Therapix Biosciences Ltd.
Annual Report │
2014
1
CONTENTS
Chapter A
Chapter B
Chapter C
Chapter D
Chapter E
Description of the Corporation's Business
The Report of the Board of Directors on the State of the Corporation's Affairs
Annual Financial Statements
Additional Information about the Corporation
Letters of Representation
As of the report date, Therapix Biosciences Ltd. ("the Company") is a "small corporation" in
accordance with the conditions stipulated in Regulation 5c to the Israeli Securities Regulations
(Periodic and Immediate Reports), 1970 ("the Regulations"). According to the decision of the
Company's Board, the Company adopts and applies (to the extent that such application is relevant or
irrelevant to the Company) several exemptions prescribed in the Regulations as follows:
1.
2.
3.
4.
1
2
3
4
Increasing the materiality threshold in connection with the attachment of valuations to 20%1;
Increasing the minimum requirement for attachment of financial statements of material
associates to interim financial statements to 40% (the materiality threshold for attaching annual
financial statements is (remains) 20%2;
Exemption from adopting the provisions of the Second Addendum to the Regulations regarding
(details of the exposure to market risks and their management (the Galai Report))3;
Cancelling the duty to issue a report on internal control and an auditors' report on internal
control thereby allowing the Company to attach only letters of representation that are limited in
scope4.
Regulation 5d(b)(1) to the Regulations. Pursuant to the ISA Staff legal resolution SLB 105-23, as updated on
March 13, 2014, regarding parameters for testing the materiality of valuations, "a very material valuation in a
small corporation" is defined as a valuation:
(a) whose subject matter represents at least 20% of the Company's total assets; or
(b) whose effect of the change in value on the net income or comprehensive income, as applicable, represents
at least 20% of total net income or comprehensive income, respectively, and the effect of said change
represents at least 10% of the Corporation's equity.
Regulation 5d(b)(2) to the Regulations.
Regulation 5d(b)(3) to the Regulations.
Regulation 5d(b)(4) to the Regulations.
2
Therapix Biosciences Ltd.
Chapter A - Description of the Corporation's Business
We are hereby pleased to present a description of Therapix Biosciences Ltd. ("the Company") and its
subsidiaries (collectively - "the Group") and the developments in the Group's business in the reporting
period and as of the date of this report in conformity with the Regulations.
Date: March 29, 2015
Therapix Biosciences Ltd.
3
INDEX
Description of the Corporation's Business
Definitions ......................................................................................................................................................... 6
The Corporation's activities and description of its business development ........................................... 8
1.
The areas of activity ........................................................................................................................... 10
2.
The investments in the Company's capital and transactions in its shares ........................................... 11
3.
Dividend distribution .......................................................................................................................... 13
4.
Financial information on the Company's areas of activity ................................................................. 13
5.
The general environment and the effect of outside factors on the Company's operations ................. 14
6.
General information about the areas of activity ................................................................................. 15
7.
Technologies in which the Company has invested or has rights therein ............................................ 20
8.
Existing and prospective customers ................................................................................................... 23
9.
Competition ........................................................................................................................................ 24
10.
Research and development ................................................................................................................. 26
11.
Intangible assets.................................................................................................................................. 27
12.
Fixed assets, real estate and facilities ................................................................................................. 28
13.
Human capital ..................................................................................................................................... 29
14.
Raw materials and suppliers ............................................................................................................... 33
15.
Financing ............................................................................................................................................ 33
16.
Taxation .............................................................................................................................................. 34
17.
Restrictions and regulations underlying the Company's operations ................................................... 34
18.
Material agreements ........................................................................................................................... 37
19.
Legal proceedings ............................................................................................................................... 50
20.
Business strategy and targets .............................................................................................................. 50
21.
Predictions of developments for the next year ................................................................................... 51
22.
Risk factors ......................................................................................................................................... 51
23.
4
Chapter A - Description of the Corporation's Business
Since the Company is engaged in the research and development of medical products and in view of the
uncertainty involving the successful development of any of the Company's technologies and/or the
ability to quickly enter the relevant market, in the event of unsuccessful development of any of the
Company's technologies and/or failure to obtain the required approvals from the relevant regulatory
authorities for marketing and selling any of the above technologies and/or introducing them in the
relevant market, the Company's investment in the development of any of the above technologies may
be lost. Moreover, as an R&D company, the Company is required to raise capital to create permanent
positive cash flows from the sale of its technologies in order to finance its expenses and is at a risk of
not being able to raise the funds needed for its continued R&D activities. See also Note 1c to the
financial statements.
This chapter includes estimates, forecasts and evaluations whose materialization is uncertain and not
under the control of the Company. In view of the nature of the Company's business activities, there is
a risk underlying the Company's expectations and forecasts regarding its activities. Given the
Company's line of business, it wishes to stress that there is no certainty that the Company will be
successful in developing and/or commercializing and/or achieving significant sales of its various
developed products and might not be able to obtain the financing needed for the continued
development of its various technologies and/or might not obtain certain or any of the approvals for its
products and/or might not be able to market them as scheduled or at all. Moreover, the Company
cannot guarantee whether or to what extent certain results will occur as anticipated and/or projected
by the Company and/or that it will be able to raise capital for continuing to promote its research
and/or development activities of its invested and/or owned technologies. See also Note 1a to the
financial statements.
5
Definitions
For convenience sake, following is a glossary of the main terms used in this chapter:
ADR (American Depository
- A negotiable security that represents securities of a non-U.S. company
Receipt)
Anti CD3
that trades in the U.S. financial markets.
- The Company's immunotherapy technology (licensed from Hadasit) that
employs a monoclonal antibody administered orally or nasally for
treating autoimmune disorders (CD3). See details of this technology in
paragraph 8 below. For details of the licensing agreement, see paragraph
18 below.
Cannabinoids
- A class of diverse chemical compounds that act on cannabinoid receptors
in the body (CB1 and CB2).
Clinical trial
- A trial that is conducted on humans and is designed to test the efficacy or
safety of drugs and medical devices.
Dollar
- The US Dollar.
EMEA (European Medicines
- The European authority that controls and regulates pharmaceutical
Agency)
development and registration in Europe.
Endocannabinoids
- Molecules of the cannabinoid family which are naturally produced in the
body of humans and animals such as AEA and 2-AG.
Entourage effect
A technology (licensed to the Company by virtue of a binding term sheet)
for treating chronic pain and inflammation using cannabinoid analogs,
see details of this technology in paragraph 8 below. For details of the
binding term sheet signed with Dekel, see paragraph 18 below.
FDA (Food and Drug
Administration)
- The authority
in
the United States
that controls and regulates
pharmaceutical development and registration in the US.
GMPs (Good Manufacturing
Practices)
- Part of the quality system that controls manufacturing and reviews the
pharmaceutical, food and medical device industry. GMPs are the
guidelines for manufacturing and testing stages that affect the quality of
the end product. GMPs are designed to assure the quality of the medical
product in order to protect the health of the end consumer.
Hadasit
- Hadasit Medical Research Services & Development Ltd., the Technology
Transfer Company of Hadassah University Hospitals.
Immunotherapy
- Treatment method used to achieve the desired effect by activating the
immune system.
Lara-Pharm
- Lara-Pharm Therapeutics Ltd. a private company incorporated in Israel.
Medical device
- A device, instrument, accessory or substance used for medical treatment
or diagnosis of humans that does not act as a drug.
NIS
Orimmune
- New Israeli Shekel.
- Orimmune Bio Ltd. (formerly: Protea Vaccine Technologies Ltd.), a
private company incorporated under the laws of the State of Israel.
6
OTC (Over-the-Counter)
- Over-the-Counter trading of securities in the United States where the
Company's ADRs are listed for trade.
PCT
- International convention that defines an identical process to protect
intellectual property rights in a large number of countries.
Phase I clinical trial
Phase II clinical trial
- Controlled clinical trial on humans that is designed to test the safety of a
drug or medical device. In many cases, Phase I clinical trials are
conducted on healthy volunteers.
- Controlled clinical trial on humans that is designed to test the safety and
efficacy of a new drug on patients. This trial is sometimes divided into
two sub-phases: Phase IIa and Phase IIb. Phase IIa is specifically
designed to test the required dosage and Phase IIb is designed to obtain
information regarding efficacy.
Phytocannabinoids
- Molecules of the cannabinoid family that occur naturally in the cannabis
plant, the most known of which are THC and CBD.
Preclinical trial
- A trial that is not conducted on human subjects.
The balance sheet date
- December 31, 2014.
The Chief Scientist
- The Chief Scientist at the Ministry of Economy.
The Companies Law
- The Companies Law, 1999, as will be amended from time to time.
The Company
- Therapix Biosciences Ltd.
The Financial Statement
- The Securities Regulations (Annual Financial Statements), 2010.
Regulations
The financial statements
- The Company's audited annual consolidated financial statements as of
December 31, 2014 which are hereby attached to this report.
The Group
The ISA
- The Company and the subsidiary.
- The Israel Securities Authority.
The previous annual report
- The Company's periodic report for 2013 issued on March 27, 2014
(TASE reference: 2014-01-026091).
The report date
- March 29, 2015.
The reporting period
- The 12-month period ended December 31, 2014.
The Reporting Regulations
- The Securities Regulations (Periodic and Immediate Reports), 1970.
The Securities Law
- The Securities Law, 1968, as will be amended from time to time.
The subsidiary
- Orimmune.
The TASE
- The Tel-Aviv Stock Exchange Ltd.
7
The various descriptions of the Company's activities may include data that are based on surveys, studies
and/or essays. The Company is not responsible for the contents of those surveys, studies and/or essays.
Chapter A (the Description of the Corporation's Business) to the periodic report should be read in
conjunction with the other parts of the periodic report, including the notes to the financial statements.
1.
The Corporation's activities and description of its business development
The Company was incorporated in Israel on August 23, 2004 as a private company in compliance with
the Companies Law under the name of NasVax Ltd. On December 26, 2005, the Company's securities
began trading on the TASE. On November 14, 2013, the Company's name was changed to its current
name, Therapix Biosciences Ltd.
Until March 2014, the Company was mainly engaged in the development of several innovative
immunotherapy products and owned immunotherapy related patents. For details of the Company's
intangible assets, see paragraph 12 below.
In the context of a planned internal restructuring in the Company, in the course of 2013 until the
beginning of 20145 the Company took steps to structurally separate its activities by March 2014 by
transferring the Anti CD3 project to Orimmune as part of the investment of Acebright Holding
Limited ("Acebright"), a Chinese corporation which on the report date was an interested party in the
Company by virtue of its ownership interests therein. See details of the agreement of Acebright's
investment in the Company in paragraph 18 below. As of the report date, the Anti CD3 technology has
not yet been transferred to Orimmune. The Company continued to promote both the scientific and the
business development aspects of the Anti CD3 technology by seeking strategic partners and/or
investors.
The Company's business strategy
In late March 2014, the Company reported its new business strategy according to which it will focus
on identifying and investing in promising bio-pharma technologies while emphasizing technologies
based on a known biological mechanism that are in the post-proof of concept stage and provide
responses for major medical needs in the market and involve investing up to US$ 2 million for
achieving a significant milestone. The Company's objective is to use its capabilities and experience in
developing immunotherapy technologies in order to help these technologies in achieving a significant
milestone within a relatively short timeframe (a few years) in a manner that will allow their
commercialization and/or the introduction of strategic partners, all while continuing to promote the
Company's existing technologies6.
