Our common stock is listed for trade on both the NYSE American and the TASE, although we will be delisting from the
TASE effective as of March 22, 2023. Dual-listing may result in price variations between the exchanges due to a number of
factors. First, our common stock is traded in U.S. dollars on the NYSE American and in NIS on the TASE. In addition, the
exchanges are open for trade at different times of the day and on different days. For example, the TASE opens generally
during Israeli business hours, Sunday through Thursday, while the NYSE American opens generally during U.S. business
hours, Monday through Friday. The two exchanges also have differing vacation schedules. Differences in the trading
schedules, as well as volatility in the exchange rate of the two currencies, among other factors, may result different trading
prices for our common stock on the two exchanges. Other external influences may have different effects on the trading
price of our common stock on the two exchanges.
Compliance with changing regulation of corporate governance and public disclosure may result in additional
expenses, divert management’s attention from operating our business which could have a material adverse effect on
our business.
The laws, rules, regulations and standards including the rules promulgated by the national securities exchanges, including
the NYSE American, to which we are subject are changed and/or amended from time to time. New or changed laws, rules,
regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a
result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies,
which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing
revisions to disclosure and governance practices. As a result, our efforts to comply with evolving laws, rules, regulations
and standards are likely to continue to result in increased general and administrative expenses and a diversion of
management time and attention from revenue-generating activities to compliance activities. Members of our Board of
Directors and our executive officers, could face an increased risk of personal liability in connection with the performance
of their duties. As a result, we may have difficulty attracting and retaining qualified directors and executive officers, which
could have a material adverse effect on our business. If our efforts to comply with new or changed laws, regulations and
standards differ from the activities intended by regulatory or governing bodies, we may incur additional expenses to
comply with standards set by regulatory authorities or governing bodies which would have a material adverse effect on our
business, results of operations and financial condition.
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The issuance of preferred stock or additional shares of common stock could adversely affect the rights of our
stockholders.
Our Board of Directors is authorized to issue up to 100,000,000 shares of preferred stock without any further action on the
part of our stockholders. Our Board of Directors has the authority to fix and determine the voting rights, rights of
redemption and other rights and preferences of preferred stock. Currently, we have no shares of preferred stock
outstanding.
Our Board of Directors may, at any time, authorize the issuance of a series of preferred stock that would grant to holders
the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to
the holders of common stock and the right to the redemption of the shares, together with a premium, before the redemption
of our common stock, which may have a material adverse effect on the rights of the holders of our common stock. In
addition, our Board of Directors, without further stockholder approval, may, at any time, issue large blocks of preferred
stock. In addition, the ability of our Board of Directors to issue shares of preferred stock without any further action on the
part of our stockholders may impede a takeover of our company and may prevent a transaction that is favorable to our
stockholders.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We maintain a U.S. corporate office in Hackensack, New Jersey. Our headquarters, including a manufacturing facility,
executive offices and other facilities, are located in Carmiel, Israel. Our facilities in Israel currently contain approximately
14,700 sq/ft of manufacturing space and 3,400 sq/ft for a pilot plant, 11,700 sq/ft for offsite warehouse space and
approximately 43,100 sq/ft of laboratories, front warehouse and office space, and are leased at a rate of approximately
$81,000 per month. In addition, we are entitled to use an additional 14,500 sq/ft in the same facility, which we intend to
utilize in connection with an anticipated expansion of our manufacturing facilities. Our facilities are equipped with the
requisite laboratory services required to conduct our business, and we believe that the existing facilities are adequate to
meet our needs for the foreseeable future. Our original lease for the facility was in effect until 2016 and we have exercised
two of three options to extend the term, each for an additional five-year period. The lease is currently in effect until 2026
and we retain an additional option to extend the term for another five-year period thereafter. Upon the exercise of each
option to extend the term of the lease includes a 10% increase to the then current base rent.
Item 3. Legal Proceedings
We are not involved in any material legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our common stock is traded on the NYSE American under the symbol “PLX.” Our common stock is also listed on the
TASE under the symbol “PLX;” however, we have decided to voluntarily delist our common stock from the TASE. The
delisting will take effect on March 22, 2023 and the last trading date on the TASE will be March 20, 2023. As of
February 15, 2023, there were approximately 65 holders of record of our common stock. A substantially greater number
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of holders of our common stock are “street name” or beneficial holders, whose shares are held of record by banks, brokers
and other financial institutions.
Equity Compensation Plan Information
The following table provides information as of December 31, 2022 with respect to the shares of our common stock that
may be issued under our existing equity compensation plan.
A
B
Number of Securities
to be Issued
Upon Exercise of
Weighted Average
Exercise Price of
Outstanding Options Outstanding Options
C
Number of Securities Remaining
Available for Future Issuance
Under Equity Compensation Plans
(Excluding Securities Reflected in
Column A)
5,519,315
$
—
$
5,519,315
2.28
—
2.28
136,738
—
136,738
Plan Category
Equity Compensation Plans Approved by
Stockholders
Equity Compensation Plans Not Approved by
Stockholders
Total
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is
intended to help the reader understand our results of operations and financial condition. The MD&A is provided as a
supplement to, and should be together with our consolidated financial statements and the related notes included elsewhere
in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis, particularly with
respect to our plans and strategy for our business and related financing, include forward-looking statements that involve
risks and uncertainties. You should read “Risk Factors” in Item 1A of this Annual Report on Form 10-K for a discussion of
important factors that could cause actual results to differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and analysis.
Overview
We are a biopharmaceutical company focused on the development and commercialization of recombinant therapeutic
proteins primarily based on our proprietary ProCellEx® protein expression system. We developed our first commercial
drug product, Elelyso®, using our ProCellEx system and we are now focused on utilizing the system to develop a pipeline
of proprietary, clinically superior versions of complex recombinant therapeutic proteins that primarily target large,
established pharmaceutical markets and that in most cases rely upon known biological mechanisms of action. With our
experience to date, we believe ProCellEx will enable us to develop additional proprietary recombinant proteins that are
therapeutically superior to existing recombinant proteins currently marketed for the same indications, including applying
the unique properties of our ProCellEx system for the oral delivery of therapeutic proteins.
The most advanced investigational drug in our product pipeline is pegunigalsidase alfa, a therapeutic protein candidate for
the treatment of Fabry disease, a rare, genetic lysosomal disorder, which is the subject of a phase III clinical program. The
PRX-102 phase III clinical program includes three separate studies which are referred to as the BALANCE study, the
BRIDGE study and the BRIGHT study, each of which has been completed. The studies were designed to evaluate the
potential for improved efficacy and better quality of life for adult patients with Fabry disease and to evaluate the safety of
our drug/therapy. In addition, the Phase III clinical program includes two extension studies in which subjects that
participated in our phase I/II clinical trials and phase III clinical trials may enroll and continue to be treated with PRX-102.
On November 9, 2022, we, together with Chiesi, our development and commercialization partner for PRX-102,
resubmitted to the FDA a BLA for PRX-102 for the potential treatment of adult patients with Fabry disease. The initial
BLA for PRX-102 was submitted to the FDA on May 27, 2020 under the FDA’s Accelerated Approval pathway, and was
subsequently accepted by the FDA and granted Priority Review designation. However, in April 2021, the FDA issued a
CRL in response to the initial BLA. In preparation for the BLA resubmission, we and Chiesi participated in a Type A (End
of Review) meeting with the FDA on September 9, 2021. As part of the meeting minutes provided by the FDA, which
included the preliminary comments and meeting discussion, the FDA, in principle, agreed that the data package proposed
to the FDA for a BLA resubmission has the potential to support a traditional approval of PRX-102 for the treatment of
Fabry disease. The data package in the BLA resubmission, given the change in the regulatory landscape in the United
States, includes the final two-year analyses of our BALANCE study, which were completed in July 2022, and long-term
data from our open-label extension study of PRX-102 in adult patients treated with a 2 mg/kg every four weeks dosage of
PRX-102.
On February 7, 2022, we, together with Chiesi, submitted an MAA to the EMA which was subsequently validated by the
EMA. The submission was made after the October 8, 2021 meeting we held, together with Chiesi, with the Rapporteur and
Co-Rapporteur of the EMA regarding PRX-102.
The MAA submission includes a comprehensive set of preclinical, clinical and manufacturing data compiled from our
completed and ongoing clinical studies evaluating PRX-102 as a potential alternative treatment for adult patients with
Fabry disease. The submission was supported by the 12–month interim data analysis generated from the BALANCE study.
Data generated from our BRIDGE study, our phase I/II clinical trial in naive or untreated patients, and from our extension
study with 1 mg/kg every two weeks were also included in the submission. In addition, the MAA includes data from our
completed 12–month switch–over phase III BRIGHT study to support an additional potential treatment regimen for Fabry
patients. As part of the EMA review process, we and Chiesi received the Day 120 list of questions in June
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2022, and the full response package thereto was submitted to the EMA in September 2022 (following a 3-month clock-stop
period). An essential portion of the response included the submission of the final analysis of the two-year BALANCE study
(the final Clinical Study Report), and an interim analysis of our long-term, open-label extension study of PRX-102 in adult
patients with Fabry disease treated with the 2 mg/kg every four weeks dosage.
On February 24, 2023, we, together with Chiesi, announced that CHMP has adopted a positive opinion, recommending
marketing authorization for PRX-102. The CHMP opinion is now referred for final action to the EC. A final EC decision
on the MAA is expected in the beginning of May 2023.
In addition to PRX-102, our product pipeline currently includes, among other candidates:
(1)
modified enzyme to treat severe gout; and
PRX-115, our plant cell-expressed recombinant PEGylated uricase (urate oxidase) – a chemically
(2)
designed to elongate half-life in the circulation for NETs-related diseases.
PRX-119, our plant cell-expressed PEGylated recombinant human DNase I product candidate being
Obtaining marketing approval with respect to any product candidate in any country is dependent on our ability to
implement the necessary regulatory steps required to obtain such approvals. We cannot reasonably predict the outcome of
these activities.
On August 25, 2021, we completed exchanges, or the Exchanges, of our outstanding 7.50% Senior Secured Convertible
Notes due 2021, or the2021 Notes, with institutional note holders of a substantial majority of the 2021 Notes. The
Exchanges involved the exchange of an aggregate of $54.65 million principal amount of our outstanding 2021 Notes for an
aggregate of $28.75 million principal amount of newly issued 2024 Notes, $25.90 million in cash, and approximately
$1.1 million in cash representing accrued and unpaid interest through the closing date. The initial conversion rate for the
2024 Notes is 563.2216 shares of common stock, par value $0.001 per share, or the common Stock, for each $1,000
principal amount of 2024 Notes (equivalent to an initial conversion price of approximately $1.7755 per share of common
Stock), subject to adjustment in certain circumstances. This initial conversion price represents a premium of approximately
32.5% relative to the closing price of our common stock on the NYSE American on August 13, 2021.
On July 2, 2021, we entered into an At The Market Offering Agreement, or the Sales Agreement, with H.C. Wainwright &
Co., LLC, as our sales agent, or the Agent, which was amended on May 2, 2022. Pursuant to the terms of the Sales
Agreement, we may sell from time to time through the Agent shares of its common stock, par value $0.001 per share, or
the common Stock, having an aggregate offering price of up to $20.0 million, or the ATM Shares. Upon execution of the
Sales Agreement, we terminated the ATM Equity OfferingSM Sales Agreement, or the BofA Agreement, we had entered
into on October 1, 2020 with BofA Securities, Inc., or BofA Securities. During the term of the sales agreement with BofA
Securities, we sold a total of 3,296,123 shares of common stock for total gross proceeds of approximately $13.8 million. As
of December 31, 2022, shares of our common stock for total gross proceeds of approximately $11.3 million remain
available to be sold under the Sales Agreement.
On February 17, 2021, we closed a public offering of our common Stock, raising gross proceeds of approximately
$40.2 million at a price equal to $4.60 per share, before deducting the underwriting discount and estimated expenses of the
offering. BofA Securities acted as book-running manager for the offering with Oppenheimer & Co. acting as co-manager.
On March 18, 2020, we completed a private placement of our common Stock and warrants. In connection with the offering,
we issued 17,604,423 unregistered shares of common Stock at a purchase price per share of $2.485 and warrants to
purchase an additional 17,604,423 shares of common Stock at an exercise price of $2.36 per share. The warrants were
exercisable commencing six months following their issuance for a period of five years from the date of issuance. For
accounting purposes, the warrants are classified as equity considering the warrants’ terms. The net proceeds generated from
the private placement were approximately $41.3 million, after deducting advisory fees and other estimated offering
expenses.
On October 19, 2017, Protalix Ltd. and Chiesi entered into the Chiesi Ex-US Agreement pursuant to which Protalix Ltd.
granted to Chiesi an exclusive license for all markets outside of the United States to commercialize pegunigalsidase alfa.
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On July 23, 2018, Protalix Ltd. and Chiesi entered into the Chiesi US Agreement with respect to the commercialization of
pegunigalsidase alfa in the United States.
Under each of the Chiesi Ex-US Agreement and the Chiesi US Agreement, collectively, the Chiesi Agreements, Chiesi
made an upfront payment to Protalix Ltd. of $25.0 million in connection with the execution of each agreement. In addition,
under the Chiesi Ex-US Agreement, Protalix Ltd. is entitled to additional payments of up to $25.0 million in
pegunigalsidase alfa development costs, and to receive additional payments of up to $320.0 million, in the aggregate, in
regulatory and commercial milestone payments. Under the Chiesi US Agreement, Protalix Ltd. is entitled to payments of
up to a maximum of $20.0 million to cover development costs for pegunigalsidase alfa, and to receive additional payments
of up to a maximum of $760.0 million, in the aggregate, in regulatory and commercial milestone payments. To date,
Protalix Ltd. has received the complete amount of development costs to which it is entitled under the Chiesi Agreements.
Under the terms of both of the Chiesi Agreements, Protalix Ltd. agreed to manufacture all of the pegunigalsidase alfa
needed under the agreements, subject to certain exceptions, and Chiesi agreed to purchase pegunigalsidase alfa from
Protalix, subject to certain terms and conditions. Under the Chiesi Ex-US Agreement, Chiesi is required to make tiered
payments of 15% to 35% of its net sales, depending on the amount of annual sales outside of the United States, as
consideration for product supply. Under the Chiesi US Agreement, Chiesi is required to make tiered payments of 15% to
40% of its net sales, depending on the amount of annual sales in the United States, as consideration for product supply.
On May 13, 2021, we signed a binding term sheet with Chiesi pursuant to which we and Chiesi amended the Chiesi
Agreements in order to provide us with near-term capital. Chiesi agreed to make a $10.0 million payment to us before the
end of the second quarter of 2021 in exchange for a $25.0 million reduction in a longer term regulatory milestone payment
provided in the Chiesi EX-US Agreement. All other regulatory and commercial milestone payments remain unchanged. We
received the payment in June 2021. We also agreed to negotiate certain manufacturing related matters.
Since its approval by the FDA, taliglucerase alfa has been marketed by Pfizer in accordance with the Pfizer Agreement. In
October 2015, Protalix Ltd. and Pfizer entered into the Amended Pfizer Agreement pursuant to which we sold to Pfizer its
share in the collaboration created under the Pfizer Agreement for the commercialization of Elelyso. As part of the sale, we
agreed to transfer our rights to Elelyso in Israel to Pfizer while gaining full rights to it in Brazil. Under the Amended Pfizer
Agreement, Pfizer is entitled to all of the revenues, and is responsible for 100% of expenses, globally for Elelyso,
excluding Brazil where we are responsible for all expenses and retain all revenues.
On June 18, 2013, we entered into the Brazil Agreement with Fiocruz. Fiocruz’s purchases of BioManguinhos
alfataliglicerase to date have been significantly below certain agreed-upon purchase milestones and, accordingly, we have
the right to terminate the Brazil Agreement. Notwithstanding the termination right, we are, at this time, continuing to
supply BioManguinhos alfataliglicerase to Fiocruz and patients continue to be treated with BioManguinhos
alfataliglicerase in Brazil.
We believe that our cash and cash equivalents and short-term bank deposits as of December 31, 2022 are sufficient to
satisfy our capital needs for at least 12 months from the date that these financial statements are issued. In addition, under
the terms of our outstanding 7.50% Senior Secured Convertible Notes due 2024 (the “2024 Notes, we are required to
maintain a minimum cash balance of at least $7.5 million.
We have licensed the rights to commercialize taliglucerase alfa worldwide (other than Brazil) to Pfizer, and the rights to
commercialize pegunigalsidase alfa worldwide to Chiesi. Otherwise, we hold the worldwide commercialization rights to
our other proprietary development candidates. In addition, we continuously evaluate potential strategic marketing
partnerships as well as collaboration programs with biotechnology and pharmaceutical companies and academic research
institutes.
Critical Accounting Policies
Our significant accounting policies are more fully described in note 1 to our consolidated financial statements appearing at
the end of this Annual Report on Form 10-K. We believe that the accounting policies below are critical for one to fully
understand and evaluate our financial condition and results of operations.
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The discussion and analysis of our financial condition and results of operations is based on our financial statements, which
we prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial
statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and
expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those
described in greater detail below. We base our estimates on historical experience and on various other factors that we
believe are reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Revenues
Our primary sources of revenues include our sales of BioManguinhos alfataliglicerase in Brazil, of drug substance to Pfizer
under our Amended Pfizer Agreement and of drug product to Chiesi under the Chiesi Agreements. We recognize revenue
from the Amended Pfizer Agreement at a point in time when control over the product is transferred to customers (upon
delivery).