The Company's investment strategy is based on the following parameters7: (1) building an investment
portfolio of 2-5 technological companies; (2) providing solutions for major medical needs that are
currently unavailable; (3) choosing portfolio companies whose technology is past the proof of concept
stage; (4) choosing portfolio companies with proven and familiar method of operation; (5) achieving a
significant milestone through an investment of up to US$ 2 million; (6) achieving significant returns;
(7) carrying the investment over a limited number of years based on predetermined milestones )to
minimize risks).
5
6
7
See the Company's immediate report of March 17, 2013 (TASE reference: 2013-01-006508).
See the Company's immediate report of March 30, 2014 (TASE reference: 2014-01-029448).
See the Company's presentation for the capital market in the Company's immediate report of May 8, 2014
(TASE reference: 2014-01-059022).
8
Simultaneously, the Company's Board decided on a restructuring of the boards of the Company and its
subsidiary in order to improve its operations. In the context of this restructuring, several directors in
the Company terminated their tenure, an (acting) Chairman of the Board was appointed as well as a
VP of Business Development and Strategy and a new external director (to replace the external director
who resigned). Also, in the second half of 2014, following a recruitment process, the Company
appointed a permanent CEO for the Company to replace the former CEO who retired8.
The Group's holding structure on the report date9
Therapix Biosciences Ltd.
26%
(*)
Lara-Pharm Ltd.
90%
Orimmune Bio Ltd.
(formerly: Protea
Vaccine
Technologies Ltd.)
(*)
It should be noted that according to the terms of the agreement signed with Lara-Pharm, the Company's
interests in Lara-Pharm (26%) will be reduced if the Company fails to deliver the remaining payments on
the predetermined dates pro rata to the amounts that will be delivered. As stated above, as of the report
date, only the first payment (of US$ 250 thousand) has been made whereas the other due payments (in an
aggregate of US$ 550 thousand) have not yet made to Lara-Pharm based on the terms of the agreement
(which does not represent a violation of the agreement). However, according to the agreement, Lara-
Pharm has the right to reduce (forfeit) the Company's interests in its shares pro rata to the amounts that
will be paid in such a manner that if Lara-Pharm exercises such right, the Company's interests will be
reduced to 11% only. Moreover, Lara-Pharm has a bring-along right to obligate the Company to sell its
entire interests in the event that Lara-Pharm forfeits the Company's shares as discussed above in order to
sell them to a third party. See information of the agreement with Lara-Pharm in paragraph 18 below.
8
9
See the Company's immediate reports of April 6, 2014 (TASE reference: 2014-01-038910), March 30, 2014
(TASE reference: 2014-01-029475), March 30, 2014 (TASE reference: 2014-01-029466), January 9, 2014
(TASE reference: 2014-01-010213), January 9, 2014 (TASE reference: 2014-01-009880), March 30, 2014
(TASE reference: 2014-01-029448), April 8, 2014 (TASE reference: 2014-01-042225), August 24, 2014 (TASE
reference: 2014-01-140232) and July 13, 2014 (TASE reference: 2014-01-112740). Regarding the appointment
of the Company's CEO, see the Company's immediate report of September 23, 2014 (TASE reference: 2014-01-
163011). For details of the CEO's employment terms which are pending the approval of the Company's
shareholders' meeting, see the Company's immediate report of March 15, 2014 (TASE reference: 2014-01-
050611).
The Company also has interests in wholly-owned subsidiaries which are inactive as of the report date (Brain
Bright Ltd. and NasVax Inc.).
9
2.
The areas of activity
As discussed above, starting from the second quarter of 2014, the Company has been acting to identify
and invest in promising bio-pharma technologies while emphasizing technologies based on a known
biological mechanism that are in the post-proof of concept stage and provide solutions for major
medical needs in the market and involve investing up to US$ 2 million for achieving a significant
milestone.
As of the report date, the Company is focusing on creating a portfolio of technologies and assets based
on cannabinoid therapeutics. The Company is also continuing to promote its Anti CD3 project from
both a commercial and a scientific perspective.
The technologies in which the Company has invested or in which the Company has interests as of the
report date
2.1
Lara-Pharm
See details of the agreement for the investment in Lara-Pharm in paragraph 18 below. See
details of Lara-Pharm's technology in paragraph 8 below.
2.2
A term sheet regarding the entourage effect (the Dekel agreement)
On January 11, 2015, the Company's Board approved the signing of a binding term sheet with
Dekel Pharmaceuticals Ltd. ("Dekel", collectively with the Company - "the parties"). The
term sheet provides the principles of a final and specific agreement for licensing Dekel's
technology and IP including an option for Dekel to invest in the Company (by itself and/or
through others) ("the approved outline"). The approved outline, which is subject to the
approval of the Company's relevant entities, is a combined outline which sets forth terms for
licensing Dekel's technology and for Dekel's capital investment in the Company (by itself
and/or through others). The purpose of the engagement between the parties is to allow the
Company to develop Dekel's technology under a final and specific license agreement and
simultaneously raise the capital it needs. See more details of the agreement in paragraph 18
below.
2.3
The Anti CD3 technology
The Company received a license from Hadasit for the Anti CD3 technology. See details in
paragraph 18 below.
10
3.
The investments in the Company's capital and transactions in its shares
Following are details of the investments in the Company's capital and other material share transactions
carried out by interested parties in the Company in the two years before the report date:
3.1
Private placement agreement of January 2013
According to a private placement agreement the Company signed with Dr. Ascher Shmulewitz
and Mr. Avi Meizler (who both serve as directors in the Company as of the report date) (or
companies controlled by them), the two will invest in the Company a cumulative amount of
NIS 4,000 thousand in equal parts against the allocation of shares that will confer each of them
(on the date of allocation) 22.78% of the Company's equity and voting rights. On February 19,
2013, the Company allocated to Dr. Ascher Shmulewitz and Mr. Avi Meizler 25,000,000
Ordinary shares of the Company pursuant to the above agreement. On April 3, 2013, the
Company allocated Dr. Ascher Shmulewitz and Mr. Avi Meizler another 7,500,000 shares of
the Company10.
3.2
Private placement agreement of May 2013
According to a private placement agreement signed with an investor, the Company will
allocate the investor 4,000,000 Ordinary shares which will confer it, immediately upon
allocation, about 4.23% of the Company's issued and outstanding share capital and voting
rights (about 3.76% on a fully diluted basis) at a price of NIS 0.1 per share and a total of
NIS 400 thousand. On June 6, 2013, the Company allocated the investor 4,000,000 Ordinary
shares of the Company11.
3.3
Public offering
On July 18, 2013, the Company issued 35,937,500 Ordinary shares of the Company and
89,843,750 options (series 2) of the Company based on a shelf prospectus of August 8, 2012
and a shelf offering report of July 17, 201312.
3.4
Engagement in agreements with Acebright13
On December 25, 2013, the Company issued Acebright 10,507,500 Ordinary shares of the
Company and 18,500,000 options that are exercisable into 18,500,000 shares of the
Company14. See details of the Chinese investor's investment in the Company's share capital
and a (non-binding) term sheet for the commercialization of the Company's Anti CD3
technology which was not executed in paragraph 18 below.
10
11
12
13
14
See details in the Company's immediate reports of February 3, 2013 (TASE reference: 2013-01-028422),
February 11, 2013 (TASE reference: 2013-01-035217) and March 24, 2013 (TASE reference: 2013-01-017665).
See also the Company's immediate report of May 7, 2013 (TASE reference: 2013-01-055765).
See details in the Company's immediate report of July 18, 2013 (TASE reference: 2013-01-095940).
It should be clarified that as of the report date, Acebright is an interested party in the Company by virtue of its
holdings pursuant to the investment agreement.
See details in the Company's immediate reports of September 3, 2013 (TASE reference: 2013-01-136041),
October 6, 2013 (TASE reference: 2013-01-104890) and December 25, 2013 (TASE reference: 2013-01-
108562).
11
3.5
3.6
3.7
3.8
3.9
On January 12, 2014, the Company completed a process of capital consolidation of its shares
according to which each 10 Ordinary shares of NIS 0.01 par value of the Company's
authorized and issued share capital were consolidated to a single share of NIS 0.01 par value
of the Company15.
On May 8, 2014, the Company issued a shelf offering report16 by way of uniform unit price
auction to the public (each unit consisting of 100 shares, 100 options (series 3) and 100
options (series 4)) and on the same date the Company completed a capital raising of 30,094
units (at the predetermined price of NIS 95 per share). In the offering, the Company raised a
(gross) total of approximately NIS 2.86 million17. The proceeds were designed to promote the
investment in a related company, investigate new projects and expand the portfolio, promote
the Company's existing technologies and finance its operating activities, all based on the
Board's resolutions as they will be from time to time. On May 15, 2014, pursuant to a shelf
offering report, the Company issued 406,269 options (series 4) in a private placement to
resellers as part of their commission18.
On December 21, 2014, the Company issued 1,300,000 Ordinary shares of the Company and
2,600,000 options of the Company to three private investors at a price of NIS 0.5 per share and
an exercise price of NIS 0.5 per option that vests immediately and NIS 0.65 per contingent
option allocated according to the investment agreement19.
On March 15, 2015, the Company issued 500,000 Ordinary shares of the Company and
1,000,000 options of the Company to two private investors (one of whom participated in the
private placement described in paragraph 3.7 above) at a price of NIS 0.5 per share and an
exercise price of NIS 0.65 per option that vests immediately and NIS 1.1 per contingent option
allocated according to the investment agreement20.
On March 30, 2015, the Company entered into an investment agreement according to which it
will allocate a private investor 4,400,000 Ordinary shares of the Company at a price of
NIS 0.5 per share in consideration of NIS 2.2 million21.
3.10 On January 20, 2015, the Company issued 10,875 Ordinary shares of the Company to the
holder of options (series 2) who had already exercised the options. As of the report date, the
options (series 2) all expired22.
15
16
17
18
19
20
21
22
See details in the Company's immediate reports of January 1, 2014 (TASE reference: 2014-01-001165), January
2, 2014 (TASE reference: 2014-01-003034) and January 13, 2014 (TASE reference: 2014-01-014011).
For details of the Company's shelf offering report, see the Company's immediate report of May 8, 2014 (TASE
reference: 2014-01-059028).
For details of the results of the offering, see the Company's immediate report of May 8, 2014 (TASE reference:
2014-01-059742).
For details, see the Company's immediate report of May 15, 2014 (TASE reference: 2014-01-064788).
For details, see the Company's immediate report of December 21, 2014 (TASE reference: 2014-01-226122) and
an immediate report on the extension of the vesting date of the options that vest immediately of March 15, 2015
(TASE reference: 2015-01-050608).
For details, see the Company's immediate report of March 15, 2015 (TASE references: 2015-01-051154 and
2015-01-051157).
For details, see the Company's immediate report of March 30, 2015 (TASE reference: 2015-01-065656).
For details, see the Company's immediate report of January 20, 2015 (TASE references: 2015-01-015346 and
2015-01-022720).
12
3.11
The following table presents information of private placements made by the Company from
the beginning of 2013 through the report date (see also allocations to officers in paragraph 13
below):
Type of
optionee
Date of
allocation
Type of
security
Quantity
No. of
optionees
Consideration
Consideration
in cash
Other
consideration
Private
investors
Investor
Chinese
investor
(Acebright)
Private
investors
Private
investors
Private
investor
02/2013
Shares
25,000,000
03/2013
12/2013
12/2013
12/2014
12/2014
2/2015
3/2015
Shares
Shares
Options
Shares
Options
Shares
Shares
Shares
4,000,000
10,507,500
18,500,000
1,300,000
2,600,000
500,000
1,000,000
4,400,000
2
1
1
1
3
2
1
2,500,000
400,000
1,569,600
650,000
250,000
2,200,000
---
---
---
---
---
---
---
---
---
3.12
Listing the Company's ADRs OTC in the US
Company value
after the money
derived from the
allocation (if
relevant)
NIS in thousands
9,212
10,093
19,459
---
8,560
9,210
12,222
As part of the Company's plan to enhance the accessibility of foreign investors to the
Company's activities and in keeping with its new business strategy, in early October 2014, the
Company completed the process of listing its Level 1 ADRs on the OTCQB in the US. As of
the report date, each ADR is comprised of 20 Ordinary shares of the Company which are
traded OTC in the US under the symbol of THXBY23.
4.
Dividend distribution
Since its establishment, the Company has not distributed any dividends to its shareholders.
5.
Financial information on the Company's areas of activity
See details of the Company's financial results and balance sheets in the financial statements hereby
attached to this report. See explanations of developments in the financial data in connection with the
Company's areas of activity, including adjustments to certain amounts in the financial statements and
their nature in the Report of the Board of Directors in Chapter B to the periodic report.
23
See the Company's immediate reports of May 28, 2014 (TASE reference: 2014-01-075777) and July 20, 2014
(TASE
at
also
See
http://www.otcmarkets.com/stock/THXBY/quote.
2014-01-117225).
reference:
OTCQB's
website
link
the
to
13
6.
The general environment and the effect of outside factors on the Company's operations
The Company's business opportunities and the risks underlying its operations mainly arise from
general, industrial and specific factors that are characteristic of the Company's operations as detailed
in paragraph 23 below. Nevertheless, there are certain macroeconomic factors that are liable to affect
the Company's operations as follows:
6.1
Developments in global markets
6.1.1
6.1.2
6.1.3
The global economy - global economy recorded a growth of 2.6% in 2014 compared
with a growth of 2.5% in 2013. Among others, this growth arises from the significant
recovery in the US and UK markets against the slower recovery in the Eurozone
countries and Japan and the controlled slowdown in the Chinese economy. The
World Bank's expected global growth for 2015 is 3% with the continuing problems
in the Eurozone and in the emerging markets overshadowing the recovery in the US
economy and the plunge in oil prices. The World Bank's growth forecast for high-
income economies in 2015-2017 is 2.2%, compared with only 1.8% in 2014. As for
developing economies, the World Bank expects growth acceleration from 4.4% in
2014 to an estimated 4.8% in 2015 and 5.4% by 2017.
Israeli economy - the local economy has grown in 2014 by 2.6% and the Bank of
Israel expects this growth to accelerate to 3.2% in 2015 and 3% in 2016. This growth
rate represents a slowdown compared to the 3.3% growth rate in 2013. The
slowdown in the growth rate probably arises from the continued global recession
which leads to reduced demands for Israeli products.
The impact of the global and local economies on the Company's business strategy -
the developments in global markets are liable to affect the implementation of the
Company's strategy. The future technologies that are planned to be integrated in the
Company's activities might come from companies in need of external financial
resources. These developments could affect both the Company's ability to finance
the current operations of
the continued
development of their technologies and the ability of those companies to raise fund
for their current operations. In the event that such financing is not obtained, the
companies might discontinue their operations, which will impair the Company's
return on its investments, its business results, its equity and the value of its assets and
their divestiture.
technology companies and/or
the
6.1.4
The effect of the economy and financial position on the development of medical
products:
a)
b)
c)
Recession will lead to reduced demands for purchasing new technologies and
products in struggling markets and to a decline in the prices which buyers will
be willing to pay for such technologies and products, all of which will impair
the Company's profits and business results.
Some of the Company's technologies require regulatory approvals for the sale
of the underlying products in Europe and in other markets. The current
financial crisis in several markets is likely to adversely affect the Company's
ability to market its products in these markets and/or the time to market of
these technologies.
Economic crises in emerging markets might affect the Company's ability to
achieve its business development targets in these countries and/or by investors
in these markets.
14
d)
For the purpose of the continued research and/or development of the
Company's invested and/or owned technologies and/or for the purpose of the
continued investment in additional/innovative technologies based on the
Company's strategy, the Company is required to raise significant amounts of
capital. Any slowdown in global and/or local economy and/or negative trends
in the field of investments in life sciences are liable to have an adverse effect
on the Company's ability to raise significant amounts as stated above under
reasonable and/or any terms.
6.1.5 Merger of operations of companies in the area of activity - in recent years, the global
markets in which the Company operates have been experiencing a process of
mergers of companies operating in this industry. On the one hand, this trend
obligated large companies to identify and purchase products under development that
have high marketing potential and/or companies that develop attractive products and
on the other hand, the trend led to the birth of large business rivals in the industry.
With the advancement of clinical trials, pharmaceutical companies tend to enter into
for manufacturing, marketing and
license or collaboration agreements
commercializing their products.
Exchange rate fluctuations - the Company's financial results could be affected in the future by
fluctuations in the exchange rates of the currencies in the countries in which its products will
be marketed, if at all.
Israeli identity - the sale of the Company's technologies might be affected by Israel's
international status. In some cases, the Israeli identity contributes to sales (in view of the
recognition of Israel's technological advantages) whereas in other cases it may prove to be a
hindrance and might even lead to cancellation of transactions. As of the report date, the
Company is not aware of any event in which the Company's Israeli identity affected a buyer's
considerations.
The political-security situation - the Middle East has been experiencing strong political
instability in recent years. As of the report date, the Company is unable to estimate the impact
of the recent political and social turmoil on the global economy but it is likely that these
political tumults will affect the financial markets and the prices of commodities and natural
resources worldwide.
OTC trade in the US - the OTC trading of the Company's Level 1 ADRs in the US is likely to
expose the Company and its technologies to a larger public of investors but also to greater
responsibility towards those investors.
6.2
6.3
6.4
6.5
7.
General information about the areas of activity
The Company's principal areas of activity as of the report date are as follows:
Immunotherapy, particularly through the Anti CD3 technology.
Development of cannabinoid-based and related drugs.
7.1
The structure of the Company's areas of activity and changes therein
See details of the implications of the structure of the Company's areas of activity and the
changes therein arising from certain trends, events and developments in the Company's
macroeconomic environment in paragraph 6 above.
15
7.2
Specific limitations, legislations, regulations and restrictions applicable to the Company's
activities
See details of restrictions and supervision imposed on the Company's activities in paragraph
18 below.
7.3
Developments in the markets of the Company's areas of activity and changes in the
composition of customers
The Company is of the opinion that the prominent trends and indicators underlying its
technologies as of the report date are as follows:
High growth rate compared to other segments in the pharmaceutical industry;
Massive growth in investments by large manufacturers, financial investors, non-profit
organizations and governments;
Proliferation of licensing, collaboration, merger and acquisition transactions.
The Company estimates that as of the report date, the medical world is in need of new
medications designed for the populations of patients which are addressed by the Company's
technologies.
The medicinal cannabis market
The medicinal cannabis market is an important and evolving segment in global medical
therapy. The growing awareness of the medicinal benefits of the active cannabinoids in the
plant and its use for improving the quality of life of patients with numerous and diverse
indications (oncological patients, chronic pain conditions etc.) as well as the global trends of
regulatory changes relating to the use of the plant and of cannabinoids have all led to a rapid
growth in this market. The recent changes in the perception of medicinal cannabis and the
scientific and medical acknowledgement of its benefits have created a growing need for more
efficient drugs with an improved tolerance profile. The market for medicinal cannabis (and its
medical substitutes) is estimated at approximately US$ 2 billion a year in the US alone24 and is
expected to continue showing a significant growth in the coming years. The main
disadvantages of the use of the plant stem from the lack of uniformity in the dosage of the
cannabinoids in each portion which are liable to materially affect its therapeutic effect and
create side effects. Another disadvantage if the method of administration of the cannabis since
smoking it is not necessarily suitable for all patients. In addition to the use of cannabis for
medical needs, there are several medical products that are based on cannabinoids (botanical or
synthetic). These products have specific benefits such as uniform dosage, predefined efficacy
and safety profile and controlled manufacturing processes. The Company focuses on
improving these medical products to make them more efficient and safer and obtain a share of
the medicinal cannabis market for a variety of therapeutic indications.
The Company estimates that the principal risks underlying the medicinal cannabis activity at
this stage are as follows:
(1) The ability to obtain regulatory approvals in a timely manner;
(2) The ability to deal with growing competition in the market and maintain a vanguard
position in terms of technology and medical needs; and
(3) The ability to simultaneously retain the developed IP.
24
http://www.ibisworld.com/industry/medical-marijuana-growing.html,
http://www.mpp.org/assets/pdfs/library/SeeChange_MedMarijuanaMkts.pdf.
16
The Anti CD3 technology
Immune system disorders include an increasingly long list of diseases that affect a significant
percentage of the world's population, including acute inflammatory and autoimmune diseases,
some of which cause severe disabilities or even death. These diseases include, inter alia, Non-
Alcoholic Steatohepatitis (NASH), Type 2 Diabetes (T2D), Hepatitis C, colitis, lupus,
atherosclerosis, multiple sclerosis, etc.
In general, the existing treatments for these diseases are unsatisfactory and generally require
the use of drugs that suppress the entire immune system, which might potentially result in its
collapse and increase the risk of acute inflammations and severe infections and cancerous
tumors that might result in death. Recently developed innovative biological treatments might
involve pain and discomfort. The method of operation of the Anti CD3 oral technology differs
from that of other drugs. Subsequently, administration of a drug based on this technology may
be independent or complement other treatments if administered concomitantly.
The immunotherapy market for NASH
The global market segment for immunotherapy and inflammatory diseases is estimated to be
in the billions of dollars annually, and this number is expected to continue to increase with the
growing adult population. Approximately 8 million adults in the US who suffer from obesity
have fatty liver disease and approximately 30 million might contract this illness rather easily.
Fatty liver disease occurs in approximately 2-5% of the population that does not suffer from
obesity and in approximately 20% of the population that is morbidly obese25. Today, there are
no drugs to treat fatty liver disease and NASH, the most serious condition of fatty liver
disease, and patients are primarily treated with diabetes drugs in addition to other non-drug
treatments (diet, sports). In 2012, the market in the six main markets was estimated at
US$ 233 million, with an average annual growth rate of 42.2%. In 2017, this number is
expected to reach US$ 1.3 billion annually26. To the best of the Company's knowledge, various
treatments for this disease currently in development are based on technologies that materially
differ from the Anti CD3 technology.