We also generate revenues from the Chiesi Agreements. According to Accounting Standards Codification 606, Revenue
from Contracts with Customers, and all the related amendments, or ASC 606, a performance obligation is a promise to
provide a distinct good or service or a series of distinct goods or services. Goods and services that are not distinct are
bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created. A good or
service promised to a customer is distinct if the customer can benefit from the good or service either on its own or together
with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the
customer is separately identifiable from other promises in the contract.
We have identified two performance obligations in the Chiesi Agreements as follows: (1) the license and research and
development services and (2) contingent performance obligation regarding future manufacturing.
We determined that the license together with the research and development services should be combined into a single
performance obligation since Chiesi cannot benefit from the license without the research and development services. The
research and development services are highly specialized and are dependent on the supply of the drug.
The future manufacturing is contingent on regulatory approvals of the drug and we deem these services to be separately
identifiable from other performance obligations in the contract. Manufacturing services post-regulatory approval are not
interdependent or interrelated with the license and research and development services.
The transaction price of the Chiesi Agreements was comprised of fixed consideration and variable consideration (capped
research and development reimbursements). Under ASC 606, the consideration to which we would be entitled upon the
achievement of contractual milestones, which are contingent upon the occurrence of future events, are a form of variable
consideration. We estimate variable consideration using the most likely method. Amounts included in the transaction price
are recognized only when it is probable that a significant reversal of cumulative revenues will not occur. Prior to
recognizing revenue from variable consideration, we use significant judgment to determine the probability of a significant
reversal of such revenue.
Since the customer benefits from the research and development services as the entity performs the service, revenue from
granting the license and the research and development services is recognized over time using the cost-to-cost method. We
used significant judgment when we determined the costs expected to be incurred upon satisfying the identified performance
obligation.
Revenue from additional research and development services ordered by Chiesi is recognized over time using the cost-to-
cost method.
Research and Development Expense
We expect our research and development expense to remain our primary expense in the near future as we continue to
develop our product candidates. Research and development expense consists of:
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● internal costs associated with research and development activities;
● payments made to third party contract research organizations, investigative/clinical sites and consultants;
● manufacturing development costs;
● personnel-related expenses, including salaries, benefits, travel, and related costs for the personnel involved in
research and development;
● activities relating to the advancement of product candidates through preclinical studies and clinical trials; and
● facilities and other allocated expenses, which include direct and allocated expenses for rent and maintenance
of facilities, as well as laboratory and other supplies.
The following table identifies our current major research and development projects:
Project
PRX-102 – pegunigalsidase alfa
Status
BALANCE, BRIDGE and BRIGHT
studies complete; extension studies
ongoing
Expected Near Term Milestones
Following the positive opinion form
the CHMP, EMA response to MAA
expected by May 3, 2023, and the
FDA PDUFA date is May 9, 2023.
PRX-115 – Uricase
Preclinical
Phase I clinical trial to commence in
the first half of 2023.
PRX-119 – Long Acting DNase I
Preclinical
We anticipate incurring increasing costs in connection with the continued development of all of the product candidates in
our pipeline. Our internal resources, employees and infrastructure are not tied to any individual research project and are
typically deployed across all of our projects. We currently do not record and maintain research and development costs per
project.
The costs and expenses of our projects are partially funded by grants we have received from NATI. Each grant is deducted
from the related research and development expenses as the costs are incurred. For additional information regarding the
grant process, see “Business—Israeli Government Programs— Encouragement of Industrial Research, Development and
Technology Innovation, 1984” in Item 1 of this Annual Report. There can be no assurance that we will continue to receive
grants from NATI in amounts sufficient for our operations, if at all. In addition, under the two Chiesi Agreements,
Protalix Ltd. was entitled to payments of up to $45.0 million in the aggregate to cover development costs for
pegunigalsidase alfa, capped at $17.5 million per year. To date, Protalix Ltd. has received all of the development costs to
which it is entitled under the Chiesi Agreements.
At this time, due to the inherently unpredictable nature of preclinical and clinical development processes and given the
early stage of our preclinical product development programs, we are unable to estimate with any certainty the costs we will
incur in the continued development of the product candidates in our pipeline for potential commercialization. Clinical
development timelines, the probability of success and development costs can differ materially from expectations. The
current focus of our product development efforts are on pegunigalsidase alfa. Our future research and development
expenses for pegunigalsidase alfa and the other product candidates will depend on the clinical success of each product
candidate, as well as ongoing assessments of each product candidate’s commercial potential. In addition, we cannot
forecast with any degree of certainty which product candidates may be subject to future collaborations, when such
arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and
capital requirements. See “Risk Factors—If we are unable to develop and commercialize our product candidates, our
business will be adversely affected” and “—We may not obtain the necessary U.S., EMA or other worldwide regulatory
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approvals to commercialize our drug candidates in a timely manner, if at all, which would have a material adverse effect on
our business, results of operations and financial condition.”
We expect our research and development expenses to continue to be our primary expense in the future as we continue the
advancement of our clinical trials and preclinical product development programs for our product candidates, particularly
with respect to the development of pegunigalsidase alfa. The lengthy process of completing clinical trials and seeking
regulatory approvals for our product candidates requires expenditure of substantial resources. Any failure or delay in
completing clinical trials, or in obtaining regulatory approvals, could cause a delay in generating product revenue and
cause our research and development expense to increase and, in turn, have a material adverse effect on our operations. Due
to the factors set forth above, we are not able to estimate with any certainty when we would recognize any net cash inflows
from our projects. See “Risk Factors—Clinical trials are very expensive, time-consuming and difficult to design and
implement and may result in unforeseen costs which may have a material adverse effect on our business, results of
operations and financial condition.”
Share-Based Compensation
We measure share-based compensation cost for all share-based awards at the fair value on the grant date and recognition of
share-based compensation over the related service period. The fair value of stock options is determined based on the
number of shares granted and the price of our common stock, and calculated based on the Black-Scholes valuation model.
For grants made to employees and non-employees, we recognize the fair value of the grant as expense over the service
period using the accelerated method.
The guidance requires companies to estimate the expected term of the option rather than simply using the contractual term
of an option. Because of lack of sufficient data on past option exercises by employees, the expected term of the options
could not be based on historic exercise patterns. Accordingly, we adopted the simplified method, according to which
companies may calculate the expected term as the average between the vesting date and the expiration date, assuming the
option was granted as a “plain vanilla” option.
In performing the valuation, we assumed an expected 0% dividend yield in the previous years and in the next years. We do
not have a dividend policy and given the lack of profitability, dividends are not expected in the foreseeable future, if at all.
The guidance stipulates a number of factors that should be considered when estimating the expected volatility, including
the implied volatility of traded options, historical volatility and the period that the shares of the company are being publicly
traded.
The risk-free interest rate used in the valuation of the options is based on the implied yield of U.S. federal reserve zero–
coupon government bonds. The remaining term of the bonds used for each valuation was equal to the expected term of the
grant. This methodology has been applied to all grants valued by us. The guidance requires the use of a risk–free interest
rate based on the implied yield currently available on zero–coupon government issues of the country in whose currency the
exercise price is expressed, with a remaining term equal to the expected life of the option being valued. This requirement
has been applied for all grants valued as part of this report.
Convertible Notes
The outstanding convertible notes are accounted for using the guidance set forth in the Financial Accounting Standards
Board, or the FASB, Accounting Standards Codification, or ASC, 815 requiring that we determine whether the embedded
conversion option must be separated and accounted for separately. ASC 470-20 regarding debt with conversion and other
options requires the issuer of a convertible debt instrument that may be settled in cash upon conversion to separately
account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the
issuer’s nonconvertible debt borrowing rate. The 2021 Notes were accounted for partially as liability and equity
components of the instrument and partially as a debt host contract with an embedded derivative resulting from the
conversion feature. The 2024 Notes were accounted for as a liability (debt) and equity component (conversion option) as
the convertible notes may be settled wholly or partly in cash, at our option, when converted.
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Issuance costs regarding the issuance of the 2021 Notes, as well as the debt discount and debt issuance costs from the
issuance of the 2024 Notes, were deferred and amortized over the applicable convertible notes period using the effective
interest rate.
On August 25, 2021, we completed the Exchanges of a substantial majority of the 2021 Notes with certain institutional
note holders. The Exchanges involved the exchange of an aggregate of $54.65 million principal amount of our outstanding
2021 Notes for an aggregate of $28.75 million principal amount of newly issued 2024 Notes, $25.90 million in cash, and
approximately $1.1 million in cash representing accrued and unpaid interest through the closing date. The initial
conversion rate for the 2024 Notes is 563.2216 shares of common stock for each $1,000 principal amount of 2024 Notes
(equivalent to an initial conversion price of approximately $1.7755 per share of the common stock), subject to adjustment
in certain circumstances. This initial conversion price represents a premium of approximately 32.5% relative to the closing
price of our common stock on the NYSE American on August 13, 2021. The Exchanges are described in greater detail in
Note 10 to the consolidated financial statements.
For accounting purposes, as the terms of the 2021 Notes and the 2024 Notes are substantially different, the Exchanges were
considered an extinguishment of debt. We allocated the fair value of the consideration transferred to the participating note
holders between the 2021 Notes and their equity component based on the fair value of the liability component before the
extinguishment, and the remainder was allocated to the equity component. As a result, we recognized a loss from
extinguishment in the statement of operations equal to $0.8 million due to derecognition of the liability component and a
reduction of stockholders’ equity of $12.2 million.
As of December 31, 2022, a total of $28.75 million aggregate principal amount of the 2024 Notes were outstanding. In
addition, as of December 31, 2022 and 2021, none of the 2021 Notes were outstanding.
Results of Operations
Year ended December 31, 2022 Compared to the Year Ended December 31, 2021
Revenues from Selling Goods
We recorded revenues of $25.3 million for the year ended December 31, 2022, an increase of $8.6 million, or 51%,
compared to revenues of $16.7 million for the year ended December 31, 2021. The increase resulted from an increase of
$2.2 million in sales to Pfizer, an increase of $3.1 million in sales to Brazil and an increase of $3.3 million in sales to
Chiesi.
Revenues from License and R&D services
We recorded revenues from license and R&D services of $22.3 million for the year ended December 31, 2022, an increase
of $0.7 million, or 3%, compared to revenues of $21.6 million for the year ended December 31, 2021. Revenues from
license and R&D services represent mainly the revenues we recognized in connection with the Chiesi Agreements.
Cost of Goods Sold
Cost of goods sold was $19.6 million for the year ended December 31, 2022, an increase of $3.3 million, or 20%,
compared to cost of goods sold of $16.3 million for the year ended December 31, 2021. The increase in cost of goods sold
was primarily the result of the increase in sales of goods.
Research and Development Expenses
For the year ended December 31, 2022, our total research and development expenses were approximately $29.3 million
comprised of approximately $17.8 million in subcontractor-related expenses, approximately $7.3 million of salary and
related expenses, approximately $1.4 million of materials-related expenses and approximately $2.8 million of other
expenses. For the year ended December 31, 2021, our total research and development expenses were approximately
$29.7 million comprised of approximately $18.4 million in subcontractor-related expenses, approximately $7.4 million of
salary and related expenses, approximately $1.2 million of materials-related expenses and approximately $2.7 million of
other expenses.
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The decrease in research and developments expenses of $0.4 million, or 1%, for the year ended December 31, 2022
compared to the year ended December 31, 2021 resulted primarily from a $0.6 million decrease in subcontractor-related
expenses in connection with our PRX-102 clinical trials, partially offset by a $0.2 million increase in materials-related
expenses.
We expect research and development expenses to continue to be our primary expense as we enter into a more advanced
stage of preclinical and clinical trials for certain of our product candidates.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $11.7 million for the year ended December 31, 2022, a decrease of
$1.0 million, or 8%, from $12.7 million for the year ended December 31, 2021. The decrease resulted primarily from a
decrease in professional fees and salary-related expenses.
Financial Expenses and Income, Net
Financial expense, net was $1.4 million for the year ended December 31, 2022, a decrease of $5.7 million, or 80%,
compared to financial expenses of $7.1 million for the year ended December 31, 2021. The decrease resulted primarily
from lower interest and debt amortization costs due to a decrease in our outstanding notes from an aggregate principal
amount of $57.92 million of 2021 Notes to an aggregate principal amount of $28.75 million of 2024 Notes, and an increase
in the exchange rate of New Israeli Shekels for U.S. Dollars over the period.
Income taxes
Section 174 of the TCJA, which was enacted in December 2017, eliminated the option to immediately deduct research and
development expenses in the year incurred, effective January 1, 2022. The amended provision under Section 174 requires
us to capitalize and amortize these expenditures over fifteen years (for out of U.S.-based research and development). In the
year ended December 31, 2022, we recorded income taxes of approximately $530,000.
Year ended December 31, 2021 Compared to the Year Ended December 31, 2020
For a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020, see Management’s
Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K
for the year ended December 31, 2021.
Liquidity and Capital Resources
Our sources of liquidity include our cash balances and bank deposits. At December 31, 2022, we had $22.2 million in cash
and cash equivalents. We have primarily financed our operations through equity and debt financings, business
collaborations, and grants funding.
During the year ended December 31, 2022, we raised gross proceeds equal to approximately $8.7 million from the sale of
7,473,038 shares of our common stock under our ATM program.
During the year ended December 31, 2021, we raised gross proceeds equal to approximately $8.8 million from sales of
common stock under our ATM program through the sale of 1,867,552 shares of our common stock. In addition, we raised
gross proceeds of approximately $40.2 million from a public offering of our common stock before deducting the
underwriting discount and estimated expenses of the offering. In connection with the offering, we issued 8,749,999 shares
of our common stock at a purchase price per share of $4.60.
On August 25, 2021, we completed Exchanges with institutional note holders of a substantial majority of the then
outstanding 2021 Notes. The Exchanges involved the exchange of an aggregate of $54.65 million principal amount of 2021
Notes for an aggregate of $28.75 million principal amount of newly issued 2024 Notes, $25.90 million in cash and
approximately $1.1 million in cash representing accrued and unpaid interest through the closing date. The initial
conversion rate of the 2024 Notes is 563.2216 shares of our common stock per $1,000 principal amount of 2024 Notes,
which is equivalent to an initial conversion price of approximately $1.7755 per share of common stock, subject to
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adjustment in certain circumstances. This initial conversion price represents a premium of approximately 32.5% relative to
the closing price of the common stock on the NYSE American on August 13, 2021. After giving effect to the Exchanges,
$3.27 million aggregate principal amount of the 2021 Notes remained outstanding. On November 15, 2021, all of the then
outstanding 2021 Notes matured and were paid in full.
The 2024 Notes were issued pursuant to the 2024 Indenture which was entered into between us, the guarantors party
thereto, The Bank of New York Mellon Trust Company, N.A., as trustee and Wilmington Savings Fund Society, FSB, as
collateral agent. Interest on the Notes are payable semi-annually at a rate of 7.50% per annum. The 2024 Notes will mature
three years after the issuance thereof, unless earlier purchased, converted, exchanged or redeemed and will be guaranteed
by our subsidiaries. The 2024 Notes are secured by perfected liens on all of our assets, including those of our subsidiaries.
Cash Flows
Net cash used in operations was $25.0 million for the year ended December 31, 2022. The net loss for the year ended
December 31, 2022 of $14.4 million was further increased by a $7.2 million decrease in contracts liability and a
$5.3 million decrease in accounts payable and accruals and $1.2 million increase in accounts receivable-trade and other
assets, which was partially offset by a $2.1 million in share-based compensation and $1.1 million in depreciation and
$1.2 million decrease in inventories. Net cash used in investing activities for the year ended December 31, 2022 was
$5.0 million and consisted primarily of a net increase in bank deposits. Net cash provided by financing activities for the
year ended December 31, 2022 was $8.2 million representing net proceeds from the issuance of common stock through the
ATM Program.
Future Funding Requirements
As a result of our significant research and development expenditures and the lack of significant revenue from sales of
taliglucerase alfa, we have generated operating losses from our continuing operations since our inception. Our outstanding
2024 Notes are secured by a perfected lien on all of our assets. Under the terms of the 2024 Indenture, we are required to
comply with certain covenants, including the requirement to maintain a minimum cash balance of at least $7.5 million.
Failure to comply with such covenants may result in an event of default under the 2024 Indenture and, accordingly, may
result in the acceleration of the payment of the notes or in additional interest payments. As of December 31, 2022, we were
in compliance with all covenants.
We expect to continue to incur significant expenditures in the near future as we increase our research and developments
efforts with respect to our product candidates. We cannot anticipate the costs or the timing of the occurrence of such costs.
To the extent we need to obtain additional financing, it may be more difficult for us to do so given the volatility of the price
of our common stock. Our material cash needs for the next 24 months will include, among other expenses, (i) costs of
preclinical and clinical trials, (ii) employee salaries, (iii) payments for rent and operation of our manufacturing facilities,
(iv) fees to our consultants and legal advisors, patent advisors and fees for service providers in connection with our
research and development efforts and (v) payments of principal and interest on our outstanding 2024 Notes. We believe
that the funds currently available to us are sufficient to satisfy our capital needs for at least 12 months.
As discussed above, we may be required to raise additional capital to develop our product candidates and continue research
and development activities. Our ability to raise capital, and the amounts of necessary capital, will depend on many other
factors, including:
● the duration and cost of discovery and preclinical development and laboratory testing and clinical trials for
our product candidates;
● our progress in commercializing BioManguinhos alfataliglicerase in Brazil;
● the timing and outcome of regulatory review of our product candidates;
● the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and
other intellectual property rights; and
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● the costs associated with any litigation claims.