7.4
Critical success factors in the Company's operations and changes therein
There are several critical success factors that affect the Company's operations and success:
a.
b.
c.
d.
Completion of product development and successful completion of clinical trials in
treatment in various indications.
Successful completion of pre-clinical trials to prove safety and efficacy in animals;
Obtaining regulatory approvals to market its products (see paragraph 18.2 below);
Contractual arrangements with entities (pharmaceutical manufacturers) that will work
with the company to finance research and development and/or incorporation of the
Company's technologies in their products;
25
26
See US government website – http://digestive.niddk.nih.gov/ddiseases/pubs/nash.
OpportunityAnalyzer: Nonalcoholic Steatohepatitis (NASH) - Opportunity Analysis and Forecasts to 2017 -
Event-Driven Update, March 2014, GlobalData.
17
e.
f.
g.
h.
i.
Development of other products based on technologies in the Company's possession;
Obtaining approvals for patent applications to protect intellectual property;
Contractual arrangements in agreements to commercially manufacture the products
under competitive conditions;
Commercial manufacturing capacity for products developed by the company;
Ability to raise sufficient funds and financing for company operations, including
research and development, protection of intellectual property, compliance with
standards and obtaining approvals from the regulatory authorities, including by way of
collaborations, development agreements with major manufactures, grants from the
Chief Scientist, etc.
7.5
Changes in the supply and raw material system
See paragraph 14 below.
7.6 Main barriers to entry in the Company's areas of activity and changes therein
The Company's operations are largely based on licenses granted to it for use of intellectual
property on which the products that the Company is developing is based. In addition, the
Company is working to expand the technological base and products.
The following barriers to entry affect the Company's ability to enter its area of activity:
a.
b.
c.
d.
e.
The existence of clinical, technological and business knowledge needed for developing
the technologies in the Company's areas of activity;
The existence of knowledge of and acquaintance with regulatory and licensing
mechanisms needed to comply with the standards of the relevant regulatory authorities
pertaining to the manufacturing and marketing of the Company's products in various
countries in which the Company chooses to market the products, once they reach the
commercial stage;
Familiarity and experience with the required regulatory and approval mechanisms for
clinical trials in order to obtain the approvals on time and within a relatively short
period of time;
The existence of clinical, technological and scientific knowledge needed to plan clinical
trials in a manner that will allow obtaining conclusive results and information to be
obtained to the extent possible while reducing costs and conducting a relatively small
number of clinical trials;
Familiarity with international pharmaceutical and vaccine manufacturers and access to
these companies that would allow them the possibility of collaborating with regards to
the Company's technologies;
18
f.
g.
h.
Acquaintance with the companies, investigators and research institutions both in Israel
and around the world needed to identify new, attractive technologies;
The ability to raise significant funds to promote research and development, protect
intellectual property, comply with standards and obtain approvals from the regulatory
authorities;
The knowledge underlying the licenses granted to the Company for its technologies that
are detailed above, which constitutes patent-protected intellectual property and/or in
patent applications.
7.7
Alternative products to the products being developed by the Company and changes therein
As for the immunotherapy segment, see paragraph 10 below.
As for cannabinoid-based therapy, the existing alternative products consist of using the
cannabis plant for medicinal purposes as well as drugs that contain cannabinoids, as discussed
in paragraph 10 below.
19
8.
Technologies in which the Company has invested or has rights therein
8.1
General
The following table summarizes the main information regarding the Company's principal technologies:
Name of
product in
development
Disease/s for
which the
product is
being
developed
Advantages over existing
therapies
Stage of
development
(status) as of
the report
date
Company
rights in the
product
Projected milestones
over the next 12
months
Nearest milestone
and milestone due
date
Estimated cost
for completing
nearest
milestone
Size and scale of
annual funds of
product's target
market (in US
dollars)
27
Phase IIa
clinical trial
ended
successfully
in 201128
Licensing
agreement –
See
paragraph
18.3 below
Start of production of
the humanized
antibody, expansion of
patent portfolio,
manufacturing of
capsules, preparation
for clinical trial
US$ 1-2
million
First phase in
transfer of
humanized
antibody for GMP
manufacturing
The target market
for NASH in 2017
is expected to total
US$ 1.3 billion29.
See paragraph 7
above
Anti
(antibody)
CD3
NASH
Ulcerative
colitis/IBD)
Change to oral
administration (PO) of
the antibody, which
activates a unique
mechanism of the
immune system and
causes the desired
therapeutic effect.
Prevents large-scale
suppression of the
immune system that
occurs when the
antibody is administered
by injection.
Corporate
assessment
regarding
start date for
marketing the
medical
product under
development
2020
Corporate assessment
regarding projected
market share assuming
marketing approval is
obtained
2% in the first year and up
to 25% in the fifth year
Phase IIa
clinical trial
began in
201430
Start of production of
the humanized
antibody, expansion of
patent portfolio,
manufacturing of
capsules, preparation
for clinical trial
Termination of
treatment of
patients and
conclusion of the
trial half way
through the year
Approximately
US$ 3.6 billion in
202231
2021
1% in the first year and up
to 10% in the fifth year
27
28
29
30
31
Source of assessment listed in the report regarding size of potential market for its products is publications by entities outside the Company that the Company has reasonable grounds to
believe are reliable (references to these publications are found in the footnotes to the table or in the footnotes to paragraph 7 to the report). For the most part, these publications assess the
market size on later dates in 2013, but include, for the most part, the projected annual growth rate. In order to assess market size in 2013, the Company's calculation was based on
projections from said publications for later years and from which the projected annual growth rate was deducted for 2013 and thereafter.
See the Company's immediate reports of August 22, 2010 (TASE reference: 2010-01-593637), September 12, 2010 (TASE reference: 2010-01-616743), March 21m 2011 (TASE reference:
2011-01-085731), August 7, 2011 (TASE reference: 2011-01-246567) and October 27, 2011 (TASE reference: 2011-01-309405). Regarding the results of the clinical trial, see the
Company's immediate report of October 2, 2012 (TASE reference: 2012-01-246915).
OpportunityAnalyzer: Nonalcoholic Steatohepatitis (NASH) - Opportunity Analysis and Forecasts to 2017 - Event-Driven Update, March 2014, GlobalData.
See the Company's immediate report of May 14, 2018 (TASE reference: 2014-01-065805).
Decision Resources – Ulcerative colitis report, October 2013.
20
In addition, as discussed above, the Company intends to consummate the Dekel
transaction and license Dekel's technology to develop the medicinal cannabis segment.
See details of the transaction for the purchase of shares of Lara-Pharm in paragraph 18
below.
For details of the Anti CD3 clinical trial for the Hepatitis C indication and its results,
see paragraph 8 to Chapter A to the previous annual report.
It should be emphasized that the Anti CD3 technology's development stage, consisting
of the successful Phase IIa clinical trial of the NASH indication and the beginning of the
clinical trial for the ulcerative colitis indication, addresses the OKTS non-humanized
antibody which originates from mice whose production has been discontinued. The
Company estimates that in order to be able to continue the development of the drug
based on this antibody (against CD3), the Company must continue the development (a
process which was completed) and production of a humanized antibody that will require
conducting Phase I clinical trials.
in
information, as defined
The information in the table above includes projections, assessments and estimates, which
represent forward-looking
the Securities Law, whose
materialization is not guaranteed and whose materialization depends, inter alia, on factors
that are outside the Company's control, such as developments in the treatment of diseases
that the Company's developments were designed to treat, competitors' developments,
position of the Company's business partners on various developments and their business
and strategic decisions with regards to these developments, the ability to raise funds to
conduct additional clinical trials and manufacture antibodies, the ability to enter
contractual arrangements with adequate business partners, availability and willingness of
patients to participate in clinical trials, clinical trial results, requirements of the medical
institutions where the clinical trials will be conducted, acceptance of the Company's
developments by the medical community, etc.
8.2
The Anti CD3 technology
Immunotherapy that uses orally administered anti CD3 monoclonal antibodies (alone or in
combination with other molecules) for controlling the immune system. The commercial use of
anti CD3 monoclonal antibodies IV for preventing transplant rejection was approved by the
FDA back in 1986. One of the main limitations of this therapy is the significant side effects
that arise from the non-selective widespread suppression of T-cells in the immune system.
This technology is based on joint patents between Hadasit and the Harvard University Medical
Center according to a license received by Hadasit for using these patents. The innovation in
the Company's developed therapy based on the license received by Hadasit lies in the method
of administration of the antibody - orally, which is expected to prevent the widespread
immune suppression and allow treating various inflammatory and autoimmune diseases with
the required safety. This technology was tested in clinical trials conducted by the Company.
See a description of the technology and the Company's development process in paragraph 8
above and in paragraph 18 below. See details of an attempted business development of this
technology with Chinese investors in paragraph 18 below.
21
The technology focuses on development of a unique immunotherapy of inflammatory and
autoimmune diseases with a monoclonal antibody to CD3 that is administered orally (per os).
The antibody affects lymphatic tissue in the lining of the digestive system by induction of
regulatory T-cells that bind to the disease sites and suppress the activity of other T-cells that
attack specific organs in the patient. In the first clinical trial, treatment successfully complied
with the safety criteria and immunological changes were measured that might indicate the
efficacy of the treatment in controlling and inhibiting inflammatory processes. In pre-clinical
trials in accepted models of the disease, oral administration of the Anti CD3 antibodies was
shown to prevent progression of the disease in a range of inflammatory and autoimmune
diseases including jaundice related to the immune system, fatty liver (NASH), Type 1
diabetes, Type 2 diabetes, Multiple Sclerosis (MS) model, Lupus (SLE), ulcerative colitis
(UC), prevention of graft versus host disease, psoriasis and atherosclerosis.
See more details of the next development stages of this technology and the required clinical
trials in paragraph 8 to Chapter A to the previous annual report.
See the main details of the clinical trials conducted by the Company in the Anti CD3
technology in paragraph 11 to Chapter A to the previous annual report. See details of the
license agreement with Hadasit in paragraph 19 below.
8.3
The entourage effect
Cannabinoids are a diverse group of chemical compounds that operate on specific receptors in
the body (CB1 and CB2). This family includes molecules that are derived from the cannabis
plant (phytocannabinoids) (the most known ones being THC and CBD) and molecules that are
naturally produced in the human and animal body (endocannabinoids) (such as AEA and 2-
AG). Dozens of molecules have been identified as part of the cannabinoid family.
Cannabinoids participate in a large number of physiological processes and are used for
treating a wide range of medical conditions. Cannabinoids have been proven as pain relievers
and anti-inflammatory, prevent nausea and enhance appetite and are therefore widely used
among cancer patients who undergo chemotherapy. Other uses include mental health and
psychological conditions such as posttraumatic stress disorder and anxiety. These compounds
were also found to be effective in treating epilepsy, Parkinson's, cancer and MS. In 1998, Prof.
Raphael Mechoulam, Israel Prize laureate, described the "entourage effect" which explains
how an allegedly inactive compound synergizes with an active cannabinoid. One of the most
studied cannabinoids in entourage effect research is the palmitoylethanolamide (PEA), part of
the endocannabinoid family derived from fatty acids. PEA has extensive pharmacological
benefits such as relieving pain and inflammation. Despite being part of the endocannabinoid
system, PEA does not bind to the CB1 and CB2 receptors. Dekel's entourage effect technology
and knowhow consist of synergizing compounds like PEA with other cannabinoids and drug
families such as opiates and steroids in order to increase the drug's effect thereby allowing the
use of smaller doses and preventing undesired side effects. Several clinical trials have
demonstrated the synergy between PEA and other painkillers such as opiates and anti-epileptic
drugs that are given for neuropathic pain. When combined with opiates, PEA significantly
mitigates the dependency on morphine and doubles the number of days of the drug's efficacy
without causing dependency. Moreover, to the best of the Company's knowledge, Dekel has
illustrated PEA-induced enhanced steroid activity, mainly when used dermatologically. This
enhanced activity stems from the shared effect of the steroids and PEA on the target
molecules. PEA's ability to intensify the cannabinoid system's activity has been described by
Prof. Mechoulam. To the best of the Company's knowledge, Dekel is acting to synergize PEA
with THC and create a new drug under an accelerated regulatory approval process to enhance
THC medicinal effect. Such product will minimize the side effects relating to the use of these
compounds. Combining PEA with phytocannabinoids (THC and CBD) will support the
enhancement of the efficacy of the drugs based on these compounds for indications such as
pain relief, nausea and vomiting in cancer patients.
22
8.4
Lara-Pharm's technology
Lara-Pharm develops cannabinoid-based prescription drugs as a medical product whose aim is
to replace the use of medicinal cannabis for various indications. Based on this development, to
the best of the Company's knowledge according to information obtained from Lara-Pharm, the
first product in the series of products which Lara-Pharm plans to develop is synthetic cannabis
in a proprietary formulation through an inhaler ("the medical product" or "the inhaler", as
applicable) in order to serve as a medicinal alternative for medical marijuana. The inhaler is
designed using a state-of-the-art innovative technology that aims to provide a solution for the
medical need for marijuana as therapy for various diseases and/or medical conditions32 by
licensing the technology and marketing it as a prescription medicine to the large pharma
companies. Lara-Pharm aspires to develop the product that is administered through the inhaler
as a beneficial alternative for existing medical solutions in the market that do not provide an
appropriate response to the medical needs of millions of patients worldwide. In such cases, the
product may serve as a medicinal alternative with a similar function to that of medicinal
marijuana that is preferable to cannabinoid-based drugs that are orally administered. In view
of Lara-Pharm's technology and development, the absorption of the active ingredients from the
lungs after using the inhaler will be more effective than after taking them orally. The improved
absorption of the active ingredients will possibly allow reducing the required dosage for
achieving the same medical effect and therefore is likely to minimize the side effects
associated with these ingredients. As a first stage, Lara-Pharm's R&D activity underlying the
medical product using the inhaler focuses on developing the formulation towards commencing
pre-clinical trials. Lara-Pharm intends to begin pre-clinical trials in the course of 2015.
9.
Existing and prospective customers
9.1
9.2
9.3
As of the report date, the Company does not have any regular or fixed customers that make
commercial purchases and therefore does not have an order backlog.
As discussed above, the Company mainly focuses on identifying and investing in promising
bio-pharma technologies while emphasizing technologies based on a known biological
mechanism that are in the post-proof of concept stage and provide responses for major medical
needs in the market and involve investing up to US$ 2 million for achieving a significant
milestone.
As of the report date, the Company is attempting to create a portfolio of cannabinoid-based
therapeutic technologies and assets. The Company is also promoting the Anti CD3 project
from a commercial and scientific perspective. The plausible commercial track for the
technologies and plans being developed by the Company is collaborating with leading
pharmaceutical and biotechnological companies. Agreements of this type generally consist of
various payments and royalties that are contingent on development and commercialization
milestones.
32
Conditions arising from chemotherapy, sleep disorders, pain, posttraumatic stress disorder, arthritis, multiple
sclerosis, cardio and vascular diseases, epilepsy, diabetes, glaucoma, nausea, Parkinson's, inflammation,
migraines etc.
23
10. Competition
The entourage effect and Lara-Pharm technologies
As of the report date, the Company has examined several possible indications for the development and
application of its technologies, including in connection with pain and chemotherapy-induced nausea
and vomiting (CINV). Nevertheless, at the current development stage of the technologies, the
Company estimates that it is too early to address the relevant markets and specific competitors.
In general, it may be argued that the medicinal cannabis market offers therapeutic solutions that are
distinguished according to FDA control and consumption. The highest selling FDA controlled
synthetic cannabis product is Marinol whose US sales are estimated at approximately US$ 200 million
a year whereas the more widely consumed medicinal cannabis reaches total sales of some US$ 2
billion in the US every year and is expected to grow to approximately US$ 8 billion in 2016. The
benefits of Dekel's and Lara-Pharm's technologies lie in the potential improvement/enhancement of
the existing drug and the creation of a medical alternative for medicinal cannabis.
The Anti CD3 technology
To the best of the Company's knowledge, there is currently no development which uses similar
mechanisms to those of the Company's technology which is in competition with the Company's Anti
CD3 technology.
Listed below is information about the competition in the three different indications in which the
Company conducted clinical trials on the use of the Anti CD3 technology (as of the report date, the
Company is not conducting any clinical trials):
NASH - to the best of the Company's knowledge, there are currently no approved drugs for the
treatment of NASH. At this stage, the Company considers the indication for treatment of NASH as the
Company's leading indication. Subsequently, the Company analyzed the relevant economic parameters
for the drug while emphasizing the cost structure and projected return from insurance mechanisms in
the US. Based on the projected quantities and production costs, the Company expects the production
cost of the drug for one treatment day to be approximately US$ 3. The Company premises that this
cost would allow it to present a high gross profit.
The aforementioned information with regards to production costs and gross profits is forward-
looking information, as defined in the Securities Law, whose materialization is not guaranteed and
whose materialization depends, inter alia, on factors that are outside the Company's control such as
changes in prices of raw materials and personnel costs, scope of insurance coverage that will be
provided, if any, the Company's ability to conduct the necessary clinical trials and the timeframes of
these trials, the results of the Company's clinical trials, changes in the structure of competition,
costs and efficacy of alternative drugs that will be marketed in the future, etc.
24
To the best of the Company's knowledge, several drugs are in various stages of development. The
Company's management believes that the main ones are as follows:
Development in
competition with
NASH
Jenken Biosciences
The drug is
currently used to
treat drug and
alcohol addiction
(JKB-122) in
clinical trials on
NASH patients.
Results indicated
some efficacy in
parameters related
to the liver. Safety
apparently good.
Development plan
– not known.
Pricing not known.
Development in
competition with
NASH
L-ACG (carnitine)
is in Phase II.
Oral
administration.
Basic approach of
food supplement
and not a drug.
To date – good
results in several
parameters but
method of trial
makes its
comprehension
difficult.
Safety – good.
Mechanism of
action different.
Cost - expected
selling price - low
(currently sold in a
different
formulation as a
food supplement).
No guarantee
regarding
continuation of
clinical trials on
NASH patients.
Development in
competition with
NASH
Genfit is
developing the
GFT505 product to
treat NASH and
other liver
diseases. The
company
completed the
Phase IIa clinical
trial but has yet to
publish results for
the product that
should control the
activity of genes
involved in the
inflammation
process. The
company began a
Phase IIb clinical
trial in which
patients are treated
for one year with
two doses and a
placebo with the
end point
including a biopsy
examination. In
February 2014, the
company was
given approval for
the designated fast
track by the FDA.
In March 2015,
Genfit announced
that that it failed to
meet the clinical
trial targets. The
mechanism focus
of Genfit differs
from that of
Therapix, and
subsequently the
product may be a
complementary
and not necessarily
a competing
product.
Company product
NASH product
NASH product
Anti-CD3 (mAb)
Route of administration
- oral
The main advantage
over the competition is
the use of an antibody
that is administered
orally and that works as
an anti-inflammatory
drug. Final dosage is
not known.
The Company expects
that insurance coverage
will be given and will
allow a selling price at a
level of tens of dollars
and a wide profit
margin. Whereas
insurance
reimbursement is
subject to future
discussions, the
Company premises
relatively low
production costs
(depending on final
dosage).
To date – no adverse
events.
Intercept Pharma –
Intercept specializes
in the development
and
commercialization of
drugs to treat chronic
liver disease based
on semi-synthetic
bile acid Obeticholic
Acid (OCA). The
drug is based on the
Farnesoid X
receptor. In January
2014, the company
published that the
Phase IIb trial which
is being conducted
on NASH patients
was being terminated
earlier than
scheduled by the
DSMB as a result of
the assessment of
successful efficacy
The company
reported that it met
all of its main targets
for this trial. At the
same time, it should
be noted that the
Company reported
change in the lipid
profile of patients
that includes
elevation of LDL and
a decrease in HDL.
The focus of
Intercept's
mechanisms differs
from that of
Therapix, and
therefore may be
considered a
complementary and
not necessarily
competing product.
Galmed
Pharmaceuticals is
developing the
aramchol as a
treatment of
NASH. Aramchol
is a conjugate
molecule of fatty
acid and bile acid.
The company has
shown positive
results in a Phase
IIa clinical trial
while complying
with the main
targets that
included a
decrease in lipids
in the liver and
other clinical
parameters but did
not demonstrate a
decrease in
hepatitis or a
change in fibrosis.
The company is
currently in patient
enrolment stage for
the Phase IIb trial
and is scheduled to
begin the Phase III
trial in 2015. The
company recently
raised US$ 38
million on the
American stock
market to cover
development
expenses. The
mechanism focus
of Galmed differs
from that of
Therpaix, and
subsequently this
might be a
complementary
and not necessarily
competing product.
25
The data in the table above, with regards to the Company's products and with regards to the
competitions' products, projected continuation of development and its results, selling prices,
margins and insurance coverage are strictly estimates of the Company's management, based on its
experience and familiarity with the pharmaceutical market, and constitutes forward-looking
information, as defined in the Securities Law, whose materialization is not guaranteed and whose
materialization depends, inter alia, on factors that are outside the Company's control such as the
state of competition in the market, decisions by regulatory authorities and insurance companies that
might affect insurance coverage given to the drugs, volume of demand for the drugs, acceptance of
the drugs in the medical community and competition with other drugs in the market at the same
time.
11. Research and development
11.1
11.2
The Company intends to act for the development of Dekel's technology and the continued
development of the Company's Anti CD3 technology, including by introducing partners and/or
strategic investors and by granting sublicenses and/or selling the Company's rights in the
technology to third parties.
In the past, the Company financed its R&D investments in its various technologies from its
own resources, from grants received from the Chief Scientist and from raising capital from
private and public resources in return for the allocation of securities of the Company and/or its
subsidiaries, as discussed below.