We expect to finance our future cash needs through corporate collaborations, licensing or similar arrangements, public or
private equity offerings and/or debt financings. We currently do not have any commitments for future external funding,
except with respect to the development-related payments and milestone payments that may become payable under the
Chiesi Agreements. On July 2, 2021, we entered into the Sales Agreement in connection with a new ATM program, as
amended on May 2, 2022, pursuant to which we may sell from time to time through the Agent ATM Shares having an
aggregate offering price of up to $20.0 million. On the same date, we terminated our former ATM program. As of
December 31, 2022, shares of our common stock for total gross proceeds of approximately $11.3 million remain available
to be sold under the Sales Agreement. During January and February 2023, we sold 3,590,813 ATM Shares under the Sales
Agreement generating gross proceeds equal to approximately $5.5 million.
Contractual obligations
Our contractual obligations include obligations under our convertible notes, operating lease obligations, purchase
obligations, a certain clinical contract and the liability for employee rights upon retirement.
Our convertible senior notes had an aggregate outstanding principal balance of $28.75 million at December 31, 2022. The
notes will mature on September 1, 2024 unless earlier purchased, converted, exchanged or redeemed, and interest is
payable on the note semi-annually at a rate of 7.50% per annum.
We lease certain assets under operating leases, which expire through 2026, with an option to extend the lease on our main
facility to 2031. The leases relate primarily to office, laboratory and manufacturing space and vehicles used by our
employees. Our aggregate future minimum commitments under these facility and vehicles leases over the next five fiscal
years is approximately $3.8 million as of December 31, 2022.
As of December 31, 2022, we are subject to open purchase orders issued to certain suppliers and other vendors mainly in
connection with our research and development and manufacturing activities that were outstanding as of December 31, 2022
for approximately $7.4 million over the next five fiscal years.
We have a contractual obligation of approximately $719,000 as of December 31, 2022 payable over the fiscal year ending
December 31, 2023. In addition, we enter into contracts in the normal course of business with CROs, CMOs and other third
parties for clinical trials, preclinical and other research studies and manufacturing services. These contracts do not contain
minimum purchase commitments and are cancelable by us upon prior notice. Payments due upon cancellation consist only
of payments for services provided or expenses incurred, including non-cancelable obligations of our service providers, up
to the date of cancellation.
As of December 31, 2022, we have a contractual obligation of approximately $1.6 million for employee rights upon
retirement.
We are also party to certain research and license agreements. If all of the contingencies with respect to milestone payments
under our research and license agreements are met, as of December 31, 2022, the aggregate milestone payments payable
would be approximately $8.4 million, and would be payable, if at all, as our projects progress over the course of a number
of years. The royalty payments payable by our company in connection with sales of each of our product candidates, if any,
shall not exceed low, single-digit percentages of net sales of the relevant product.
Effects of Currency Fluctuations
Currency fluctuations could affect us through increased or decreased acquisition costs for certain goods and services.
Currency fluctuations during the year ended December 31, 2022, resulted in $1.0 million being recognized as financial
income. We do not believe currency fluctuations have had a material effect on our results of operations during the years
ended December 31, 2021 or 2022.
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Recently Issued Accounting Pronouncements
Certain recently issued and recently adopted accounting pronouncements are discussed in note 1r of the financial
statements included in Item 8 of this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Currency Exchange Risk
The currency of the primary economic environment in which our operations are conducted is the U.S. dollar. Most of our
revenues and above 50% of our expenses and capital expenditures are incurred in dollars, and a significant source of our
financing has been provided in U.S. dollars. Since the dollar is the functional currency, monetary items maintained in
currencies other than the dollar are remeasured using the rate of exchange in effect at the balance sheet dates and non-
monetary items are remeasured at historical exchange rates. Revenue and expense items are remeasured at the average rate
of exchange in effect during the period in which they occur. Foreign currency translation gains or losses are recognized in
the statement of operations.
Approximately 43% of our costs, including salaries, expenses and office expenses, are incurred in NIS. Inflation in Israel
may have the effect of increasing the U.S. dollar cost of our operations in Israel. If the U.S. dollar declines in value in
relation to the NIS, it will become more expensive for us to fund our operations in Israel. A revaluation of 1% of the NIS
will affect our loss before tax by less than 1%. The exchange rate of the U.S. dollar to the NIS, based on exchange rates
published by the Bank of Israel, was as follows:
Average rate for period
Rate at period-end
Year Ended December 31,
2021
3.230
3.110
2022
3.360
3.519
2020
3.442
3.215
To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to
decrease the risk of financial exposure from fluctuations in the exchange rate of the U.S. dollar against the NIS. These
measures, however, may not adequately protect us from material adverse effects due to the impact of inflation in Israel.
Interest Rate Risk
Our exposure to market risk is confined to our cash and cash equivalents. We consider all short term, highly liquid
investments, which include short-term deposits with original maturities of three months or less from the date of purchase,
that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash, to be cash equivalents.
The primary objective of our investment activities is to preserve principal while maximizing the interest income we receive
from our investments, without increasing risk. We invest any cash balances primarily in bank deposits and investment
grade interest-bearing instruments. We are exposed to market risks resulting from changes in interest rates. We do not use
derivative financial instruments to limit exposure to interest rate risk. Our interest gains may decline in the future as a
result of changes in the financial markets.
Item 8. Financial Statements and Supplementary Data
See the Index to Consolidated Financial Statements on Page F-1 attached hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
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Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of
the end of the period covered by this Form 10-K. The controls evaluation was conducted under the supervision and with
the participation of management, including our Chief Executive Officer and Chief Financial Officer. Disclosure controls
and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our
reports filed under the Exchange Act, such as this Form 10-K, is recorded, processed, summarized and reported within the
time periods specified in the Commission’s rules and forms. Disclosure controls and procedures are also designed to
reasonably assure that such information is accumulated and communicated to our management, including the Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
The evaluation of our disclosure controls and procedures included a review of the controls’ objectives and design, our
implementation of the controls and their effect on the information generated for use in this Annual Report on Form 10-K.
This type of evaluation will be performed on a quarterly basis so that the conclusions of management, including the Chief
Executive Officer and Chief Financial Officer, concerning the effectiveness of the disclosure controls and procedures can
be reported in our periodic reports on Form 10-Q and Form 10-K. The overall goals of these various evaluation activities
are to monitor our disclosure controls and procedures, and to modify them as necessary. Our intent is to maintain the
disclosure controls and procedures as dynamic systems that change as conditions warrant.
Based on the controls evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the
end of the period covered by this Form 10-K, our disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified by the Commission, and that material information related to our company and
our consolidated subsidiaries are made known to management, including the Chief Executive Officer and Chief Financial
Officer, particularly during the period when our periodic reports are being prepared.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to
provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements
for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial
reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally
accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with
authorizations of management and our directors; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial
statements.
Management assessed our internal control over financial reporting as of December 31, 2022, the end of our fiscal year.
Management based its assessment on criteria established in Internal Control—Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment included
evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process
documentation, accounting policies and our overall control environment.
Based on our assessment, management has concluded that our internal control over financial reporting was effective as of
the end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
We reviewed the results of management’s assessment with the Audit Committee of our Board of Directors.
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Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure
controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A
control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the
control system’s objectives will be met. The design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error
or fraud will not occur or that all control issues and instances of fraud, if any, within a company have been detected. These
inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion
of two or more people or by management override of the controls. The design of any system of controls is based in part on
certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to
future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or
deterioration in the degree of compliance with policies or procedures.
Attestation Report of Independent Registered Public Accounting Firm
Not applicable.
Changes in internal controls
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15f and 15d-15f under the
Exchange Act) that occurred during the quarter ended December 31, 2022 that have materially affected, or that are
reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information in our 2023 Proxy Statement regarding directors and executive officers appearing under the headings
“Security Ownership of Certain Beneficial Owners and Management — Section 16(a) Beneficial Ownership Reporting
Compliance” and “Election of Directors” is incorporated by reference in this section.
Item 11. Executive Compensation
The information appearing in our 2023 Proxy Statement under the headings “Director Compensation,” “Compensation
Discussion and Analysis,” “Report of the Compensation Committee,” and “Executive Compensation” is incorporated by
reference in this section.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information appearing in our 2023 Proxy Statement under the heading “Security Ownership of Certain Beneficial
Owners and Management” is incorporated by reference in this section.
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Item 13. Certain Relationships and Related Transactions, and Director Independence
The information appearing in our 2023 Proxy Statement under the headings “Election of Directors—Corporate
Governance” and “—Certain Relationships and Related Transactions” is incorporated by reference in this section.
Item 14. Principal Accountant Fees and Services
Our independent registered public accounting firm is Kesselman & Kesselman, Certified Public Accountants (Isr.), A
member of PricewaterhouseCoopers International Limited, Tel Aviv, Israel, PCAOB ID. No. 1309.
The information appearing in our 2023 Proxy Statement under the heading “Ratification of Appointment of Independent
Registered Public Accounting Firm” is incorporated by reference in this section.
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Item 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this Annual Report on Form 10-K:
PART IV
1. Financial Statements. The following Consolidated Financial Statements of Protalix BioTherapeutics, Inc. are
included in Item 8 of this Annual Report on Form 10-K:
Report of Independent Registered Public Accounting Firm (PCAOB name: Kesselman & Kesselman C.P.A.s and
PCAOB ID: 1309)
Consolidated Balance Sheets as of December 31, 2021 and 2022
Consolidated Statements of Operations for the years ended December 31, 2020, 2021 and 2022
Consolidated Statements of Changes in Capital Deficiency for the years ended December 31, 2020, 2021 and
2022
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2021 and 2022
Notes to Consolidated Financial Statements
Page
F-2
F-4
F-5
F-6
F-7
F-9
2. Financial Statement Schedule. Financial statement schedules have been omitted since they are either not
required, are not applicable or the required information is shown in the consolidated financial statements or related notes.
3. Exhibits.
Exhibit
Number
1.1
Exhibit Description
At the Market Offering Agreement,
dated July 2, 2021, between the
Company and H.C. Wainwright & Co.,
LLC
Form
8-K
Incorporated by Reference
File
Number
001-33357
Exhibit
1.1
Date
July 2, 2021
Filed
Herewith
3.1
Certificate of Incorporation of the
8-K
001-33357
3.1
April 1, 2016
Company
3.2
Amendment to Certificate of
Def 14A
001-33357 Appen.
July 1, 2016
Incorporation of the Company
A
3.3
Second Amendment to Certificate of
Def 14A
001-33357 Appen.
Incorporation of the Company
A
October 17,
2018
3.4
Third Amendment to Certificate of
Incorporation of the Company
8-K
001-33357
3.1
December 20,
2019
3.5
Fourth Amendment to Certificate of
10-Q
001-33357
3.1
August 15, 2022
Incorporation of the Company
3.6
Bylaws of the Company
8-K
001-33357
3.2
October 17,
2018
4.1†
Form of Restricted Stock
8-K
001-33357
4.1
July 18, 2012
Agreement/Notice
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Table of Contents
4.2
4.3†
4.4
4.5
4.6
4.7
10.1
Form of Warrant
8-K
001-33357
4.1
March 12, 2020
Form of Stock Option Agreement
(Executives)
Form of Stock Option Agreement
(Standard)
Indenture, dated as of August 24, 2021,
between Protalix BioTherapeutics, Inc.,
the guarantors party thereto, The Bank of
New York Mellon Trust Company, N.A.,
as trustee and Wilmington Savings Fund
Society, FSB, as collateral agent
10-Q
001-33357
4.8
August 10, 2020
10-Q
001-33357
4.9
August 10, 2020
8-K
001-33357
4.2
August 26, 2021
Form of Exchange Note (2024)
8-K
001-33357
4.3
August 26, 2021
Description of Capital Stock
Lease Agreement between Protalix Ltd.
and Angel Science Park (99) Ltd., dated
as of October 28, 2003 as amended on
April 18, 2005
8-K
001-33357
10.9
January 8, 2007
X
10.2
Unprotected Lease Agreement
10-K
001-33357
10.21 March 17, 2008
10.3††
Amended and Restated Agreement
10-Q
001-33357
10.1 May 14, 2021
between Protalix Ltd. and Comercio e
Serviços Ltda. dated June 17, 2013
10.4††
Technology Transfer and Supply
10-Q
001-33357
10.2 May 14, 2021
Agreement made as of June 18, 2013 by
and between Protalix Ltd. and Fundação
Oswaldo Cruz
10.5††
Binding Term Sheet between Protalix
Ltd. and Chiesi Farmaceutici S.p.A.
10-Q
001-33357
10.3 May 14, 2021
10.6††
Amended and Restated Exclusive
10-Q/A
001-33357
10.1 December 11,
License and Supply Agreement by and
between Pfizer Inc. and Protalix Ltd.,
dated October 12, 2015
2015
10.7††
Exclusive License and Supply
10-K
001-33357
10.16 March 6, 2018
Agreement dated as of October 17, 2017,
made by and between Protalix Ltd. and
Chiesi Farmaceutici S.p.A.
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Table of Contents
10.8††
Exclusive U.S. License and Supply
10-Q
001-33357
10.1
November 7,
2018
Agreement dated as of July 23, 2018,
made by and between Protalix Ltd. and
Chiesi Farmaceutici S.p.A.
10.9†
Employment Agreement made effective
as of May 20, 2019, by and between
Protalix Ltd. and Mr. Dror Bashan
10.10†
Employment Agreement made effective
as of July 28, 2019, by and between
Protalix Ltd. and Mr. Eyal Rubin
8-K
001-33357
10.1 May 21, 2019
8-K
001-33357
10.1
July 29, 2019
10.11
Form of Securities Purchase Agreement
8-K
001-33357
10.1 March 12, 2020
10.12†
10.13†
10.14
10.15
10.16
10.17††
Amended and Restated Pro
BioTherapeutics, Inc. 2006 Stock
Incentive Plan, as amended
Employment Agreement with Yael
Hayon, Ph.D. dated June 7, 2020
Form of Exchange Agreement, dated as
of August 12, 2021 among Protalix
BioTherapeutics, Inc. and the holders
named therein
Amended and Restated U.S. Security
Agreement dated of August 24, 2021
among Protalix BioTherapeutics, Inc.,
the guarantors party thereto, Wilmington
Savings Fund Society, FSB, as collateral
agent and The Bank of New York
Mellon Trust Company, N.A., as Notes
Trustee
2021 Security Agreement/Debenture,
made on August 24, 2021 between
Protalix Ltd. and Altshuler Shaham
Trusts Ltd., as security trustee
Fill/Finish Agreement effective on
August 29, 2022 made by and between
Chiesi Farmaceutici S.p.A and Protalix
Ltd.
S-8
333-266131
4.1
July 14, 2022
8-K
001-33357
10.1
June 8, 2020
8-K
001-33357
10.1
August 12, 2021
8-K
001-33357
10.1
August 26, 2021
8-K
001-33357
10.2
August 26, 2021
10-Q
001-33357
10.1
November 14,
2022
10.18††
Letter Agreement dated August 29, 2022
from Chiesi Farmaceutici S.p.A to
Protalix Ltd.
10-Q
001-33357
10.2
November 14,
2022
10.19
Letter Amendment dated May 2, 2022
8-K
001-33357
1.1
May 2, 2022
21.1
Subsidiaries
10-K
001-33357
21.1
February 26,
2010
77
Table of Contents
23.1
31.1
31.2
Consent of Kesselman & Kesselman,
Certified Public Accountants (Isr.), A
member of PricewaterhouseCoopers
International Limited, independent
registered public accounting firm for the
Registrant
Certification of Chief Executive Officer
pursuant to Rule 13a-14(a) as adopted
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Financial Officer
pursuant to Rule 13a-14(a) as adopted
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
32.1
18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, Certification of Chief
Executive Officer
32.2
18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, Certification of Chief
Financial Officer
101.INS XBRL INSTANCE DOCUMENT - the
instance document does not appear in the
Interactive Data File because its XBRL
tags are embedded within the Inline
XBRL document
101.SCH XBRL SHEMA FILE
101.CAL XBRL CALCULATION FILE
101.DEF XBRL DEFINITION FILE
101.LAB XBRL LABEL FILE
101.PRE XBRL PRESENTATION FILE
104
Cover Page Interactive Data File -
formatted in Inline XBRL and included
as Exhibit 101
X
X
X
X
X
X
X
X
X
X
X
X
† Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to
participate.
†† Portions of this exhibit were omitted and have been filed separately with the Secretary of the Securities and Exchange
Commission pursuant to the Registrant’s application requesting confidential treatment under Rule 24b-2 of the
Exchange Act.
78
Table of Contents
Item 16. Form 10-K Summary
None.
79
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of February 27, 2023.
SIGNATURES
PROTALIX BIOTHERAPEUTICS, INC.
By:/s/ Dror Bashan
Dror Bashan
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Dror Bashan and Eyal Rubin, and each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying
and confirming that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Dror Bashan
Dror Bashan
/s/ Eyal Rubin
Eyal Rubin
/s/ Zeev Bronfeld
Zeev Bronfeld
/s/ Amos Bar Shalev
Amos Bar Shalev
/s/ Shmuel Ben Zvi
Shmuel Ben Zvi, Ph.D.
/s/ Pol F. Boudes
Pol F. Boudes, M.D.
/s/ Gwen A. Melincoff
Gwen A. Melincoff
/s/ Aharon Schwartz
Aharon Schwartz, Ph.D.