11.3 Below is a summary of the grants received by the Company and that were invested in R&D
(NIS in thousands):
Project name
Grant
received
through
2011
Grant
received in
2012
Grant
received in
2013
Grant received
in 2013 and as of
the report date
Therapix/Anti CD3
Therapix/Alzheimer's
EU/Orimmune
(formerly: Protea)
Chief Scientist/
Orimmune (formerly:
Protea)
Total grants - Therapix
and Orimmune
(formerly: Protea)
1,569
1,945
402
-
656
533
142
491
748
84
-
-
2,716
3,368
486
-
-
-
-
-
Special stipulations
established by the
Chief Scientist with
regards to grants
and/or their
repayment
Payment of royalties
of 3%
Payment of royalties
of 3%
No
grant
Payment of royalties
of 3%
repayment of
Balance of
grants received
from the Chief
Scientist as of
the report date
Terms of
repayment of
the grants and
timetables33
2015-2018
2015-2018
repayment
No
of grants
The Company
to
decided
close
the
program
3,916
617
798
1,239
6,570
33
For more information – see appraisal regarding the undertakings to the Chief Scientist attached to the Company's
financial statements that are included in this report. It is hereby clarified that the timetables for repaying the
grants are based on the Company's assessments and constitute forward-looking information, as defined in the
Securities Law, whose materialization is not guaranteed and a significant part of which are outside the
Company's control or not under its exclusive control. As such, there is no guarantee that these assessments will
materialize, fully or in part, or that they will materialize in a manner different than presented in this table. This,
inter alia, due to factors not in the Company's control such as changes in market conditions and the competitive
and business environment, obtaining approvals for future trials, results of future trials that the Company may
conduct, the Company's ability to finance future trials, its ability to produce and market products, the Company's
success in entering collaboration agreements with regards to its technologies under commercial conditions and
materialization of the Company's risk factors, as specified in paragraph 23 below.
26
12.
Intangible assets
The Company's technologies as discussed above include the orally administered Anti CD3 antibody
for treating inflammatory, autoimmune and other diseases.
In addition, the Company has signed a binding term sheet underlying Dekel's technology.
Below are details of the patents used by the Company in the development of its technologies and in its
current activities. See paragraphs 19.5-19.6 for information on the license agreements which grant the
Company rights to these technologies.
In most cases, the life of an approved patent is 20 years from the date of the patent application,
excluding cases in which a patent term extension is granted based on local laws. The patent renewal
dates differ in each country. In certain countries, a maintenance fee is levied on patent applications.
The Anti CD3 technology
The Company has development and commercialization rights in this technology in accordance with
the licensing agreement (see paragraph 19.6 below). The current developments of the Company with
regards to the Anti CD3 technology primarily rely on the patents and patent applications listed below:
Patent name and
number
Patent description
Company rights
in the patent
Methods of
modulating
immunity *
US 7883703
Treatment with Anti-CD3
Antibody for autoimmune diseases,
administered orally
(patent for use)
Usage and
commercialization
license from
Hadasit
Projected
expiration
date of
patent
11/2023
Countries
in which
they are
approved
US
Europe
Australia
*
In October 2010, approval was obtained in the United States for the "methods of modulating
immunity" patent that focuses on the oral administration (per os) of the Anti CD3 antibody to
treat various inflammatory and autoimmune diseases. The approval that was given includes the
following indications: diabetes, multiple sclerosis, psoriasis, rheumatoid arthritis, SLE, lupus,
graft-versus-host disease, inflammatory bowel disease and uveitis. For more information about
said approval, see the immediate report published by the Company on October 5, 2010 (TASE
reference: 2010-01-636270).
27
Patent name and
number
Patent
description
Company rights in the
patent
Priority date
Usage and
commercialization
license from Hadasit
November 14,
2003
Usage and
commercialization
license from Hadasit
January 18,
2008
January 18,
2009
Patent
application
deadline
November 12,
2004
Countries in which an
application was
submitted
US (approved),
Europe (approved),
Canada (approved),
Hong Kong(submitted),
Japan (approved),
Australia (approved)
US
Australia (abandoned)
India (abandoned)
Israel
NasVax rights
April 29,
2010
April 29, 2011 US
Europe
India
China
Japan
Korea
NasVax rights
02/2012
02/2013
PCT (can be submitted
– international)
NasVax rights
06/2012
03/2013
PCT (can be submitted
– international)
Methods of
modulating immunity
Combination therapy
of beta-glycolipids
and antibodies for the
treatment of immune-
related disorders
Methods and
compositions for
treating and/or
preventing hepatitis
with anti-CD3
immune molecule
therapy
Methods and
Compositions for
treating an orphan
indication
Methods and
compositions with
immune therapy
against CD3
Anti CD3 antibody
treatment for
autoimmune diseases,
oral or nasal
administration (mucous)
(patent on use)
Combination use of
beta-glycolipids such as
GC (Glucosyl
Ceramide0 with Anti-
CD3 antibody for
immune-related
disorders (patent on use)
Use of the Anti CD3
molecule to treat or
prevent jaundice,
including viral, and fatty
liver disease (NASH)
(patent on use)
Treatment with Anti
CD3 antibody for
orphan disease,
administered orally or
nasally (mucous)
Humanized Anti CD3
antibody
The BBS technology
Regarding patents relating to the BBS technology, the Company is in the process of returning the
patents to Ramot as part of the agreement for the recovery of the license to Ramot.
13. Fixed assets, real estate and facilities
Starting from August 2014, the Company is subleasing from an unrelated third party spaces in an
office building in Tel-Aviv which are used as the Company's offices and headquarters. The lease fees
are immaterial to the Company. To secure the Company's obligations under the sublease agreement
the Company provided the lessor a bank guarantee in an immaterial amount.
28
14. Human capital
14.1
The Company operates with a limited number of executive managers in an aim to achieve
effective management of its operations within its budget and meet the targets established by
the Board from time to time given the Company's cash flow and financing limitations.
14.2
In the course of 2014, the Company's entire management team was replaced.
14.3 As of the report date, senior management consists of seven employees (about 6.3 positions)
including the CEO (whose employment terms have not yet been approved), the CFO, the VP
of Business Development and Strategy and the Director of R&D and Regulation (external
consultant). The Company also has an active Chairman of the Board.
14.4
14.5
The Company also has a limited number of temporary part-time employees, consultants and
service providers and does not hire any subcontractors.
The following table presents the headcount of the Company's full-time employees as of
December 31, 2013 and 2014 and as of the report date:
Area of activity
Senior management
Business development
Finances and administration
Research and development
Total
No. of employees/service
providers as of the report
date
2
1
3
1
7
No. of employees/service
providers as of December
31, 2014
2
1
3
1
7
No. of employees/service
providers as of December
31, 2013
2
-
3
4
9
14.6 Organizational structure
Below is a diagram of the Company's organizational structure:
Active Chairman
CEO
Business Development &
Strategy
CFO
Research&
Development/Regulation
Accounting and
Administration
29
14.7
Employment agreements
As of the report date, the Company's entire employees are employed under personal contracts.
These contracts include clauses pertaining to non-disclosure and non-compete and exclusivity
and protection of the Company's IP rights against third parties. The terms of employment
consist of paid vacation, recreation and other social benefits pursuant to applicable law. The
employment agreements are normally signed for an indefinite term whereby each party may
terminate the agreement by providing an advance notice of 30 days (or 14 days during the trial
period), excluding irregular cases that provide for immediate termination as set forth in the
agreements. Agreements with consultants generally determine shorter early notice periods to
allow flexibility and quick breakaway without significant costs to the Company in view of its
financial position.
14.8 Officers and senior management
The Company's senior officers and members of management are also employed under personal
contracts that include non-disclosure, non-compete and IP protection clauses. The terms of
employment generally include participation in car expenses, paid vacation and recreation and
other social benefits pursuant to applicable law. The employment agreements are normally
signed for an indefinite term whereby each party may terminate the agreement by providing an
advance notice of 30 days, excluding irregular cases that provide for immediate termination as
set forth in the agreements.
See details of the main engagements between the Company and senior officers in the
Company in conformity with Regulation 21 to the Reporting Regulations in Chapter D
(Additional Information about the Corporation) to this report.
As of the report date, the Company believes that it is not dependent on any of its employees
and/or senior officers.
All the Company's directors and senior officers are covered by a directors' and officers'
professional liability insurance policy through an Israeli insurance company. See details in
Regulation 29a to Chapter D (Additional Information about the Corporation) to this report.
In addition, the Company grants standard letters of indemnity and quittance to the officers in
the Company and/or in the subsidiaries, as they will be from time to time, during their service
as officers in related companies, and to officers who are controlling shareholders or their
relatives.
14.9 Officer remuneration policy
Based on the provisions of Amendment No. 20 to the Companies Law, on January 23, 2014,
the Company adopted an officer remuneration policy ("the remuneration policy")34. The
objective of the remuneration policy is to describe and specify the Company's officer
remuneration policy. The remuneration policy serves as a tool for the Company to provide
incentives and rewards to officers.
34
See the Company's immediate report of January 23, 2014 (TASE reference: 2014-01-023434).
30
When signing new employment and/or management agreements and/or renewing or revising
existing agreements, the Company aspires to assimilate and implement the remuneration
policy, provided that it retains the right to make certain adjustments as needed and pursuant to
applicable law.
The remuneration components to which the officers are entitled will only be the components
that have been specifically approved by the Company's qualified entities and subject to the
provisions of applicable law. The adoption of the remuneration policy by the Company does
not grant its officers any rights whatsoever.
The Company's remuneration policy became effective from the date of its approval by the
general meeting on March 24, 2014 and will remain in effect for a period of three years (until
March 24, 2017), unless it is adjusted and/or modified before that, all in keeping with the
provisions of the Companies Law and the regulations published thereunder, as amended from
time to time.
The principles of the Company's remuneration policy were made public35.
14.10 The Company's option plan
(a)
In July 2005, the Company's Board adopted a plan to allocate unlisted options for the
purchase of up to 11,082 Ordinary shares of NIS 0.01 par value each of the Company to
employees, directors, consultants, service providers or anyone whose services are
deemed valuable by the Company's Board, at no consideration ("the option plan").
(b) As of the report date, the Company granted 2,678,257 options, of which 2,045,891
options were granted to officers in the Company.
(c) The following table presents information of options granted under the option plan to
employees, officers and consultants of the Company in 2013 and 2014 and as of the
report date (categorized according to the type of optionee)36:
Type of optionee
Allocation date
No. of optionees Amount of offered
Officer (other than
CEO or director)
Chairman of the
Board
April 23, 201437
January 27, 201438
1
1
options
266,242
423,037
Consideration Corporate value
after the money
derived from the
allocation (if
applicable)
--
--
--
--
35
36
37
38
See Appendix A to the Company's (revised) immediate report of February 6, 2014 (TASE reference: 2014-01-
034204 and an immediate report of March 24, 2014 (TASE reference: 2014-01-022311).
For details of the options granted to the CEO based on his employment agreement which has not yet been
approved, see the Company's immediate report of March 15, 2014 (TASE reference: 2014-01-050611).
See the Company's immediate report of April 23, 2014 (TASE reference: 2014-01-049038).
See the Company's immediate report of January 27, 2014 (TASE reference: 2014-01-024814).
31
(d)
In accordance with the option plan, the options to employees, including directors but
excluding controlling shareholders in the Company, will be allocated in accordance with
Section 102 of the Income Tax Ordinance, and the options to consultants, service
providers and the controlling shareholders in the Company will be allocated in
accordance with Section 3(i) of the Income Tax Ordinance.
The options that will be allocated in accordance with the option plan will be held by a
trustee during a capping period as defined in the Income Tax Ordinance. The trustee
will act in compliance with the trust agreement to be signed, inter alia, between the
trustee and the Company.