President, Chief Executive Officer
(Principal Executive Officer) and Director
February 27, 2023
Chief Financial Officer, Treasurer and
Secretary (Principal Financial
and Accounting Officer)
February 27, 2023
Chairman of the Board
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
Director
Director
Director
Director
Director
80
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PROTALIX BIOTHERAPEUTICS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB name:
Kesselman & Kesselman C.P.A.s and PCAOB ID: 1309)
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 2021 and 2022
Consolidated Statements of Operations for the years ended December 31, 2020, 2021 and 2022
Consolidated Statements of Changes in Capital Deficiency for the years ended December 31, 2020, 2021 and
2022
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2021 and 2022
Notes to Consolidated Financial Statements
Page
F-2
F-4
F-5
F-6
F-7
F-9
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Protalix BioTherapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Protalix BioTherapeutics, Inc. and its
subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of
operations, changes in capital deficiency and cash flows for each of the three years in the period ended
December 31, 2022, including the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting
principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
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 (i) relates to accounts or disclosures that are material to the consolidated financial
statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication
of critical audit matters 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.
F-2
Table of Contents
Liquidity and capital resources
As discussed in Note 1 to the consolidated financial statements, management believes that its cash and cash
equivalents and short-term bank deposits as of December 31, 2022, together with additional funds raised
subsequent to December 31, 2022, are sufficient to satisfy the Company’s capital needs for at least the next
12 months. The Company has been funded primarily through offerings of the Company’s securities and
borrowings. Management expects that the Company will incur additional losses as it continues to focus its
resources on advancing the development of its therapeutic candidates, based on a prioritized plan that will
result in negative cash flows from operating activities.
The principal considerations for our determination that performing procedures related to liquidity and capital
resources is a critical audit matter are the estimation and execution uncertainty regarding the Company’s future
cash flows and management’s judgments and assumptions in estimating these cash flows to conclude the
Company would have sufficient liquidity to fund its operations for at least the next 12 months. This in turn led to
a high degree of auditor subjectivity and judgment to evaluate the audit evidence supporting the liquidity
conclusions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with our
overall opinion on the consolidated financial statements. Our audit procedures included, among others, testing
the reasonableness of the forecasted revenue, operating expenses, and uses and sources of cash used in
management’s assessment of whether the Company has sufficient liquidity to fund its operations for at least the
next 12 months. We assessed the appropriateness of the forecast assumptions by comparing prior period
forecasts to actual results, comparing forecasted revenue to recent historical financial information, inquiring of
management regarding the mitigating actions to reduce costs and manage cash flows and assessing whether the
mitigating actions were within the Company's control, testing the underlying data generated to prepare the
forecast scenarios and determined whether there was adequate support for the assumptions underlying the
forecast, considering the terms of the Company's existing convertible debt to obtain an understanding of the
debt covenants, and evaluating management's analysis of the impact of the above assumptions on the forecasted
cash flows.
/s/ Kesselman & Kesselman
Certified Public Accountants (Isr.)
A member of PricewaterhouseCoopers International Limited
Tel Aviv, Israel
February 27, 2023
We have served as the Company’s auditor since 2000.
F-3
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
ASSETS
December 31,
2021
2022
CURRENT ASSETS:
Cash and cash equivalents
Short-term bank deposits
Accounts receivable – Trade
Other assets
Inventories
Total current assets
NON-CURRENT ASSETS:
Funds in respect of employee rights upon retirement
Property and equipment, net
Operating lease right of use assets
Total assets
LIABILITIES NET OF CAPITAL DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accruals:
Trade
Other
Operating lease liabilities
Contracts liability
Total current liabilities
LONG TERM LIABILITIES:
Convertible notes
Contracts liability
Liability for employee rights upon retirement
Operating lease liabilities
Total long term liabilities
Total liabilities
COMMITMENTS
CAPITAL DEFICIENCY
Common Stock, $0.001 par value: Authorized - as of December 31, 2021 and 2022,
120,000,000 and 144,000,000 shares, respectively; issued and outstanding - as of
December 31, 2021 and 2022, 45,556,647 and 53,790,167 shares, respectively
Additional paid-in capital
Accumulated deficit
Total capital deficiency
Total liabilities net of capital deficiency
$
$
$
$
$
$
$
$
$
$
38,985 $
-
3,442
1,285
17,954
61,666 $
2,077 $
4,962
4,960
73,665 $
6,986 $
16,433
1,207
8,550
33,176 $
27,887 $
11,790
2,472
4,376
46,525 $
79,701 $
17,111
5,069
4,586
1,310
16,804
44,880
1,267
4,553
5,087
55,787
5,862
12,271
1,118
13,178
32,429
28,187
-
1,642
4,169
33,998
66,427
46
368,852
(374,934)
(6,036)
73,665 $
54
379,167
(389,861)
(10,640)
55,787
The accompanying notes are an integral part of the consolidated financial statements.
F-4
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share amounts)
REVENUES FROM SELLING GOODS
REVENUES FROM LICENSE AND R&D SERVICES
TOTAL REVENUE
COST OF GOODS SOLD
RESEARCH AND DEVELOPMENT EXPENSES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
OPERATING INCOME (LOSS)
FINANCIAL EXPENSES
FINANCIAL INCOME
FINANCIAL EXPENSES, NET
LOSS BEFORE TAXES ON INCOME
TAXES ON INCOME
NET LOSS FOR THE YEAR
LOSS PER SHARE OF COMMON STOCK – BASIC AND DILUTED
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK
USED IN COMPUTING LOSS PER SHARE – BASIC AND DILUTED
2020
Year Ended December 31,
2021
2022
$
$
$
$
16,236
46,662
62,898
(10,873)
(38,167)
(11,148)
2,710
(9,671)
438
(9,233)
(6,523)
$
16,749
21,601
38,350
(16,349)
(29,734)
(12,729)
(20,462)
(7,521)
401
(7,120)
(27,582)
(6,523) $
(0.22) $
(27,582) $
(0.62) $
25,292
22,346
47,638
(19,592)
(29,349)
(11,711)
(13,014)
(2,529)
1,146
(1,383)
(14,397)
(530)
(14,927)
(0.31)
29,148,047
44,140,233
48,472,159
The accompanying notes are an integral part of the consolidated financial statements.
F-5
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL DEFICIENCY
(U.S. dollars in thousands)
Balance at January 1, 2020
Changes during 2020:
Issuance of common stock and warrants, net of issuance
cost
Issuance of common stock under the Sales Agreement,
net
Share-based compensation related to stock options
Share-based compensation related to restricted stock
award
Exercise of warrants
Net loss
Balance at December 31, 2020
Changes during 2021:
Issuance of common stock, net of issuance cost
Issuance of common stock under the Sales Agreement,
net
Share-based compensation related to stock options
Share-based compensation related to restricted stock
award
Exercise of warrants
Reacquisition of equity component of convertible notes
Equity component of convertible notes, net of
transaction costs
Net loss
Balance at December 31, 2021
Changes during 2022:
Issuance of common stock under the Sales Agreement,
net
Share-based compensation related to stock options
Share-based compensation related to restricted stock
award
Exercise of warrants
Net loss
Balance at December 31, 2022
* Represents an amount less than $1.
Common
Stock
Number of
Shares
Common
Stock
Additional
Paid–In
Capital
Accumulated
Deficit
Total
Amount
14,838,213
$
15
$ 270,492
$ (340,829) $ (70,322)
17,604,423
18
41,325
1,428,571
694,073
200,000
1
1
*
4,866
2,264
861
472
34,765,280
$
35
$ 320,280
41,343
4,867
2,264
862
472
(6,523)
$ (347,352) $ (27,037)
(6,523)
8,749,999
1,867,552
173,816
9
2
*
37,616
8,573
1,405
970
—
(12,019)
12,027
45,556,647
$
46
$ 368,852
(27,582)
$ (374,934) $
37,625
8,575
1,405
970
—
(12,019)
12,027
(27,582)
(6,036)
8,236
1,124
7,473,038
759,482
1,000
7
1
*
8,229
1,124
960
2
53,790,167
$
54
$ 379,167
961
2
(14,927)
$ (389,861) $ (10,640)
(14,927)
The accompanying notes are an integral part of the consolidated financial statements.
F-6
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Year Ended December 31,
2021
2022
2020
Net loss
Adjustments required to reconcile net loss to net cash used in operating activities:
Share-based compensation
Depreciation
Financial (income) expenses, net (mainly exchange differences)
Changes in accrued liability for employee rights upon retirement
Loss (gain) on amounts funded in respect of employee rights upon retirement
Gain on sale of fixed assets
Loss on extinguishment of convertible notes
Amortization of debt issuance costs and debt discount
Changes in operating assets and liabilities:
$ (6,523) $ (27,582) $ (14,927)
3,126
1,302
171
(494)
(28)
-
-
3,470
2,375
1,118
417
133
(100)
(51)
831
2,673
2,085
1,086
(989)
(543)
3
-
-
300
Increase (decrease) in contracts liability (including non-current portion)
Decrease (increase) in accounts receivable-trade and other assets
Changes in operating lease right of use assets, net
Decrease (increase) in inventories
Increase (decrease) in accounts payable and accruals
Decrease in other long term liabilities
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in bank deposits
Proceeds from sale of short-term deposits
Purchase of property and equipment
Proceeds from sale of property and equipment
Decrease in restricted deposit
Amounts paid (funded) in respect of employee rights upon retirement, net
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment for convertible notes redemption and transactions costs
Payment for promissory note
Proceeds from issuance of common stock and warrants, net
Proceeds from issuance of common stock under the Sales Agreement, net
Exercise of warrants
Net cash provided by financing activities
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF YEAR
(26,205)
2,091
95
(4,927)
2,274
(458)
(7,162)
(1,194)
(5)
1,150
(4,804)
-
$ (26,106) $ (10,285) $ (25,000)
13,230
(1,032)
241
(4,872)
2,385
(51)
$ (20,000) $ (37,835) $ (16,000)
11,000
(628)
-
-
593
$ (5,035)
-
(655)
-
384
319
$ (19,952) $
57,835
(1,459)
53
436
(109)
18,921
$
-
(215)
41,343
4,867
472
$ 46,467
$ (30,036) $
(4,086)
37,625
8,575
-
12,078
$
$
-
-
-
8,236
2
8,238
$
64
473
17,792
$ 18,265
$
$
6
20,720
$
(77)
(21,874)
18,265
38,985
38,985
$ 17,111
The accompanying notes are an integral part of the consolidated financial statements.
F-7
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(U.S. dollars in thousands)
SUPPLEMENTARY INFORMATION ON INVESTING AND FINANCING
ACTIVITIES NOT INVOLVING CASH FLOWS:
Purchase of property and equipment
Operating lease right of use assets obtained in exchange for new operating lease
liabilities
SUPPLEMENTARY DISCLOSURE ON CASH FLOWS
Interest paid
Interest received
As to extinguishment of convertible notes see Note 10.
Year Ended December 31,
2021
2022
2020
$
$
$
$
317
632
4,344
438
$
$
$
$
94
309
3,410
379
$
$
$
$
143
794
2,198
93
The accompanying notes are an integral part of the consolidated financial statements.
F-8
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
a. General
Protalix BioTherapeutics, Inc. (collectively with its subsidiaries, the “Company”) and its wholly-owned
subsidiaries, Protalix Ltd. and Protalix B.V. (collectively, the “Subsidiaries”), are biopharmaceutical
companies focused on the development and commercialization of recombinant therapeutic proteins based on
the Company’s proprietary ProCellEx® protein expression system (“ProCellEx”). To date, the Company has
successfully developed taliglucerase alfa (marketed under the name BioManguinhos alfataliglicerase in Brazil
and certain other Latin American countries and Elelyso® in the rest of the territories) for the treatment of
Gaucher disease that has been approved for marketing in the United States, Brazil, Israel and other markets.
The Company has a number of product candidates in varying stages of the clinical development process. The
Company’s strategy is to develop proprietary recombinant proteins that are therapeutically superior to
existing recombinant proteins currently marketed for the same indications.
The most advanced investigational drug in the Company’s product pipeline is pegunigalsidase alfa, or PRX-
102, a therapeutic protein candidate for the treatment of Fabry disease, a rare, genetic lysosomal disorder,
which is the subject of a phase III clinical program. The PRX-102 phase III clinical program includes three
separate studies which are referred to as the BALANCE study, the BRIDGE study and the BRIGHT study, each
of which has been completed. The studies were designed to evaluate the potential for improved efficacy and
better quality of life for adult patients with Fabry disease and to evaluate the safety of the Company’s
drug/therapy. In addition, the Phase III clinical program includes two extension studies in which subjects that
participated in the Company’s phase I/II clinical trials and phase III clinical trials may enroll and continue to
be treated with PRX-102.
On November 9, 2022, the Company, together with its development and commercialization partner for PRX-
102, Chiesi Farmaceutici S.p.A. (“Chiesi”), resubmitted to the U.S. Food and Drug Administration (the
“FDA”) a biologics license application (“BLA”) for PRX-102 for the potential treatment of adult patients
with Fabry disease. The initial BLA for PRX-102 was submitted to the FDA on May 27, 2020 under the
FDA’s Accelerated Approval pathway, and was subsequently accepted by the FDA and granted Priority
Review designation. However, in April 2021, the FDA issued a Complete Response Letter (CRL) in response
to the initial BLA. In preparation for the BLA resubmission, the Company and Chiesi participated in a Type
A (End of Review) meeting with the FDA on September 9, 2021. As part of the meeting minutes provided by
the FDA, which included the preliminary comments and meeting discussion, the FDA, in principle, agreed
that the data package proposed to the FDA for a BLA resubmission has the potential to support a traditional
approval of PRX-102 for the treatment of Fabry disease. The data package in the BLA resubmission, given
the change in the regulatory landscape in the United States, includes the final two-year analyses of the
Company’s phase III BALANCE clinical trial of PRX-102 (the “BALANCE study”), which were completed in
July 2022, and long-term data from the Company’s open-label extension study of PRX-102 in adult patients
treated with a 2 mg/kg every four weeks dosage of PRX-102.
On February 7, 2022, the Company, together with Chiesi, submitted a Marketing Authorization Application
(“MAA”) for PRX-102 to the European Medicines Agency (“EMA”) which was subsequently validated by
the EMA. The submission was made after the October 8, 2021 meeting the Company held, together with
Chiesi, with the Rapporteur and Co-Rapporteur of the EMA regarding PRX-102.
The MAA submission includes a comprehensive set of preclinical, clinical and manufacturing data compiled
from the Company’s completed and ongoing clinical studies evaluating PRX-102 as a potential alternative
treatment for adult patients with Fabry disease, including data from the Company’s completed 12–month
switch–over phase III BRIGHT clinical trial in adult patients with Fabry disease treated with a 2 mg/kg every
four weeks dosage to support an additional potential treatment regimen for Fabry patients. As part of the
EMA review process, Chiesi and the Company received the Day 120 list of questions in June
F-9
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022, and the full response package thereto was submitted to the EMA in September 2022 (following a 3-
month clock-stop period). An essential portion of the response included the submission of the final analysis of
the two-year BALANCE study (the final Clinical Study Report), and an interim analysis of the Company’s
long-term, open-label extension study of PRX-102 in adult patients with Fabry disease treated with the
2 mg/kg every four weeks dosage.
On February 24, 2023, the Company, together with Chiesi, announced that the EMA’s Committee for
Medicinal Products for Human Use (the “CHMP”) adopted a positive opinion, recommending marketing
authorization for PRX-102. The CHMP opinion is now referred for final action to the European Commission
(the “EC”). A final EC decision on the MAA is expected in the beginning of May 2023.
In addition to PRX-102, the Company’s product pipeline currently includes, among other candidates:
(1)
(2)
PRX-115, the Company’s plant cell-expressed recombinant PEGylated uricase (urate oxidase) – a
chemically modified enzyme to treat severe gout; and
PRX-119, the Company’s plant cell-expressed PEGylated recombinant human DNase I product
candidate being designed to elongate half-life in the circulation for NETs-related diseases.
Obtaining marketing approval with respect to any product candidate in any country is dependent on the
Company’s ability to implement the necessary regulatory steps required to obtain such approvals. The
Company cannot reasonably predict the outcome of these activities.
On July 2, 2021, the Company entered into an At The Market Offering Agreement (the “Sales Agreement”)
with H.C. Wainwright & Co., LLC, as the Company’s sales agent (the “Agent”) which was amended on
May 2, 2022. Pursuant to the terms of the Sales Agreement, the Company may sell from time to time through
the Agent shares of its common stock, par value $0.001 per share (the “Common Stock”), having an
aggregate offering price of up to $20.0 million (the “ATM Shares”). Upon execution of the Sales Agreement,
the Company terminated the ATM Equity OfferingSM Sales Agreement (the “BofA Agreement”) it had
entered into on October 1, 2020 with BofA Securities, Inc. (“BofA Securities”). During the term of the sales
agreement with BofA Securities, the Company sold a total of 3,296,123 shares of Common Stock for total
gross proceeds of approximately $13.8 million. As of December 31, 2022, shares of Common Stock for total
gross proceeds of approximately $11.3 million remain available to be sold under the Sales Agreement.
On October 19, 2017, Protalix Ltd. and Chiesi entered into an Exclusive License and Supply Agreement (the
“Chiesi Ex-US Agreement”) pursuant to which Protalix Ltd. granted to Chiesi an exclusive license for all
markets outside of the United States to commercialize pegunigalsidase alfa. On July 23, 2018, Protalix Ltd.
entered into an Exclusive License and Supply Agreement with Chiesi (the “Chiesi US Agreement”) with
respect to the commercialization of pegunigalsidase alfa in the United States.
Under each of the Chiesi Ex-US Agreement and the Chiesi US Agreement (collectively, the “Chiesi
Agreements”), Chiesi made an upfront payment to Protalix Ltd. of $25.0 million in connection with the
execution of each agreement. In addition, under the Chiesi Ex-US Agreement, Protalix Ltd. is entitled to
additional payments of up to $25.0 million in pegunigalsidase alfa development costs, and to receive
additional payments of up to $320.0 million, in the aggregate, in regulatory and commercial milestone
payments. Under the Chiesi US Agreement, Protalix Ltd. is entitled to payments of up to a maximum of
$20.0 million to cover development costs for pegunigalsidase alfa, and to receive additional payments of up
to a maximum of $760.0 million, in the aggregate, in regulatory and commercial milestone payments. To
date, Protalix Ltd. has received the complete amount of development costs to which it is entitled under the
Chiesi Agreements.
F-10
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the terms of both of the Chiesi Agreements, Protalix Ltd. will manufacture all of the pegunigalsidase
alfa needed under the agreements, subject to certain exceptions, and Chiesi will purchase pegunigalsidase alfa
from Protalix, subject to certain terms and conditions. Under the Chiesi Ex-US Agreement, Chiesi is required
to make tiered payments of 15% to 35% of its net sales, depending on the amount of annual sales outside of
the United States, as consideration for product supply. Under the Chiesi US Agreement, Chiesi is required to
make tiered payments of 15% to 40% of its net sales, depending on the amount of annual sales in the United
States, as consideration for product supply.
On May 13, 2021, the Company signed a binding term sheet with Chiesi pursuant to which the Company and
Chiesi amended the Chiesi Agreements in order to provide the Company with near-term capital. Chiesi
agreed to make a $10.0 million payment to the Company before the end of the second quarter of 2021 in
exchange for a $25.0 million reduction in a longer term regulatory milestone payment provided in the Chiesi
EX-US Agreement. All other regulatory and commercial milestone payments remain unchanged. The
Company received the payment in June 2021. The Company also agreed to negotiate certain manufacturing
related matters.
Since its approval by the FDA, taliglucerase alfa has been marketed by Pfizer Inc. (“Pfizer”) in accordance
with the exclusive license and supply agreement entered into between Protalix Ltd. and Pfizer, which is
referred to herein as the Pfizer Agreement. In October 2015, Protalix Ltd. and Pfizer entered into an amended
exclusive license and supply agreement, which is referred to herein as the Amended Pfizer Agreement,
pursuant to which the Company sold to Pfizer its share in the collaboration created under the Pfizer
Agreement for the commercialization of Elelyso. As part of the sale, the Company agreed to transfer its rights
to Elelyso in Israel to Pfizer while gaining full rights to it in Brazil. Under the Amended Pfizer Agreement,
Pfizer is entitled to all of the revenues, and is responsible for 100% of expenses globally for Elelyso,
excluding Brazil where the Company is responsible for all expenses and retains all revenues.
On June 18, 2013, the Company entered into a Supply and Technology Transfer Agreement (the “Brazil
Agreement”) with Fundação Oswaldo Cruz (“Fiocruz”), an arm of the Brazilian Ministry of Health (the
“Brazilian MoH”), for taliglucerase alfa. Fiocruz’s purchases of BioManguinhos alfataliglicerase to date have
been significantly below certain agreed-upon purchase milestones and, accordingly, the Company has the
right to terminate the Brazil Agreement. Notwithstanding the termination right, the Company is, at this time,
continuing to supply BioManguinhos alfataliglicerase to Fiocruz and patients continue to be treated with
BioManguinhos alfataliglicerase in Brazil.
The novel coronavirus disease (“COVID-19”), which was declared by the World Health Organization to be a
global pandemic on March 11, 2020, has had numerous adverse effects on the global economy. To date, the
Company’s clinical trials have not been adversely affected by COVID-19, although certain practices the
Company adopted during the earlier stages of the pandemic in its offices and facilities in an effort to promote
social distancing resulted in minor delays in the performance of administrative activities outside of the
clinical programs.
The Company expects to continue to incur significant expenditures in the near future due to research and
developments efforts with respect to the product candidates. See also Note 10 with regards to financial
covenants under the terms of the Company’s outstanding 7.50% Senior Secured Convertible Notes due 2024
(the “2024 Notes”), including the requirement to maintain a minimum cash balance of at least $7.5 million.
As of December 31, 2022, the Company is in compliance with all covenants. The Company believes that its
cash and cash equivalents and short-term bank deposits as of December 31, 2022, together with additional
funds raised from the sale of ATM shares under the Sales Agreement subsequent to December 31, 2022, are
sufficient to satisfy the Company’s capital needs for at least 12 months from the date that these financial
statements are issued.
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
b. Basis of presentation
The Company’s financial statements have been prepared in accordance with generally accepted accounting
principles in the United States (“U.S. GAAP”).
c. Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of
contingent liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those estimates. As applicable to these
consolidated financial statements, the most significant estimates relate to revenue recognition.
d. Functional currency
The dollar is the currency of the primary economic environment in which the operations of the Company and
its Subsidiaries are conducted. The Company’s revenues are derived in dollars. Most of the Company’s
expenses and capital expenditures are incurred in dollars, and the major source of the Company’s financing
has been provided in dollars.
Transactions and balances originally denominated in dollars are presented at their original amounts. Balances
in non-dollar currencies are translated into dollars using historical and current exchange rates for non-
monetary and monetary balances, respectively. For non-dollar transactions and other items (stated below)
reflected in the statements of operations, the following exchange rates are used: (i) for transactions –
exchange rates at the transaction dates or average rates; and (ii) for other items (derived from non-monetary
balance sheet items such as depreciation and amortization, etc.) – historical exchange rates. Currency
translation gains and losses are recorded as financial income or expenses, as appropriate.
e. Cash equivalents
The Company considers all short-term, highly liquid investments, which include short-term bank deposits
with original maturities of three months or less from the date of purchase, that are not restricted as to
withdrawal or use and are readily convertible to known amounts of cash, to be cash equivalents.
f. Accounts Receivables
Accounts receivable have been reduced by an allowance for credit losses. The Company maintains the
allowance for estimated losses resulting from the inability of the Company’s customers to make required
payments. The allowance represents the current estimate of lifetime expected credit losses over the remaining
duration of existing accounts receivable considering current market conditions and supportable forecasts
when appropriate. The estimate is a result of the Company’s ongoing evaluation of collectability, customer
creditworthiness, historical levels of credit losses and future expectations. As of December 31, 2022 and
2021, the allowance was negligible.
No write-off activity and recoveries for the periods presented were recognized.
g. Inventories
Inventories are valued at the lower of cost or net realizable value. Cost of raw and packaging materials and
purchased products is determined using the “moving average” basis.
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cost of finished products is determined as follows: the value of the raw and packaging materials component
is determined primarily using the “moving average” basis; the value of the labor and overhead component is
determined on an average basis over the production period.
Inventory is written down for estimated obsolescence based upon management assumptions about future
demand and market conditions.
h. Property and equipment
1. Property and equipment are stated at cost, net of accumulated depreciation and amortization.
2. The Company’s assets are depreciated by the straight-line method on the basis of their estimated useful
lives as follows:
Laboratory equipment
Furniture
Computer equipment
Years
5
10-15
3
Leasehold improvements are amortized by the straight-line method over the shorter of (i) the expected lease
term and (ii) the estimated useful life of the improvements.
i. Impairment in value of long-lived assets
The Company tests long-lived assets for impairment if an indication of impairment exists. If the sum of
expected future cash flows of definite life assets (undiscounted) is less than the carrying amount of such
assets, the Company recognizes an impairment loss, and writes down the assets to their estimated fair values.
j. Income taxes
1. Deferred income taxes
Deferred taxes are determined utilizing the assets and liabilities method based on the estimated future tax
effects of the differences between the financial accounting and tax bases of assets and liabilities under the
applicable tax laws. Deferred tax balances are computed using the tax rates expected to be in effect when
those differences reverse. A valuation allowance in respect of deferred tax assets is provided if, based
upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets
will not be realized. The Company has provided a full valuation allowance with respect to its deferred tax
assets. The Company used statutory tax rates of 21% and 23%. See also Note 12.
2. Uncertainty in income taxes
Tax benefits recognized in the financial statements are those that the Company’s management deems at
least more likely than not to be sustained, based on technical merits. The amount of benefits recorded for
these tax benefits is measured as the largest benefit the Company’s management deems more likely than
not to be sustained. Liabilities relating to uncertain tax positions are classified as current in the
consolidated balance sheets to the extent the Company anticipates making payments within one year.
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
k. Revenue Recognition
Under Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers, a
contract with a customer exists only when: the parties to the contract have approved it and are committed to
perform their respective obligations, the Company can identify each party’s rights regarding the distinct
goods or services to be transferred (“performance obligations”), the Company can determine the transaction
price for the goods or services to be transferred, the contract has commercial substance and it is probable that
the Company will collect the consideration to which it will be entitled in exchange for the goods or services
that will be transferred to the customer.
Revenues are recorded in the amount of consideration to which the Company expects to be entitled in
exchange for performance obligations upon transfer of control to the customer.
1. Revenues from selling products
The Company recognizes revenues from selling goods at a point in time when control over the product is
transferred to customers (upon delivery).
2. Revenues from Chiesi Agreements
The Company has identified two performance obligations in the Chiesi agreements as follows: (1) the
license and research and development services and (2) the contingent performance obligation regarding
future manufacturing.
The Company determined that the license together with the research and development services should be
combined into single performance obligation since Chiesi cannot benefit from the license without the
research and development services. The research and development services are highly specialized and are
dependent on the supply of the drug.
The future manufacturing is contingent on regulatory approvals of the drug and the Company deems
these services to be separately identifiable from other performance obligations in the contract.
Manufacturing services post-regulatory approval are not interdependent or interrelated with the license
and research and development services.
The transaction price was comprised of fixed consideration and variable consideration (capped research
and development reimbursements). Under ASC 606, the consideration to which the Company would be
entitled upon the achievement of contractual milestones, which are contingent upon the occurrence of
future events, are a form of variable consideration. The Company estimates variable consideration using
the most likely method. Amounts included in the transaction price are recognized only when it is
probable that a significant reversal of cumulative revenues will not occur. Prior to recognizing revenue
from variable consideration, the Company uses significant judgment to determine the probability of
significant reversal of such revenue.
Since the customer benefits from the research and development services as the entity performs the
service, revenue from granting the license and the research and development services is recognized over
time using the cost-to-cost method. The Company used significant judgment when it determined the costs
expected to be incurred upon satisfying the identified performance obligation.
Revenue from additional research and development services ordered by Chiesi, is recognized over time
using the cost-to-cost method.
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Revenue from R&D services
Revenue from the research and development services is recognized over time using the cost-to-cost
method since the customer benefits from the research and development services as the entity performs
the service.
l. Research and development costs
Research and development costs are expensed as incurred and consist primarily of personnel, subcontractors
and consultants (mainly in connection with clinical trials), facilities, equipment and supplies for research and
development activities. In connection with purchases of assets, amounts assigned to intangible assets to be
used in a particular research and development project that have no alternative future use are charged to
research and development costs at the purchase date. Costs incurred for performing research and development
services are included in research and development expenses.
m. Concentration of credit risks and trade receivable
Financial instruments that potentially subject the Company to concentration of credit risk consist principally
of bank deposits and account receivables - trade. The Company’s deposits are instruments with highly rated
financial institutions, mainly in Israeli banks, and, as a matter of policy, limits the amounts of credit exposure
to any one financial institution. The Company has not experienced any credit losses in these accounts and
does not believe it is exposed to any significant credit risk on these instruments. The Company’s trade
receivables represent amounts to be received from its customers. The Company does not require its customers
to post collateral with respect to receivables.
As of December 31, 2022, the accounts receivables balance was composed of $2.3 million from Fiocruz,
$1.2 million from Chiesi and $1.1 million from Pfizer.
n. Share-based compensation
The Company accounts for share-based payment awards classified as equity awards, including stock-based
option awards and restricted stock, using the grant-date fair value method. The fair value of share-based
payment transactions is recognized as an expense over the requisite service period.
The Company calculates the fair value of stock-based option awards on the date of grant using the Black-
Scholes option pricing model. This option pricing model requires estimates as to the option’s expected term
and the price volatility of the underlying stock.
The Company measures compensation expense for restricted stock based on the market value of the
underlying stock at the date of grant.
The Company elected to recognize compensation cost for awards to employees, consultants and other service
providers with only service conditions that has a graded vesting schedule using the accelerated method.
The Company elects to account for forfeitures as they occur.
o. Net loss per share
Basic and diluted loss per share (“LPS”) are computed by dividing net loss by the weighted average number
of shares of the Company’s Common Stock outstanding for each period. The calculation of diluted LPS does
not include approximately 22,850,682, 28,502,017 and 34,097,716 shares of Common Stock
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
underlying outstanding options, warrants and convertible notes for the fiscal years ended December 31, 2020,
2021 and 2022, respectively, because the effect would be anti-dilutive.
p. Convertible notes
The outstanding convertible notes are accounted for using the guidance set forth in the Financial Accounting
Standards Board (“FASB”) ASC 815 requiring that the Company determine whether the embedded
conversion option must be separated and accounted for separately. ASC 470-20 regarding debt with
conversion and other options requires the issuer of a convertible debt instrument that may be settled in cash
upon conversion to separately account for the liability (debt) and equity (conversion option) components of
the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The Company’s
outstanding 7.50% Senior Secured Convertible Notes due 2021 (the “2021 Notes”) were accounted for
partially as liability and equity components of the instrument and partially as a debt host contract with an
embedded derivative resulting from the conversion feature. During the year ended December 31, 2017, the
embedded derivative was reclassified to additional paid in capital. The Company’s outstanding 2024 Notes
were accounted for as a liability (debt) and equity component (conversion option) as the convertible notes
may be settled wholly or partly in cash, at the option of the Company, when converted.
Issuance costs regarding the issuance of the 2021 Notes, as well as the debt discount and debt issuance costs
from the issuance of the 2024 Notes, were deferred and amortized over the applicable convertible notes
period using the effective interest rate.
As of December 31, 2022, a total of $28.75 million aggregate principal amount of the 2024 Notes were
outstanding. In addition, as of December 31, 2022 and 2021, none of the 2021 Notes were outstanding.
q. Leases
Leases are classified as finance or operating, with classification affecting the pattern and classification of
expense recognition in the statement of operations. The Company determines if an arrangement is a lease at
inception. Lease classification is governed by five criteria in ASC 842-10-25-2. If any of these five criteria is
met, the Company classifies the lease as a finance lease. Otherwise, the Company classifies the lease as an
operating lease. The Company does not have any finance leases.
Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in
the consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities
represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU
assets and liabilities are recognized at the commencement date based on the present value of lease payments
over the lease term. The Company uses its incremental borrowing rate based on the information available at
the commencement date to determine the present value of the lease payments.
The Company elected the short-term lease recognition exemption for all leases with a term shorter than 12
months. This means, for those leases, the Company does not recognize ROU assets or lease liabilities.
Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company
will either exercise or not exercise the option to renew or terminate the lease. The Company recognizes lease
expenses over the lease term on a straight-line basis.
The Company applies the portfolio approach to account for the operating lease ROU assets and liabilities for
certain car leases and incremental borrowing rates.
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
r. New accounting pronouncements
Recently adopted accounting pronouncements
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848) - Facilitation of the
Effects of Reference Rate Reform on Financial Reporting.” In addition, in January 2021, the FASB issued
ASU 2021-01, “Reference Rate Reform (Topic 848) - Scope.” The amendments in these ASUs apply to all
entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another
reference rate expected to be discontinued because of reference rate reform. Together, these ASUs provide
optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to
contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are
met. The expedients and exceptions provided by the amendments do not apply to contract modifications made
and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships
existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are
retained through the end of the hedging relationship. These ASUs were effective upon issuance and may be
applied prospectively to contract modifications and hedging relationships entered into or evaluated through
December 31, 2022. The adoption of this standard did not have a material impact on the Company’s
consolidated financial statements.
Recently issued accounting pronouncements, not yet adopted
In August 2020, the FASB issued ASU 2020-06 “Debt – Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40).” This
guidance simplifies the accounting for certain financial instruments with characteristics of liabilities and
equity, including convertible instruments and contracts on an entity’s own equity. The amendments to this
guidance are effective for fiscal years beginning after December 15, 2023, and interim periods within those
fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020,
including interim periods within those fiscal years. The Company is currently evaluating the impact of the
adoption of this standard on its consolidated financial statements.
NOTE 2 - COMMERCIALIZATION AGREEMENTS
a. On November 30, 2009, Protalix Ltd. and Pfizer entered into the Pfizer Agreement (as amended in
June 2013) pursuant to which Pfizer was granted an exclusive, worldwide license to develop and
commercialize taliglucerase alfa, except for Israel and Brazil. Under the Pfizer Agreement Protalix was
entitled to 40% of the results (profits or losses) earned on Pfizer’s sales of taliglucerase alfa.
In October 2015, the Company entered into the Amended Pfizer Agreement with Pfizer. Pursuant to the
amendment, the Company granted Pfizer an exclusive license in the entire world, including Israel but
excluding Brazil. Pfizer acquired all the information, knowledge and permission to manufacture and sell
Elelyso.
Protalix Ltd. also agreed to provide Pfizer with:
1. Manufacturing and supply of the drug substance for its incorporation into the licensed product in
consideration of an agreed price per unit.
2. Assistance in arranging for the manufacture of the drug substance by Pfizer or by alternative
supplier chosen by Pfizer in consideration of an agreed hourly rate plus reimbursement of expenses.