The Company's Board has the authority to amend the terms of the option plan.
The options can be exercised in one portion or in several portions over the exercise
period.
Each optionee is entitled to receive the options and/or the shares deriving from the
exercise of the options ("the underlying shares"), provided that on the date of receipt
of the options and/or underlying shares, the optionee is an employee or service provider
of the Company.
The options can be exercised until the earlier of the date set forth in the agreement
between the optionee and the Company or the end of any extended period as stipulated
below ("the exercise period").
Upon termination of the employee's employment by the Company and/or termination of
the contractual arrangement between the service provider and the Company ("the
optionee's contractual arrangement with the Company" and "the date of
termination of the contractual arrangement", as applicable), the options allocated to
that optionee will expire. The optionee will be entitled to exercise the options granted to
it even after the date of termination of the contractual arrangement under the
circumstances prescribed in the option plan.
The options will be subject to adjustments as specified below:
In the event of a transaction, as defined below in this paragraph, the options will be
assigned to the receiving company or swapped with shares of the receiving company, in
accordance with the consideration that will be given to the Company's shareholders,
including consideration in shares of the receiving company, consideration in cash or any
other form of consideration. In said circumstances, the exercise price will be adjusted,
as set forth by the Company's Board. The Company will inform the optionees of said
transaction at least 10 days prior to the record date of the transaction. If the Company
chooses not to act as specified, and subject to the provisions of the agreements that were
signed with the optionees, the exercise period may be accelerated, the options will be
considered as exercised and each optionee will be entitled to sell the underlying shares
to the Company, which will be required to purchase them at market price, as defined in
the plan.
"Transaction" is defined as a merger, acquisition or restructuring of the Company that
will result in the dissolution of the Company or the sale of all or most of the Company's
assets.
32
In the event of voluntary liquidation of the Company prior to the end of the exercise
period of the options, the Company will inform the optionees of said liquidation and the
optionees will be entitled to exercise the options within 10 days from date of said notice.
Options that are not exercised within said 10 days will expire.
If any change occurs in the Company's issued capital by way of dividend in shares
(bonus shares), stock split, consolidation or exchange of shares, a change in the
Company's capital structure or any other similar event, the number and type of shares
that will derive from the options as part of the plan will be proportionally adjusted in
order to proportionally maintain the number of shares, without any change in the
exercise price. In said case, the cumulative type and number of shares that can be issued
as part of the exercise of the options by virtue of the plan, in relation to the options that
have not yet been exercised, will be similarly adjusted, as will be determined by the
Company's Board. There will be no adjustment in the event of a rights issue.
14.11 The Company's Scientific Advisory Board
The Company has a Scientific Advisory Board that discusses the scientific issues relating to
the Company, whose members as of the report date include Prof. Itamar Shalit, Prof. Howard
Weiner, Prof. Yaron Ilan and Dr. Ascher Shmulewitz.
14.12 Benefits and nature of employment agreements
See details relating to the Company's officers in Regulation 21 to Chapter D to this report.
15. Raw materials and suppliers
The Company's main suppliers are the owners of the knowledge from which the Company acquires
and/or receives a license to develop, use, market and commercialize its technologies, as described
below.
Each supplier is an exclusive supplier of the relevant technology. Nonetheless, in light of the nature of
the licensing agreements, the Company believes that it does not have an absolute dependency on any
of the said suppliers, since its rights are derived from the usage agreement that, barring a fundamental
breach of contract by the Company, entitles the Company to continue its activity in accordance with
the terms of the licensing agreement. The Company has several agreements with other suppliers that
are used by the Company for outsourcing. These suppliers include companies that specialize in
research and development, conducting animal testing, clinical trials, regulation etc. The Company
believes that working with these suppliers does not pose a real risk, based on the reputation of these
suppliers, experience with working with them and the availability of alternative suppliers.
16. Financing
The Company finances its operations with funds from the private and public offerings it carried out
and from grants from the Chief Scientist as specified in paragraph 11.4 above.
Nevertheless, it should be mentioned that as of the report date, the Company's shelf prospectus of
August 8, 2012 is no longer in effect and cannot serve as a basis for raising capital in the context of
shelf offering reports.
The Company's financial statements include a going concern notice and from time to time, the
Company's Board examines various options for the Company's continued funding, including private
placements and capital raisings (rights issues).
33
See details of an agreement for making a material investment of approximately US$ 0.5 million in the
Company's share capital in the Company's immediate report of March 30, 2015 (TASE reference:
2015-01-065656).
17. Taxation
For information about taxation, see Note 15 to the financial statements.
18. Restrictions and regulations underlying the Company's operations
18.1
The Law for the Encouragement of Industrial Research and Development, 1984 ("the R&D
Law")
The R&D Law establishes a series of requirements with which the applicant of the R&D
grants must comply. Although the R&D Law establishes that the parties entitled to benefits in
accordance with the Law will pay the State Treasury royalties from any revenue deriving from
or generated by the product developed in the program, including ancillary services to the
product or that involve it, the Company is not required to pay royalties. In addition, the R&D
Law requires that the product to be developed as a result of the research and development will
be manufactured solely in Israel unless approval is issued by the Ministry of Industry, Trade
and Labor's Research Committee to transfer manufacturing rights of the product to outside of
Israel.
On April 7, 2005, Amendment No. 3 to the R&D Law was published ("the Amendment").
The Amendment allows, inter alia, the transfer or sale of knowledge whose development was
supported by the grants of the Chief Scientist's Office to third parties outside of Israel, in
consideration for a certain part (according to a defined formula) of the consideration from the
transfer or sale of the knowledge, or consideration for receipt of knowledge from third parties
or participation in research and development. In accordance with its provisions, the
Amendment became effective in June 2005 and also applies retroactively to programs
approved before that date, including research and development programs for which the
Company received a letter of approval.
18.2 Regulatory approvals for the stages of development
Approval for marketing medical products is subject to stringent regulations around the world.
The regulatory process in obtaining the necessary approvals is composed of various stages,
each of which requires the Company to comply with certain conditions and criteria. Once the
Company has successfully passed all of the trial phases, it can submit an application for
approval to register the medical product by the relevant regulatory authorities, such as the
FDA in the United States, or EMEA in Europe, or the Ministry of Health in Israel.
The Company will apply for product development approvals from the health authorities in
Israel and in other countries in which it decides to operate, based on the calculations listed
below that are required for continued development and later for commercial marketing of its
products, or will partner with a manufacturer that will obtain said approvals. The work
involved in obtaining approvals and licenses in various countries for the use of the products
development by the Company ("the product") requires an enormous financial investment.
34
All of the procedures involving the product's clinical trials, tests, manufacturing, labeling,
publication, sales promotion, export and marketing are subject to the supervision of regulatory
authorities in the different countries. The Company believes that the strategy of granting
licenses for using some of the Company's technologies is preferable in that a large percentage
of the later activities (advanced clinical trials, licensing, marketing, etc.) will be carried out by
the partner in receiving the license in the said stages.
The development stages required to obtain approval for marketing and manufacturing the
product include, inter alia,
a.
b.
Pre-clinical trials on laboratory animals;
Development of adequate and controlled manufacturing conditions that are approved by
the various health authorities;
c. Meticulously controlled clinical trials that provide proof of the efficacy and safety of the
product;
d.
e.
f.
g.
Submission of the product's registration file to the regulatory authorities in various
countries;
Review of the product's registration file by the health authorities in various countries;
Obtaining marketing approval;
Studies after the start of marketing, if necessary.
All of the trial and approval procedures are time-consuming and require tremendous effort and
significant financial investment, with no guarantee that any approval will be granted at the end
of a reasonable amount of time or at all.
Pre-clinical trials include a laboratory review of the product and animal trials. These trials are
designed to test the product's potential efficacy and safety for use. The results of the pre-
clinical trials, along with the information on product manufacturing methods and analytical
properties (composition, stability of the chemical components, etc.) are submitted to the
authorities and reviewed as part of the review process required to obtain approval to begin
clinical trials in human subjects.
During the clinical trial stage, the investigational product is given to healthy or sick human
beings under the supervision of the doctor – investigator qualified to regulate trials in human
subjects. Every clinical trial must undergo an audit and receive prior approval from an
independent institutional ethics committee in the institution where the trial is being conducted
and from the Ministry of Health if necessary. According to the Helsinki Covenant, the
committee supervising clinical trials considers granting said approval, inter alia, the ethical
foundations related to the trial, product safety for use and exposure to tort suits against the
institution carrying out the trial for the planned trial.
The number of subjects in each of the trials is established in conjunction with the qualified
licensing authorities. In principle, clinical trials are conducted in three phases that can
sometimes overlap. In the first phase, during which the product is first administered to human
subjects, safety is primarily tested (adverse events), the subject's tolerability of the dosage. In
addition, specific biomarkers are tested during blood tests for the preparation's safety.
35
In the second phase, clinical trials are conducted on a defined population of patients in order to
determine the safety and efficacy of the product used to treat a defined indication, to establish
tolerance to different dosages and the optimal dosage as well as identify adverse events and
health risks. In the third phase, trials are conducted on a larger scale, for additional and
broader proof of the product's efficacy and safety in a large number of subjects and study sites.
Once the product has been approved, Phase IV clinical trials are occasionally conducted to
accumulate more information on treatment results in the approved indication, and to examine
the benefit to patients if the product has passed an accelerated licensing stage (approval in an
accelerated process is primarily carried out for life-saving drugs). The applicant for the
approval must complete Phase IV clinical trials if and when they are instructed to do so.
Failure to comply with any of the stipulations in the approval process might result in a
revocation of the product license.
The results of the pre-clinical and clinical studies, along with the information specified on the
product vehicle and its method of manufacturing, are submitted to the health authorities by the
approval applicant. The health authorities are entitled to delay approval of the license if all of
the required conditions have not been met or if additional trials are needed. In addition, the
health authorities are entitled to condition approval on the conducting of Phase IV trials, in
order to monitor product efficacy and large-scale safe use. There is no guarantee that the
product that is in registration proceedings will receive approval in a reasonable period of time,
if at all. Even if approval is granted, it might be limited and restricted.
As previously mentioned, the Company's products will be subject to existing laws in various
countries in which the products (by the Company or by parties that will be granted licenses to
its technologies) will be marketed, in accordance with the requirements of the health
authorities in each of those countries. Licensing in the various countries must be obtained
uniquely before marketing of the product begins in each country. The licensing procedure
differs in each country.
18.3 Ministry of Health
The Company's operations in Israel are subject to a permit from the Ministry of Health for
conducting trials in human subjects, and to approval from the Helsinki Committee, as
specified below.
18.4
Public Health Regulations (Clinical Trials in Human Subjects, 1980 ("the Regulations") and
Procedure No. 14 of the Pharmaceutical Administration in the Ministry of Health – Clinical
Trials in Human Subjects
The regulations and procedure establish the steps for approval for conducting a clinical trial
and trial on medical equipment. According to the procedure, every clinical trial is subject to
the Regulations, to the provisions of the procedure, to the provisions of the Harmonized
Tripartite Guideline for Good Clinical Practice ICH-GCP (E6) and to the provisions of the
standard for Clinical Investigation of Medical Devices for Human Subjects (AMAR). The
Regulations establish that a clinical trial in a human subject will not be approved until after the
Helsinki Committee (see below) of the hospital that is planning to conduct the trial has
approved the trial and has issued written notice of this to the medical director of the hospital in
which the trial will be conducted and the director of the hospital was convinced that the trial
does not violate the Helsinki Declaration and with Regulations. In certain cases, an opinion is
required from the higher Helsinki Committee for Clinical Trials in Human Subjects in order
for the trial to be approved.