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Promissory note – as of the date of the amendment, the Company owed Pfizer $4.3 million as a result of
the accumulated losses incurred by the Collaboration Operation. Following the new agreements, the
Company committed to pay Pfizer the principal sum of the debt at the earlier of (a) November 12, 2020
and (b) the date upon which it becomes due pursuant to any event of default, as defined. In September
2020, the Company amended the outstanding $4.3 million promissory note payable to Pfizer by
November 2020 to extend the maturity date to the earlier of (a) January 31, 2022 and (b) the date that the
Company receives any milestone payment from Chiesi, if at all, subject to certain conditions and
exceptions. The amendment also provides that the Company shall make a payment of $430,000 to Pfizer.
The payment was creditable against the principal amount of the note, in whole or in part, if the Company
satisfied the note in full on or prior to September 30, 2021, depending on the date the note is satisfied. On
March 29, 2021, the Company paid approximately $4.0 million to Pfizer satisfying the promissory note
in full.
b. In October 2017, Protalix Ltd. entered into the Chiesi Ex-U.S. Agreement with respect to the
commercialization of pegunigalsidase alfa (hereafter – the drug) for the treatment of Fabry disease.
Under the terms of the Chiesi Agreement, Protalix Ltd. granted to Chiesi exclusive licensing rights for
the commercialization of the drug for all markets outside of the United States. At the effective date,
Protalix Ltd. had maintained the exclusive commercialization rights to the drug in the United States,
which rights were subsequently granted to Chiesi in July 2018.
Protalix Ltd. will be mainly responsible for (i) continuing the development of the drug until a regulatory
approval is granted and (ii) manufacture and supply the drug to Chiesi, based on Chiesi’s requests.
The consideration consists of the following:
1. Upfront, non-refundable payment of $25.0 million.
2. Additional payments of up to $25.0 million in development costs, capped at $10.0 million per year.
3. Payments for additional studies, as may be approved from time to time by Chiesi.
4. Milestone payments of up to $320.0 million with respect to certain regulatory and commercial
events as defined in the Chiesi Agreement.
5. Additional payments as consideration for the supply of the drug. The payment will vary from 15%
to 35% of Chiesi’s average selling price of the drug, depending on the amount of annual sales.
6. Protalix Ltd. will be the sole manufacturer of the drug.
Chiesi does not have sublicensing rights (except for certain territories).
In July 2018, Protalix Ltd. entered into the Chiesi U.S. Agreement with respect to the commercialization
of the drug for the treatment of Fabry disease. Under the terms of the Chiesi U.S. Agreement, Protalix
Ltd. granted to Chiesi exclusive licensing rights for the commercialization of the drug for all markets in
the United States. Protalix Ltd. will be mainly responsible for (i) continuing the development of the drug
until a regulatory approval is granted, (ii) continuing certain clinical development efforts in relation to the
drug after a regulatory approval is granted and (iii) manufacture and supply the drug to Chiesi, based on
Chiesi’s requests.
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consideration consists of the following:
1. Upfront, non-refundable payment of $25.0 million.
2. Additional payments of up to $20.0 million in development costs, capped at $7.5 million per year.
3. Payments for additional studies, as may be approved from time to time by Chiesi.
4. Milestone payments of up to $760.0 million with respect to certain regulatory and commercial
events as defined in the Chiesi Agreement, which has been reduced to $735.0 million.
5. Additional payments as consideration for the supply of the drug. The payment will vary from 15%
to 40% of Chiesi’s average selling price of the drug, depending on the amount of annual sales.
6. Protalix will be the sole manufacturer of the drug.
Chiesi does not have sublicensing rights.
As of December 31, 2022, the Company has received, or is entitled to receive, the following payments
from Chiesi:
1. Upfront payments equal to $50.0 million, in the aggregate.
2. Payments equal to $45.0 million in consideration for development services performed.
3. Payments equal to approximately $48.7 million in connection with the performance of extension
studies.
4. Payment equal to $10.0 million in lieu of certain milestone payments.
During 2020, 2021 and 2022, the Company recognized revenues of approximately $3.5 million,
$0.6 million and $1.2 million, respectively, related to the then $10.0 million future milestone payment.
The Company assessed the likelihood of achieving the milestone using the most likely amount method
and evaluated for the constraint by including in the transaction price variable consideration to the extent
that it is probable that a significant reversal in the amount of cumulative revenue recognized will not
occur. The $10.0 million payment was received in June 2021.
c. On June 18, 2013, Protalix Ltd. entered into the Brazil Agreement with Fiocruz for BioManguinhos.
Fiocruz’s purchases of BioManguinhos alfataliglicerase to date have been significantly below certain
agreed upon purchase milestones and, accordingly, the Company has the right to terminate the Brazil
Agreement. Notwithstanding, the Company is, at this time, continuing to supply BioManguinhos
alfataliglicerase to Fiocruz under the Brazil Agreement, and patients continue to be treated with
BioManguinhos alfataliglicerase in Brazil.
d. On March 16, 2020, the Company agreed to conduct a feasibility study with Kirin Holdings Company,
Limited (“Kirin”) to evaluate the production of a novel complex protein utilizing ProCellEx®, the
Company’s proprietary plant cell-based protein expression system. Under the agreement, Kirin was
obligated to bear the costs of conducting cell line engineering and protein expression studies on the target
protein. In addition, the contract provided Kirin with an option to a future service for which the Company
received a non-refundable payment in the amount of $1.0 million. During the year ended December 31,
2021, the Company completed its obligations under the agreement and the agreement expired, including
the option to provide additional services. Following the expiration of the option, the Company
recognized as revenue the $1.0 million received in March 2020.
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - PROPERTY AND EQUIPMENT
a. Composition of property and equipment grouped by major classifications is as follows:
(U.S. dollars in thousands)
Laboratory equipment
Furniture and computer equipment
Leasehold improvements
Less – accumulated depreciation and amortization
December 31,
2021
$ 18,237
2,718
16,759
$ 37,714
(32,752)
4,962
$
2022
$ 18,495
2,823
16,921
$ 38,239
(33,686)
4,553
$
b. Depreciation in respect of property and equipment totaled approximately $1.3 million, $1.1 million and
$1.1 million for the years ended December 31, 2020, 2021 and 2022, respectively.
NOTE 4 - INVENTORIES
a.
Inventories at December 31, 2021 and 2022 consisted of the following:
(U.S. dollars in thousands)
Raw materials
Work in progress
Finished goods
Total inventory
December 31,
$
2021
3,166
3,262
11,526
$ 17,954
$
2022
3,508
2,678
10,618
$ 16,804
b. During the years ended December 31, 2020, 2021 and 2022, the Company recorded approximately
$0.3 million, $0.4 million and $0.04 million, respectively, for write-down of inventory under cost of goods
sold.
NOTE 5 - LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT
The Israeli Subsidiary is required to make a severance payment upon dismissal of an employee or upon
termination of employment in certain circumstances. The severance pay liability to the employees (based upon
length of service and the latest monthly salary - one month’s salary for each year employed) is recorded on the
Company’s balance sheets under “Liability for employee rights upon retirement.” The liability is recorded as if it
were payable at each balance sheet date on an undiscounted basis.
The liability is funded in part from the purchase of insurance policies or by the establishment of pension funds
with dedicated deposits in the funds. The amounts used to fund these liabilities are included in the Company’s
balance sheets under “Funds in respect of employee rights upon retirement.” These policies are the Company’s
assets. However, under labor agreements and subject to certain limitations, any policy may be transferred to the
ownership of the individual employee for whose benefit the funds were deposited. In the years ended
December 31, 2020, 2021 and 2022, the Company deposited approximately $121,000, $108,000 and $96,000,
respectively, with insurance companies in connection with its severance payment obligations.
In accordance with the current employment agreements with certain employees, the Company makes regular
deposits with certain insurance companies for accounts controlled by each applicable employee in order to secure
the employee’s rights upon retirement. The Company is fully relieved from any severance pay liability with
respect to each such employee after it makes the payments on behalf of the employee. The liability accrued in
respect of these employees and the amounts funded, as of the respective agreement dates, are not reflected in
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the Company’s balance sheets, as the amounts funded are not under the control and management of the Company
and the pension or severance pay risks have been irrevocably transferred to the applicable insurance companies
(the “Contribution Plans”).
The amounts of severance pay expenses were approximately $885,000, $990,000 and $945,000 for each of
the years ended December 31, 2020, 2021 and 2022, respectively, of which approximately $747,000, $857,000
and $800,000 in the years ended December 31, 2020, 2021 and 2022, respectively, were in respect of the
Contribution Plans. Gain (loss) on amounts funded in respect of employee rights upon retirement totaled
approximately $28,000, $100,000 and $(3,000) for the years ended December 31, 2020, 2021 and 2022,
respectively.
The Company expects to contribute approximately $857,000 in the year ending December 31, 2023 to insurance
companies in connection with its severance liabilities, approximately $779,000 of which will be contributed to
one or more Contribution Plans.
During the five-year period following December 31, 2022, the Company expects one employee retirement upon
normal retirement age. As of December 31, 2022 the Company holds funds of approximately $150,000 in respect
of the anticipated retirement.
NOTE 6 - COMMITMENTS
a. Royalty Commitments
The Company is obligated to pay royalties to the National Authority for Technological Innovation (“NATI”)
on proceeds from the sale of products developed from research and development activities that were funded,
partially, by grants from NATI or its predecessor, the Office of the Israeli Innovation Authority (IIA). At the
time the grants were received, successful development of the related projects was not assured.
In the case of failure of a project that was partly financed as described above, the Company is not obligated to
pay any such royalties or repay funding received from NATI or the IIA.
Under the terms of the applicable funding arrangements, royalties of 3% to 6% are payable on the sale of
products developed from projects funded by NATI or the IIA, which payments shall not exceed, in the
aggregate, 100% of the amount of the grant received (dollar linked), plus, commencing upon January 1, 2001,
interest at an annual rate based on LIBOR. In addition, if the Company receives approval to manufacture
products developed with government grants outside the State of Israel, it will be required to pay an increased
total amount of royalties (possibly up to 300% of the grant amounts plus interest), depending on the
manufacturing volume that is performed outside the State of Israel, and, possibly, an increased royalty rate.
Royalty expenses to NATI or the IIA are included in the statement of operations as a component of the cost of
revenues and were approximately $911,000, $1.2 million and $1.2 million during the years ended
December 31, 2020, 2021 and 2022, respectively.
At December 31, 2021 and 2022, the maximum total royalty amount payable by the Company under these
funding arrangements is approximately $38.6 million and $37.4 million, respectively (without interest,
assuming 100% of the funds are payable).
b. Subcontracting Agreements
The Company has entered into sub-contracting agreements with several clinical providers and consultants in
Israel, the United States and certain other countries in connection with its primary product development
F-21
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
process. As of December 31, 2022, total commitments under said agreements were approximately
$0.7 million.
c. Fill/Finish Agreement
On August 29, 2022, the Company entered into a Fill/Finish Agreement (the “F/F Agreement”) and a Letter
Agreement, in each case with Chiesi. The Company agreed to supply Chiesi with drug substance for PRX-
102 and, following relevant technology and technical information transfer activities, Chiesi has agreed,
among other things, to provide the Company with commercial fill/finish services for PRX-102, including to
support the anticipated global launch of PRX-102. The F/F Agreement shall continue in force until
December 31, 2025, unless terminated earlier in accordance with the terms of the F/F Agreement and the term
may be extended by mutual agreement for an additional period of seven years upon mutual written agreement
prior to expiration of the initial term.
NOTE 7 - OPERATING LEASES
The Company is a party to several lease agreements for its facilities, the latest of which has been extended
until 2026. The Company has the option to extend certain of such agreements on one additional occasion for
an additional five-year period. During the extended lease period, the aggregate monthly rental payments will
increase by 7.5%-10% for the option. The Company expects to exercise the final option in future periods. As
of December 31, 2022, the Company provided bank guarantees of approximately $501,000, in the aggregate,
to secure the fulfillment of its obligations under the lease agreements.
The Company entered into several three-year leases for vehicles which are regularly amended as new vehicles
are leased.
The following table sets forth data regarding the Company’s operating leases for the years ended
December 31, 2020, 2021 and 2022:
(U.S. dollars in thousands)
Operating lease costs
Cash paid for amounts included in the measurement of
lease liabilities
Weighted average remaining lease term (in years)
Weighted average discount rate
Year Ended December 31,
2020
$ 1,382
2021
$ 1,632
2022
$ 1,398
1,391
1,289
9.5
8.9
12.7 % 12.8 % 12.8 %
1,404
8.2
The following table sets forth a maturity analysis of the Company’s operating lease liabilities as of
December 31, 2022:
(U.S. dollars in thousands)
2023
2024
2025
2026
2027
2028 and thereafter
Total undiscounted cash flows
Less: imputed interest
Present value of operating lease liabilities
F-22
December 31, 2022
1,118
968
963
865
933
3,572
8,419
3,132
5,287
$
$
$
$
$
$
$
$
$
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - REVENUE
The following table summarizes the Company’s disaggregation of revenues:
(U.S. dollars in thousands)
Pfizer
Brazil
Chiesi
Total revenues from selling goods
Revenues from license and R&D services
$
$
$
$
2020
Year Ended December 31,
2021
10,160
6,400
189
16,749
21,601
$
$
$
$
$
$
$
$
$
$
8,105
8,000
131
16,236
46,662
2022
12,403
9,452
3,437
25,292
22,346
During the year ended December 31, 2021, and following the CRL received from the FDA and other
understandings with Chiesi, the Company changed its estimate for total costs expected to be incurred until
satisfying the performance obligation under the Chiesi Agreements. This resulted in reduced revenues recognized
in respect of this performance obligation in 2021.
NOTE 9 - SHARE CAPITAL
a. Authorized Capital
On June 30, 2022, the Company held its 2022 Annual Meeting of Stockholders (the “Annual Meeting”). At
the Annual Meeting, the Company’s stockholders, among other matters, approved an amendment to the
Company’s Certificate of Incorporation, as amended, to increase the number of shares of Common Stock
authorized for issuance from 120,000,000 to 144,000,000.
b. Rights of the Company’s Common Stock
The Company’s Common Stock is listed on the NYSE American and on the Tel Aviv Stock Exchange (the
“TASE”); however, the Company has decided to voluntarily delist its common stock from the TASE. The
Company’s common stock will be delisted from the TASE on March 22, 2023 and the last trading date on the
TASE will be March 20, 2023. The Company’s common stock will continue to be listed for trade on the
NYSE American. Each share of Common Stock is entitled to one vote. The holders of shares of Common
Stock are also entitled to receive dividends whenever funds are legally available, when and if declared by the
Board of Directors. Since its inception, the Company has not declared any dividends.
c. Stock based compensation
On December 14, 2006, the Board of Directors adopted the Protalix BioTherapeutics, Inc. 2006 Stock
Incentive Plan, as amended (the “Plan”). The Plan has since been amended to, among other things, increase
the number of shares of Common Stock available under the Plan to 8,475,171 shares. The grant of options to
Israeli employees under the Plan is subject to the terms stipulated by Sections 102 and 102A of the Israeli
Income Tax Ordinance (the “Ordinance”). Each option grant made to an Israeli citizen is subject to the track
chosen by the Company, either Section 102 or Section 102A of the Ordinance, and pursuant to the terms
thereof, the Company is not allowed to claim, as an expense for tax purposes, the amounts credited to
employees as a benefit, including amounts recorded as salary benefits in the Company’s accounts, in respect
of options granted to employees under the Plan, with the exception of the work-income benefit component, if
any, determined on the grant date. For Israeli non-employees, the share option plan is subject to Section 3(i)
of the Ordinance.
As of December 31, 2022, 136,738 shares of Common Stock remain available for grant under the Plan.
F-23
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The vesting period of the outstanding options and restricted shares is generally four years from the date of
grant. The rights of common stock obtained from the exercise of options and the restricted stock (once vested)
are identical to those of other common stock of the Company. The contractual term of these options is
primarily for ten years.
For purposes of determining the fair value of the options and restricted stock granted to employees and non-
employees, the Company’s management uses the fair value of the Common Stock. The fair value of options
granted for both employees and directors is estimated at the date of grant using the Black-Scholes option-
pricing model.
1. Options and restricted stock granted to employees and directors:
A summary of share option plans, and related information, under all of the Company’s equity incentive plans
for the year ended December 31, 2022, and the effect of share-based compensation on the statement of
operations for the year ended December 31, 2022, is as follows:
a) Options granted to employees and directors:
Year Ended December 31, 2022
Number
of
options
2,259,020
3,480,000
219,705
5,519,315
1,731,434
$
$
$
Weighted
average
exercise
price
4.42
1.03
4.62
2.28
4.25
Year Ended December 31, 2022
Number of Restricted Stock
458,027
759,482
926,035
291,474
Outstanding at beginning of year
Changes during the year:
Granted
Forfeited and expired
Outstanding at end of year
Exercisable at end of year
b) Restricted stock granted to employees:
Outstanding at beginning of year
Changes during the year:
Granted
Vested
Non vested at end of year
F-24
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
c) The following tables summarize information concerning outstanding and exercisable options as of
December 31, 2022:
Options outstanding
Options exercisable
December 31, 2022
Exercise
prices
$1.03-$2.00
$3.55-$3.73
$4.69-$5.60
$17.20
Number of
options
outstanding
at end of
year
3,610,000
1,361,965
466,000
81,350
5,519,315
Weighted
average
remaining
contractual
life
Weighted
average
remaining
contractual
life
8.99
6.48
5.67
2.10
Number of
options
exercisable
300,625
903,459
446,000
81,350
1,731,434
9.60
6.78
5.71
2.10
* As of December 31, 2022, the aggregate intrinsic value of all the outstanding options and exercisable options was
approximately $1.2 million and $74,000, respectively.
d) The fair value of each option granted during 2020, 2021 and 2022 for both employees and directors
is estimated at the date of grant using the Black-Scholes option-pricing model. The following
weighted average assumptions were applied in determining the options’ fair value on their grant
date:
Year Ended December 31,
Stock price (USD)
Exercise price (USD)
Risk free rate
Volatility
Dividend yield
Expected life (Years)
2022
1.03
1.03
2021
2020
1.57
3.64
3.64
1.57
0.74 % 0.88 % 3.32 %
79.50 % 84.30 % 85.94 %
0 %
6
0 %
6
0 %
6
e) The total unrecognized compensation cost of employee stock options at December 31, 2022 is
approximately $2.2 million. The unrecognized compensation cost of employee stock options is
expected to be recognized over a weighted average period of 1.12 years.
During the three years ended December 31, 2022, there were no exercises of stock options, and the
Company did not realize any tax benefit in connection with any exercises.
The total vesting-date value of equity classified restricted stock vested during 2022 was $0.8 million.
As of December 31, 2022, the unrecognized compensation cost related to all unvested equity
classified restricted stock of $0.2 million is expected to be recognized as an expense over a
weighted-average period of 0.64 years.
F-25
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
f) The following table illustrates the effect of share-based compensation on the statement of operations:
(U.S. dollars in thousands)
Cost of goods sold
Research and development expenses
Selling, general and administrative expenses
d. Private and 144A Offerings
Year Ended December 31,
2021
2022
2020
$ 1,036
2,090
$ 3,126
$
269
648
1,458
$ 2,375
$
135
518
1,432
$ 2,085
On March 18, 2020, the Company completed a private placement (the “2020 Offering”) to certain existing
and new institutional and other accredited investors in reliance on the exemption from registration set forth in
Section 4(2) of the U.S. Securities Act of 1933, as amended (the “Securities Act”). The Company sold
approximately 17.6 million unregistered shares of Common Stock in the 2020 Offering at a price per share of
$2.485. The Company generated gross proceeds equal to approximately $43.7 million in the Private
Placement; net proceeds generated from the private placement were approximately $41.3 million, after
deducting advisory fees and other estimated offering expenses. Each share of Common Stock issued was
accompanied by a warrant to purchase one share of Common Stock at an exercise price equal to $2.36. The
warrants were exercisable commencing six months following their issuance for a period of five years from the
date of issuance. For accounting purposes, the warrants are classified as equity considering the warrants’
terms.
During the year ended December 31, 2020, the Company issued 200,000 shares of Common Stock in
connection with the cash exercise of a warrant issued in the 2020 Offering and generated proceeds equal to
$472,000 from such exercise.
On June 7, 2021, the Company issued 173,816 shares of Common Stock in connection with the cashless
exercise of a warrant to purchase 2,816,901 shares of Common Stock issued in the 2020 Offering. The
Company did not generate any proceeds from the cashless exercise.
During the year ended December 31, 2022, the Company issued 1,000 shares of Common Stock in
connection with the cash exercise of a warrant issued in the 2020 Offering and generated proceeds equal to
$2,360 from such exercise.
e. At-the-Market (ATM) Offering
On July 2, 2021, the Company entered into the Sales Agreement with the Agent. Pursuant to the terms of the
Sales Agreement, the Company may sell from time to time through the Agent ATM Shares having an
aggregate offering price of up to $20.0 million.
The Company has no obligation to sell any of the Shares, and may at any time suspend sales under the Sales
Agreement or terminate the Sales Agreement in accordance with its terms. The Agent is entitled to a
commission of up to 3.0% of the aggregate gross proceeds from the ATM Shares sold.
During the year ended December 31, 2020, the Company sold 1,428,571 shares of Common Stock under the
BofA Agreement. The Company generated gross proceeds equal to approximately $5.0 million in connection
with such sales.
During the year ended December 31, 2021, but prior to the termination of the BofA Agreement, the Company
sold 1,867,552 shares of Common Stock under the BofA Agreement. The Company generated gross proceeds
equal to approximately $8.8 million in connection with such sales.
F-26
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the year ended December 31, 2022, the Company sold 7,473,038 ATM Shares under the Sales
Agreement. The Company generated gross proceeds equal to approximately $8.7 million in connection with
such sales.
f. Public Offering
On February 17, 2021, the Company issued and sold 8,749,999 shares of Common Stock in an underwritten
public offering at a price to the public of $4.60 per share for gross proceeds of approximately $40.2 million
before deducting the underwriting discount and estimated expenses of the offering. The above included the
exercise of the underwriters’ over-allotment option to purchase 1,141,304 shares of Common Stock. BofA
Securities acted as book-running manager for the offering with Oppenheimer & Co. acting as co-manager.
NOTE 10 - CONVERTIBLE NOTES
On August 25, 2021, the Company completed exchanges (the “Exchanges”) of a substantial majority of the
Company’s outstanding 2021 Notes with certain institutional note holders. The Exchanges involved the exchange
of an aggregate of $54.65 million principal amount of the Company’s outstanding 2021 Notes for an aggregate of
$28.75 million principal amount of newly issued 2024 Notes, $25.90 million in cash, and approximately
$1.1 million in cash representing accrued and unpaid interest through the issue date. The initial conversion rate for
the 2024 Notes is 563.2216 shares of Common Stock for each $1,000 principal amount of 2024 Notes (equivalent
to an initial conversion price of approximately $1.7755 per share of the Common Stock), subject to adjustment in
certain circumstances, which is based on a 32.5% premium to the closing price of the Common Stock on the
NYSE American at the close of trading on August 13, 2021, the exchange date.
a. 7.5% Convertible Notes Due 2021
On December 1, 2016, the Company entered into a note purchase agreement with institutional investors,
which held part of the 2018 Notes (the “2016 Purchasers”), relating to the sale by the Company of
$22.5 million aggregate principal amount of 7.50% Senior Secured Convertible Notes due 2021 in a private
placement pursuant to Section 4(a)(2) under the Securities Act. Concurrently with the consummation of the
private placement of the 2021 Notes, the Company entered into a privately negotiated exchange agreement
(the “2016 Exchange Agreement”) with certain existing note holders identified therein to exchange
$54.1 million aggregate principal amount of the Company’s outstanding 2018 Notes for (i) $40.186 million
aggregate principal amount of 2021 Notes, (ii) 2,384,673 shares of Common Stock and (iii) cash, equal to the
accrued and unpaid interest on the 2018 Notes and any fractional shares. The closing date of the purchase
agreement and the 2016 Exchange Agreement was December 7, 2016. The issuance of the 2021 Notes and
shares in the exchange and the private placement were made in reliance on the exemption from the
registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof. The net proceeds from the
private placement were $19.7 million, after deducting the placement agent’s fees and the Company’s
estimated offering expenses.
In connection with the completion of the exchange and the private placement, the Company entered into the
Indenture, dated as of December 7, 2016, with the guarantors party thereto, The Bank of New York Mellon
Trust Company, N.A., as trustee and Wilmington Savings Fund Society, FSB, as collateral agent (the “2016
Indenture”). The 2021 Notes accrued interest at a rate of 7.50% per year. A portion of the interest payable was
allowed to be made in shares of Common Stock at the Company’s election.
On July 24, 2017, the Company entered into another note purchase agreement with certain institutional
investors relating to the private issuance and sale by the Company of $10.0 million in aggregate principal
amount of its 2021 Notes. The 2021 Notes were issued pursuant to the 2016 Indenture. The net proceeds from
this purchase agreement were $9.5 million, after deducting the Company’s offering expenses.
F-27
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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On November 15, 2021, all the then outstanding 2021 Notes matured and were paid in full, and the 2016
Indenture expired.
The following table sets forth total interest expense recognized related to the 2021 Notes:
(U.S. Dollars in thousands)
Contractual interest expense
Debt discount amortization
Loss from extinguishment
Other expenses
Total
b. 7.5% Convertible Notes Due 2024
Year Ended December 31,
2020
4,344
3,470
-
1,300
9,114
$
$
2021
2,855
2,575
831
-
6,261
$
$
The 2024 Notes were issued pursuant to an indenture entered into between the Company, the guarantors party
thereto, The Bank of New York Mellon Trust Company, N.A., as trustee and Wilmington Savings Fund
Society, FSB, as collateral agent (the “2024 Indenture”). Interest on the Notes is payable semi-annually at a
rate of 7.50% per annum. The Notes mature three years after the issuance thereof, unless earlier purchased,
converted, exchanged or redeemed and are guaranteed by the Company’s subsidiaries. The 2024 Notes are
secured by perfected liens on all of the assets of the Company and its subsidiaries.
For accounting purposes, as the terms of the 2021 Notes and the 2024 Notes are substantially different, the
Exchanges were considered an extinguishment of debt. The Company allocated the fair value of the
consideration transferred to the participating note holders between the 2021 Notes and their equity component
based on the fair value of the liability component before the extinguishment, and the remainder was allocated
to the equity component. As a result, the Company recognized a loss from extinguishment in the statement of
operations equal to $0.8 million due to derecognition of the liability component and a reduction of
stockholders’ equity of $12.2 million.
The Company accounted for the 2024 Notes as a liability (debt) and equity component (conversion option) as
the convertible notes may be settled wholly or partly in cash, at the option of the Company, when converted.
The equity component with respect to the cash conversion feature net of transaction costs of approximately
$12.0 million was recognized in the Company’s additional paid in capital.
Transaction costs in the amount of approximately $869,000 were allocated to the liability and equity
component. The debt discount and debt issuance costs regarding the issuance of the 2024 Notes are deferred
and amortized over the convertible notes period using the effective interest rate.
Holders may convert their 2024 Notes at any time. The initial conversion rate for the 2024 Notes is 563.2216
shares of Common Stock for each $1,000 principal amount of 2024 Notes (equivalent to an initial conversion
price of approximately $1.7755 per share of the Common Stock). Upon conversion, the Company may settle
the 2024 Notes by paying or delivering, as the case may be, cash, shares of Common Stock or a combination
thereof, at the Company’s election.
To date, there has been no conversion of 2024 Notes. As of December 31, 2022, a total of $28.75 million
aggregate principal amount of the 2024 Notes were outstanding.
F-28
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Prior to the maturity date, the Company may redeem in cash:
any or all of the 2024 Notes if, on or after March 31, 2023, the last reported sale price of the Common
a)
Stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive
trading days exceeds 130% of the conversion price on each applicable trading day, or
b)
all of the 2024 Notes then outstanding if the aggregate principal amount of the 2024 Notes then
outstanding is less than 15% of the aggregate principal amount of the notes issued on August 25, 2021.
To date, there has been no redemption of 2024 Notes.
The 2024 Notes are guaranteed by the Restricted Subsidiaries (as defined in the 2024 Indenture) and are
secured by a first-priority security interest in all of the present and after-acquired assets of the Company and
each of the Restricted Subsidiaries (the “Collateral”), including, but not limited to, (i) 100% of the capital
stock of the Guarantors (as defined in the 2024 Indenture) and each Restricted Subsidiary of the Company
that is held by the Company or any Restricted Subsidiary, (ii) intellectual property, including all copyrights,
copyright licenses, patents, patent licenses, software, trademarks, trademark licenses and trade secrets and
other proprietary information, including, but not limited to, domain names, (iii) all cash, deposit accounts,
securities accounts, commodities accounts and contract rights, (iv) all real property and leased property,
subject to applicable minimum thresholds, as set forth in the 2024 Indenture, and (v) all other tangible and
intangibles of the Company and the Guarantors. In connection with the grant of such liens, the Company
entered into certain agreements with both Wilmington Savings Fund Society, FSB, as collateral agent in the
United States, and with Altshuler Shaham Trusts Ltd., as security trustee in Israel. The 2024 Indenture
restricts the ability of the Company, the Subsidiaries and any future subsidiaries to make certain investments,
including transfers of the Company’s assets that constitute collateral securing the 2024 Notes, in its existing
and future foreign subsidiaries, subject to certain exceptions.
Upon (i) the occurrence of a fundamental change (as defined in the 2024 Indenture) or (ii) if the Company
calls the 2024 Notes for redemption as described below (either event, a “make-whole fundamental change”)
and a holder elects to convert its 2024 Notes in connection with such make-whole fundamental change, the
Company will, in certain circumstances, increase the conversion rate by a number of additional shares (the
“Additional Shares”). In no event will the conversion rate exceed the maximum conversion rate, which is
746.2686 shares per $1,000 principal amount of 2024 Notes, which amount is inclusive of repayment of the
principal of the 2024 Notes.
If a fundamental change occurs at any time, holders will have the right, at their option, to require the
Company to purchase for cash any or all of the 2024 Notes, or any portion of the principal amount thereof,
that is equal to $1,000 or an integral multiple of $1,000 in excess thereof, on a date of the Company’s
choosing that is not less than 20 calendar days nor more than 35 calendar days after the date of the applicable
fundamental change company notice. The price the Company is required to pay for a 2024 Note is equal to
100% of the principal amount of such 2024 Note plus accrued and unpaid interest, if any, to, but excluding,
the fundamental change purchase date. Under the terms of the 2024 Indenture, the Company is required to
meet certain covenants including the requirement to maintain a minimum cash balance of at least
$7.5 million. Failure to meet covenants can be considered an event of default and, accordingly, may result in
the acceleration of the payment of the notes or in additional interest payments. As of December 31, 2022, the
Company was in compliance with all covenants.
The Company prepared a valuation of the fair value of the 2024 Notes and 2021 Notes (a Level 3 valuation)
as of August 25, 2021. The value was estimated by implementing the binomial model. The liability
component was valued based on the Income Approach. The following parameters were used:
F-29
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock price (USD)
Expected term
Risk free rate
Volatility
Yield
2021 Notes
1.34
0.23
0.05 %
78.95 %
7.87 %
2024 Notes
1.34
3.03
0.44 %
91.35 %
7.66 %
The following table sets forth total interest expense recognized related to the 2024 Notes:
(U.S. dollars in thousands)
Contractual interest expense
Amortization of debt issuance costs and debt discount
Total
Year Ended December 31,
2021
2022
$
$
767
97
864
$
$
2,156
300
2,456
NOTE 11 - FAIR VALUE MEASUREMENT
The Company discloses fair value measurements for financial assets and liabilities. Fair value is based on the price
that would be received from the sale of an asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date.
The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used
to measure fair value into three broad levels, which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or
liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the
lowest priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs
and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its
assessment of fair value.
The fair value of the financial instruments included in the working capital of the Company is usually identical or
close to their carrying value.
The fair value of the outstanding $28.75 million 2024 Notes as of December 31, 2022 is approximately
$34.6 million based on a level 3 measurement.
F-30
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company prepared the valuation of the fair value of the 2024 Notes (a Level 3 valuation) as of December 31,
2022. The value of these notes were estimated by implementing the binomial model. The liability component was
valued based on the Income Approach. The following parameters were used:
Stock price (USD)
Expected term
Risk free rate
Volatility
Yield
NOTE 12 - TAXES ON INCOME
a. The Company
2024 Notes
1.37
1.67
4.41 %
71.24 %
12.75 %
Protalix BioTherapeutics, Inc. is taxed according to U.S. tax laws. The Company’s income is taxed in the
United States at the rate of up to 21%.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted into law. The new legislation
represents fundamental and dramatic modifications to the U.S. tax system. The Act contained several key tax
provisions that impacted the Company including the reduction of the maximum U.S. federal corporate income
tax rate from 35% to 21%, effective January 1, 2018. Other significant changes under the Act included,
among others, a one-time repatriation tax on accumulated foreign earnings, a limitation of net operating loss
(“NOL”) deduction to 80% of taxable income, and indefinite carryover of post-2017 NOLs. The Act also
repealed the corporate alternative minimum tax for tax years beginning after December 31, 2017. Losses
generated prior to January 1, 2018 will still be subject to the 20-year carryforward limitation and the
alternative minimum tax. Other impacts due to the Act included the repeal of the domestic manufacturing
deduction, modification of taxation of controlled foreign corporations, a base erosion anti-abuse tax,
modification of interest expense limitation rules, modification of limitation on deductibility of excessive
executive compensation, and taxation of global intangible low-taxed income.
Modification of interest expense limitation rules under the Act provides generally that for taxable years 2019-
2022 interest expense deduction shall be limited to 30% of the EBITDA and for taxable years 2022 onwards
to 30% of EBIT. Disallowed interest deduction may be carried forward indefinitely. The Company believes
that any potential impact (if applicable) of this limitation will be offset by utilization of available NOLs.
Section 174 of the Act requires taxpayers to capitalize and amortize research and development expenses for
tax years beginning after December 31, 2021. This rule became effective for the Company during the year
ended December 31, 2022, and resulted in the capitalization of research and development costs of
approximately $28.5 million. The Company will amortize these costs for tax purposes over 15 years for
research and development performed outside the United States. In the year ended December 31, 2022, the
Company recorded income taxes of approximately $530,000.
The Company believes that all future profits of its subsidiaries will be indefinitely reinvested or that there is
no expectation to distribute any taxable dividends from these subsidiaries. The determination of the amount of
the unrecognized deferred tax liability related to the undistributed earnings is estimated as an immaterial
amount.
F-31
Table of Contents
b. Protalix Ltd.
PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company as a “foreign-investment company” measures its results for tax purposes in dollar based on
Income Tax Regulations (Bookkeeping Principles of Foreign Invested Companies and of Certain Partnerships
and the Determination of Their Taxable Income), 1986. The Israeli Subsidiary is taxed according to Israeli tax
laws:
1. Tax rates
The income of the Israeli Subsidiary, other than income from “Approved Enterprises,” is taxed in Israel
at the regular corporate tax rates.
The corporate tax rate was 23% for 2018 and thereafter.
Capital gain on a sale of assets is subject to capital gain tax according to the corporate tax rate in effect in
the year during which the assets are sold.
2. The Law for the Encouragement of Capital Investments, 1959 (the “Encouragement of Capital
Investments Law”)
Under the Encouragement of Capital Investments Law, including Amendment No. 60 to the
Encouragement of Capital Investments Law as published in April 2005, by virtue of the “Approved
Enterprise” or “Benefited Enterprise” status the Israeli Subsidiary is entitled to various tax benefits as
follows:
a. Reduced tax rates
Income derived from the Approved Enterprise during a 10-year period commencing upon the year in
which the enterprise first realizes taxable income is tax exempt, provided that the maximum period
to which it is restricted by the Encouragement of Capital Investments Law has not elapsed.
The Israeli Subsidiary has an “Approved Enterprise” plan since 2004 and “Benefited Enterprise”
plan since 2009. The period of benefits in respect of the main enterprise of the Company has not yet
commenced. The period during which the Company is entitled to benefits in connection with the
Benefited Enterprise expired in 2022.
If the Israeli Subsidiary subsequently pays a dividend out of income derived from the “Approved
Enterprise” or “Benefited Enterprise” during the tax exemption period, it will be subject to tax on the
gross amount distributed (including the company tax on these amounts), at the rate which would
have been applicable if such income not been exempted.
b. Accelerated depreciation
The Israeli Subsidiary is entitled to claim accelerated depreciation, as provided by Israeli law, in the
first five years of operation of each asset, in respect of buildings, machinery and equipment used by
the Approved Enterprise and the Benefited Enterprise.
c. Conditions for entitlement to the benefits
The Israeli Subsidiary’s entitlement to the benefits described above is subject to its fulfillment of
conditions stipulated by the law, rules and regulations published thereunder, and the instruments of
approval for the specific investment in an approved enterprise. Failure by the Israeli Subsidiary to
comply with these conditions may result in the cancellation of the benefits, in whole or in part,
F-32
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and the Subsidiary may be required to refund the amount of the benefits with interest. The Israeli
Subsidiary received a final implementation approval with respect to its “Approved Enterprise” from
the Investment Center.
d. Amendment of the Law for the Encouragement of Capital Investments, 1959
In recent years, several amendments have been made to the Encouragement of Capital Investments
Law which have enabled new alternative benefit tracks, subject to certain conditions.
The Encouragement of Capital Investments Law was amended as part of the Economic Policy Law
for the years 2011-2012 (amendment 68 to the Encouragement of Capital Investments Law), which
was passed by the Israeli Knesset on December 29, 2010. The amendment sets alternative benefit
tracks to those currently in effect under the provisions of the Encouragement of Capital Investments
Law. On December 29, 2016, Amendment 73 to the Encouragement of Capital Investments Law was
published. This amendment sets new benefit tracks, inter alia, “Preferred Technological Enterprise”
and “Special Preferred Technological Enterprise” (the “Capital Investments Law Amendment”).
To date, the Company has elected not to have the Capital Investments Law Amendment apply to the
Company.
c. Tax losses carried forward to future years
As of December 31, 2022 and 2021, the Company had aggregate NOL carry-forwards equal to approximately
$247.4 million and $247.9 million, respectively, that are available to reduce future taxable income as follows:
1. The Company
The Company’s carry-forward NOLs, equal to approximately $26.7 million and $36.1 million as of
December 31, 2022 and 2021, respectively, may be restricted under Section 382 of the Internal Revenue
Code (“IRC”). IRC Section 382 applies whenever a corporation with NOL experiences an ownership
change. As a result of IRC Section 382, the taxable income for any post change year that may be offset
by a pre-change NOL may not exceed the general IRC Section 382 limitation, which is the fair market
value of the pre-change entity multiplied by the IRC long-term tax exempt rate.
Significant judgment is required in determining any valuation allowance recorded against deferred tax
assets. In assessing the need for a valuation allowance, the Company considered all available evidence,
including past operating results, the most recent projections for taxable income, and prudent and feasible
tax planning strategies. The Company reassesses its valuation allowance periodically and if future
evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded
accordingly.
2. Protalix Ltd.
At December 31, 2022 and 2021, the Israeli Subsidiary had approximately $220.7 million and
$211.8 million, respectively, of carry-forward NOLs that are available to reduce future taxable income
with no limited period of use.
F-33
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
d. Deferred income taxes:
The components of the Company’s net deferred tax assets at December 31, 2021 and 2022 were as follows:
(U.S. dollars in thousands)
In respect of:
Research and development expenses
Other timing differences
Net operating loss carry forwards
Valuation allowance
December 31,
2021
2022
$
7,217
(1,989)
56,292
(61,520)
-
$
9,548
(2,115)
56,377
(63,810)
-
Deferred taxes are computed using the tax rates expected to be in effect when those differences reverse.
e. Reconciliation of the theoretical tax expense to actual tax expense
The main reconciling item between the statutory tax rate of the Company and the effective rate is the
provision for a full valuation allowance in respect of tax benefits from carry forward tax losses due to the
uncertainty of the realization of such tax benefits (see above).
f. Tax assessments
In accordance with the Income Tax Ordinance, as of December 31, 2022, all of Protalix Ltd.’s tax
assessments through tax year 2017 are considered final.
A summary of open tax years by major jurisdiction is presented below:
Jurisdiction:
Israel
United States (*)
Years:
2019-2022
2019-2022
(*) Includes federal, state and local (or similar provincial jurisdictions) tax positions.
NOTE 13 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
Balance sheets:
(U.S. dollars in thousands)
a. Other assets:
Institutions
Prepaid expenses
Sundry
December 31,
2021
2022
$
311
905
69
$ 1,285
$
364
774
172
$ 1,310
F-34
Table of Contents
PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
b. Accounts payable and accruals – other:
Payroll and related expenses
Interest payable
Provision for vacation
Accrued expenses
Royalties payable
Property and equipment suppliers
December 31,
2021
2022
$ 1,562
767
1,506
11,981
522
95
$ 16,433
$ 1,216
719
1,404
8,008
781
143
$ 12,271
NOTE 14 - RELATED PARTY TRANSACTIONS
(U.S. dollars in thousands)
Compensation (including share-based compensation) to the non-
executive directors
Year Ended December 31,
2020
2021
2022
$
814
$
475
$
368
NOTE 15 - SUBSEQUENT EVENTS
a. During January and February 2023, the Company sold 3,590,813 ATM Shares under the Sales Agreement.
The Company generated gross proceeds equal to approximately $5.5 million in connection with such sales.
b. On January 12, 2023, the Company collected approximately $1.1 million from expense reimbursements in
connection with its collaboration with Chiesi. On January 15, 2023, the Company collected approximately
$1.1 million from sales to Pfizer. On February 7, 2023, the Company collected approximately $2.3 million
from sales of alfataliglicerase to Fiocruz.
F-35
DESCRIPTION OF CAPITAL STOCK
Exhibit 4.7
The following summarizes the material terms of the capital stock of Protalix BioTherapeutics, Inc. We are a Delaware
corporation. The rights of our stockholders are governed by the Delaware General Corporation Law (the “DGCL”) and
by our Certificate of Incorporation, as amended, and our Bylaws, which are exhibits to our Annual Report on Form 10-
K filed with the Securities and Exchange Commission (the “Commission”) and available at www.sec.gov. The
following summary is qualified in its entirety by reference to the applicable provisions of the DGCL and our
Certificate of Incorporation, as amended, and Bylaws, which are subject to future amendment in accordance with the
provisions thereof. Our common stock is the only class of our securities registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).
Authorized Capital Stock
General. Our charter provides that we may issue up to 144,000,000 shares of common stock, par value $0.001 per
share, and 100,000,000 shares of preferred stock, par value $0.0001 per share. The number of shares of our common
stock issued and outstanding as of a recent date is set forth on the cover page of our most recent Annual Report on
Form 10-K or Quarterly Report on Form 10-Q filed with the Commission. We currently have no outstanding shares of
preferred stock.
Common Stock
Voting Rights. Holders of our common stock are entitled to one vote for each share held on all matters submitted to a
vote of stockholders and do not have cumulative voting rights. Accordingly, holders of a majority of the shares of
common stock entitled to vote in any election of directors may elect all of the directors standing for election.
Dividends. Subject to the preferential rights, if any, of the holders of any outstanding series of our preferred stock,
holders of shares of our common stock are entitled to receive dividends when, as and if declared by our Board of
Directors (our “Board”) out of funds legally available therefor.
Dividend Policy. We have never declared or paid any cash dividends on our capital stock. We currently intend to retain
any future earnings to finance the growth and development of our business and therefore do not anticipate paying any
cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our
Board and will depend upon our financial condition, operating results, capital requirements, covenants in our debt
instruments (if any), and such other factors as our Board deems relevant.
Liquidation. In the event of our liquidation, dissolution or winding-up, after payment of all of our debts and liabilities,
the holders of our common stock are entitled to share ratably in all remaining assets available for distribution after the
payment of debts and liabilities and after provision has been made for each class of stock, if any, having preferences
over our common stock. Holders of our common stock, as such, have no preemptive or other rights and there are no
redemption provisions applicable to our common stock. All of our outstanding shares of common stock are fully paid
and nonassessable. The rights, preferences and privileges of holders of common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and
issue in the future. In accordance with the rules of the Tel Aviv Stock Exchange, we are allowed to issue securities
with preferential rights relating to dividends, but such securities may not have voting rights.
Other Rights. The holders of our common stock have no preemptive rights and no rights to convert their common
stock into any other securities, and our common stock is not subject to any redemption or sinking fund provisions.
Preferred Stock
Our Certificate of Incorporation, as amended, authorizes the issuance of up to 100,000,000 shares of preferred stock
with such voting rights, rights of redemption and other relative rights and preferences as may be determined from time
to time by our Board. Accordingly, our Board is empowered, without stockholder approval, to issue preferred stock
with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other
rights of the holders of our common stock. The preferred stock could be utilized, under certain circumstances, as a
method of discouraging, delaying or preventing a change in control of our company.
Anti-Takeover Effects of Provisions of Delaware Law, Our Certificate of Incorporation, as Amended, and Our
By-laws
Delaware statutory law, our Certificate of Incorporation, as amended, and our Bylaws contain provisions that could
make acquisition of our Company by means of a tender offer, a proxy contest or otherwise more difficult. These
provisions are intended to discourage certain types of coercive takeover practices and takeover bids that our Board
may consider inadequate and to encourage persons seeking to acquire control of us to first negotiate with our Board.
We believe that the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging takeover or acquisition
proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.
The description of our Certificate of Incorporation, as amended, and our Bylaws set forth below is only a summary and
is qualified in its entirety by reference to our amended and restated certificate of incorporation and amended and
restated Bylaws, which are exhibits to our most recent Annual Report on Form 10-K.
Blank Check Preferred Stock. Our amended and restated certificate of incorporation permits us to issue, without any
further vote or action by the stockholders, up to 100,000,000 shares of preferred stock in one or more series and, with
respect to each such series, to fix the number of shares constituting the series and the designation of the series, the
voting powers (if any) of the shares of the series, and the preferences and relative, participating, optional and other
rights, if any, and any qualifications, limitations or restrictions, of the shares of such series. The ability to issue such
preferred stock could discourage potential acquisition proposals and could delay or prevent a change in control.
Number of Directors; Filling Vacancies; Removal. Our Bylaws provide that the number of directors which shall
constitute the whole of the Board shall be fixed from time to time by resolution of the Board. Directors shall be elected
by a plurality vote of the shares represented in person or by proxy at the annual meeting of stockholders in each year
and entitled to vote on the election of directors. Elected directors shall hold office until the next annual meeting and
until their successors shall be duly elected and qualified. Directors need not be stockholders. If, for any cause, the
Board shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a
special meeting of stockholders called for that purpose in the manner provided in our Bylaws. In addition, our
amended and restated certificate of incorporation and amended and restated Bylaws provide that a Board vacancy
resulting from the death, removal or resignation of a director, as well as a vacancy resulting from an increase in the
number of directors or if the stockholders fail at any meeting of stockholders at which directors are to be elected to
elect the number of directors then constituting the whole Board, may be filled solely by the affirmative vote of a
majority of the remaining directors then in office even though that may be less than a quorum of the Board.
Special Meetings. Special Meetings of our stockholders may be called, for any purpose or purposes, by the Chairman
of the Board or the President or the Board of Directors at any time. Upon written request of any stockholder or
stockholders holding in the aggregate not less than 10% of all of the votes entitled to be cast on any issue proposed to
be considered at the Special Meeting signed, dated and delivered in person or sent by registered mail to the Chairman
of the Board, President or Secretary of our company, the Secretary shall call a special meeting of stockholders to be
held at the principal office of the corporation or at such place and at such time as the Secretary may fix, such meeting
to be held not less than 10 nor more than 60 days after the receipt of such request, and if the Secretary shall neglect or
refuse to call such meeting within seven days after the receipt of such request, the stockholder making such request
may do so.
No Stockholder Action by Written Consent Unless Approved by the Board. Our Bylaws requires that all actions to be
taken by stockholders must be taken at a duly called annual or special meeting, and stockholders are not permitted to
act by written consent. These provisions will make it more difficult for stockholders to take an action opposed by our
Board.
Section 203 of the Delaware General Corporation Law. Section 203 of the DGCL provides that, subject to certain
specified exceptions, a corporation will not engage in any “business combination” with any “interested stockholder”
for a three-year period following the time that such stockholder becomes an interested stockholder unless (1) before
that time, the board of directors of the corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (2) upon consummation of the transaction which
2
resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction commenced (excluding certain shares) or (3) on
or after such time, both the board of directors of the corporation and at least 662/3% of the outstanding voting stock
which is not owned by the interested stockholder approves the business combination. Section 203 of the DGCL
generally defines an “interested stockholder” to include (x) any person that owns 15% or more of the outstanding
voting stock of the corporation, or is an affiliate or associate of the corporation and owned 15% or more of the
outstanding voting stock of the corporation at any time within three years immediately prior to the relevant date and
(y) the affiliates and associates of any such person.
Section 203 of the DGCL generally defines a “business combination” to include (1) any merger or consolidation with
an interested stockholder or other entity if the merger or consolidation is caused by the interested stockholder and as a
result section (a) of Section 203 is no longer applicable to the surviving entity, (2) sales or other dispositions of 10% or
more of the corporation’s assets with or to an interested stockholder, (3) certain transactions resulting in the issuance or
transfer to the interested stockholder of any stock of the corporation or its subsidiaries, (4) certain transactions which
would increase the proportionate share of the stock of the corporation or its subsidiaries owned by the interested
stockholder and (5) receipt by the interested stockholder of the benefit (except proportionately as a stockholder) of any
loans, advances, guarantees, pledges, or other financial benefits.
We have elected not to be subject to Section 203 of the DGCL.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company.
Listing Information
Our common stock is listed on the NYSE American and the Tel Aviv Stock Exchange under the symbol “PLX.”
3
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-237736 and 333-
264394) and on Form S-8 (No. 333-148983, No. 333-182677, No. 333-203960, No. 333-225526, No. 333 239101 and No.
333-266131) of Protalix BioTherapeutics, Inc. of our report dated February 27, 2023 relating to the financial statements,
which appears in this Form 10-K.
Tel-Aviv, Israel
February 27, 2023
/s/ Kesselman & Kesselman
Certified Public Accountants (lsr.)
A member firm of PricewaterhouseCoopers
International Limited
EXHIBIT 31.1
I, Dror Bashan, certify that:
1. I have reviewed this Annual Report on Form 10-K of Protalix BioTherapeutics, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Dated: February 27, 2023
/s/ Dror Bashan
Dror Bashan
President and Chief Executive Officer
EXHIBIT 31.2
I, Eyal Rubin, certify that:
1. I have reviewed this Annual Report on Form 10-K of Protalix BioTherapeutics, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Dated: February 27, 2023
/s/ Eyal Rubin
Eyal Rubin
Sr. Vice President, Chief Financial Officer, Treasurer
PROTALIX BIOTHERAPEUTICS, INC.
CERTIFICATION
EXHIBIT 32.1
In connection with the Annual Report of Protalix BioTherapeutics, Inc. (the “Company”) on Form 10-K for the period ended
December 31, 2022 as filed with the Securities and Exchange Commission (the “Report”), I, Dror Bashan, President and Chief Executive
Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United
States Code, that to my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, 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 at the dates and for the periods indicated.
This Certificate is being furnished to the Securities and Exchange Commission as an exhibit to the Report.
Dated: February 27, 2023
/s/ Dror Bashan
Dror Bashan
President and Chief Executive Officer
PROTALIX BIOTHERAPEUTICS, INC.
CERTIFICATION
EXHIBIT 32.2
In connection with the Annual Report of Protalix BioTherapeutics, Inc. (the “Company”) on Form 10-K for the period ended
December 31, 2022 as filed with the Securities and Exchange Commission (the “Report”), I, Eyal Rubin, Sr. Vice President and Chief
Financial Officer of the Company, hereby certify as of the date hereof, solely for the purposes of Title 18, Chapter 63, Section 1350 of
the United States Code, that to my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, 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 at the dates and for the periods indicated.
This Certificate is being furnished to the Securities and Exchange Commission as an exhibit to the Report.
Dated: February 27, 2023
/s/ Eyal Rubin
Eyal Rubin
Sr. Vice President and Chief Financial Officer