36
"Helsinki Committee" will not approve a trial unless it has been convinced to its satisfaction
that the following conditions have been met, including: anticipated benefits to the trial
participant and to the group justify the risk and the discomforts involved in participation in the
trial and that the medical and scientific information that exists justifies conducting the
requested clinical trial.
19. Material agreements
19.1 Agreement for investment in medical cannabis with LaraPharm Ltd.
On April 2, 2014, the Company signed a master agreement with LaraPharm Ltd. ("Lara"), an
Israeli company that operates in the field of medical cannabis and is developing a synthesized
formulation that is based on cannabinoids (active components found in the cannabis plant) to
be administered through an inhaler ("the medical product")39. On June 15, 2014, a final
investment agreement was signed between the parties (in this paragraph, "the agreement")
according to which, subject to the fulfillment of several prerequisites40, the Company will
transfer to Lara an initial investment amount of US$ 800 thousand (based on the schedules and
dates determined in the agreement. The first installment only has been paid as of the date of
this report and the second installment which is due has not yet been paid to Lara) against
shares that will represent about 26% of Lara's issued and outstanding share capital (on a fully
diluted basis) ("the initial stage")41. The agreement also stipulates that the overall amount that
the Company will invest in Lara will be US$ 1.5 million (including the initial investment
amount), subject to the fulfillment of certain milestones42 and according to predetermined
timetables. It was also determined in the agreement that the investment funds will be used by
Lara to manage and promote its activities based on the approved budget and work plans. The
agreement also stipulates rights and conditions for appointing directors on Lara's board and
additional rights as customary in this type of agreement. Assuming that Lara successfully
meets all the milestones determined in the agreement and the Company invests the entire
investment amount as above, the Company will hold 49% of Lara's issued and outstanding
share capital (on a fully diluted basis)43.
39
40
41
42
43
See the Company's immediate See the Company's immediate report of April 2, 2014 (TASE reference: 2014-01-
035922).
Among others, these prerequisites include the completion of related agreements and the completion of various
operating, monetary and commercial information and data and additional background studies of Lara to the
Company's satisfaction.
It should be noted that according to the agreement, the percentage of the Company's holdings in Lara's shares as
mentioned above (26%) will be reduced pro rata to the amounts that will be transferred if the Company fails to
provide the remaining payments on the predetermined dates. As discussed above, as of the report date, only the
first instalment has been paid and the second installment which is due has not yet been paid to Lara. According
to the provisions of the agreement, Lara has the right to reduce the Company's holding rate in Lara's shares pro
rata to the amounts that will be transferred in a manner that as of the report date, insofar as Lara exercises its
right, the Company will hold about 11% only.
Among others, the milestones include obtaining an expert's approval for the medical product's successful
compliance with biotechnological criteria determined both in the context of a simulator test and in preclinical
trials (animal testing).
See the Company's immediate reports of June 16, 2014 (TASE reference: 2014-01-091608) and of June 23, 2014
(TASE reference: 2014-01-097152).
37
On August 10, 2014 ("the initial consummation date"), all the prerequisites for completing
the initial stage in the Lara share purchase transaction were met44. As discussed above, the
Company delivered to Lara a sum of approximately US$ 250 thousand of the initial
investment amount of US$ 800 thousand whereas the remaining sum was not delivered on the
predetermined date. According to the agreement, failure to deliver the remaining initial
investment amount by the Company will not represent breach of the agreement although Lara
will have the right to reduce (forfeit) the Company's holdings in its shares pro rata to the
amounts that are delivered, as stipulated in the agreement, and in certain cases Lara will also
be able to exercise a tag-along right and force the Company to sell its interests in Lara in the
event of such forfeiture of shares for the purpose of selling Lara's shares to a third party. Also
according to the agreement, upon the fulfillment of the first milestone within the
predetermined timeframe from the initial consummation date (a summary report of
compliance with the target of reaching a specific range of particles of powder using the inhaler
through simulator tests and its approval by an expert), Lara will allocate the Company shares
that will confer it a cumulative holding of 39.2% of the shares in Lara (on a fully diluted basis)
in return for US$ 400 thousand. Moreover, upon the fulfillment of the second milestone within
a timeframe that exceeds the predetermined date from the initial consummation date (a
summary report of compliance with the target of reaching a specific range of particles of
powder using the inhaler through animal testing and its approval by an expert), Lara will
allocate the Company shares that will confer it a cumulative holding of 49% of the shares in
Lara (on a fully diluted basis) in return for US$ 300 thousand. As of the report date, none of
the abovementioned milestones has been met. See also Note 8b to the financial statements.
19.2 A binding term signed with Dekel
In keeping with the Company's reports of October 201445 regarding the Company's
engagement with Dekel Pharmaceuticals Ltd. ("Dekel")46 in a non-binding term sheet for the
purchase of Dekel's entire share capital (on a fully diluted basis) in return for the allocation of
shares in the Company ("the previous term sheet"), which expired pursuant to its terms on
December 31, 2014 without a final and binding agreement having been approved by the
Company's relevant entities, and to replace the previous term sheet, the Company and Dekel
agreed to sign a final binding and specific license agreement regarding Dekel's technology and
IP that also consists of an option for investing in the Company ("the license agreement" and
"Dekel's technology", respectively), all subject to obtaining the necessary approvals as
specified below.
44
45
46
See additional details of Lara and its business affairs, including a description of its market structure, developed
products and R&D stage in the Company's immediate report of August 11, 2014 (TASE reference: 2014-01-
167559).
See the Company's immediate report of October 1, 2014 (TASE reference: 2014-01-167559), as amended on
October 1, 2014 (TASE reference: 2014-01-167748).
To the best of the Company's knowledge, Dekel is a privately-held company incorporated in Israel that is
engaged in the research and development of drug therapies based on synthetic cannabinoid substances (active
ingredients in cannabis and synthesized endocannabinoids) for treating chronic pain and inflammation. In
addition, to the best of the Company's knowledge, Dekel holds the IP rights to a disposable, patent-protected
dose-controlled inhalation device, which can be used in the delivery of steroids and/or cannabinoids.
38
On January 7, 2015 and January 11, 2015, the Company's Audit Committee and the
Company's Board respectively discussed and approved the signing and the terms of a binding
term sheet underlying the license agreement with Dekel ("the approved outline"), as
determined in negotiations held between the Company's representatives47 and Dekel's
representatives, which will be brought to the approval of the Company's relevant entities48.
The approved outline and the principal terms of the license agreement as agreed upon between
the parties as of the report date are as follows:
1.
2.
General - the approved outline sets forth a general outline of conditions for the grant of
a license for Dekel's technology to the Company simultaneously with Dekel's capital
investment in the Company (by itself and/or through others). The objective of the
engagement between the parties is to allow the Company to develop Dekel's technology
through the license agreement and simultaneously raise the capital needed for this
purpose, all as specified below.
Agreement for licensing Dekel's technology - Dekel will grant the Company an
irrevocable global exclusive royalty-bearing license which can be sub-licensed for using
Dekel's technology for research and development, manufacturing, sale, distribution,
marketing and commercialization of drugs which are derived from this technology
(including sublicenses). In return for the license, the Company will pay Dekel certain
amounts based on specific milestones as described below:
2.1 Upon the success of pre-clinical trials in Dekel's technology - US$ 25 thousand
(in cash and/or in share capital (at a price of NIS 0.5 per Ordinary share of the
Company) ("cash and/or equity-settled payments"));
2.2 Upon the success of Phase I/IIa clinical trials in Dekel's technology - US$ 75
thousand in cash and/or equity-settled payments;
2.3 Upon the generation of revenues (in the amount determined in the approved
outline) from the commercialization of products that are based on Dekel's
technology by Dekel and/or a third party, or FDA/EMA approval of the drug that
is based on Dekel's technology - US$ 75 thousand in cash and/or equity-settled
payments.
47
48
The Company appointed a special committee which consisted of the Company's external director (Mr. Zohar
Heiblum), the Company's CEO (Mr. Jan Turek) and the Company's VP Business Strategy & Innovation (Dr.
Elran Haber) for the purpose of negotiating with Dekel's representatives. Dekel's shareholders also included Dr.
Ascher Shmulewitz who as of the report date serves as the Chairman of the Company's Board and an interested
party therein by virtue of his interests.
In the first stage, the approved outline must be brought to the approval of the Company as required by law. In
this context it should be mentioned that based on the position of the Board, as it was also with respect to the
previous term sheet, the approved outline should be approved by the Company's various entities such as the
Audit Committee and Board (which were already obtained, as discussed above) and, as an exception and for
prudence sake only, also by the general meeting of the Company's shareholders pursuant to the provisions of
Section 275(a) to the Companies Law.
39
3.
4.
5.
6.
7.
Advance; royalties - upon the signing of the license agreement, the Company will pay
Dekel an amount of NIS 100 thousand (in the Company's shares at a value of NIS 0.5
per Ordinary share) as an advance on account of future royalties ("the advance"). The
advance will be returned to the Company by offsetting it from any future royalties based
on the license agreement until the entire advance is offset. In addition, the will pay
Dekel direct royalties from net revenues at either a high single-digit rate or indirect
royalties from sublicenses at a median double-digit rate.
Development obligation - the Company will lead, manage and finance the development
of the technology, including in connection with conducting pre-clinical trials, GMP-
based development and clinical tests with a minimum annual investment (as determined
in the approved outline) or based on an approved budge that is agreed upon between the
parties.
Option for investing in the Company ("the option") - upon signing the license
agreement, Dekel will have an option to invest an amount of US$ 500 thousand in the
Company's shares (at a price of NIS 0.5 per Ordinary share of the Company) for a
period of three months from the date of signing the license agreement.
Additional option for investing in the Company ("the additional option") - subject to
the exercise of the option mentioned in paragraph 5 above, Dekel will have an
additional option for investing an amount of up to US$ 2,000 thousand in the
Company's shares in such a manner that each option exercised as described in paragraph
5 above will entitle Dekel to four additional options for the Company's shares (at an
exercise price of NIS 0.65 per option) for a period of 12 months from the date of signing
the license agreement.
IP - if in the first year any of the payments owed to Dekel as described above is not
made (including the Company's R&D obligation), the license will be revoked and
Dekel's IP under the license will be recovered to Dekel (excluding the IP that is
generated by the Company's research and development activity in the technology). If
after the first year any of the payments owed to Dekel as described above is not made
(including the Company's R&D obligation), the license will be revoked and the entire IP
developed under the license will be recovered to Dekel (including the IP that is
generated by the Company's research and development activity in the technology).
8.
Suspending conditions - the license agreement will become effective provided that the
following conditions are met:
8.1 Detailed and final license agreement - the parties will sign a detailed and final
within 90 days from the date of approval of the approved outline by the parties,
including the fulfillment of generally accepted suspending conditions, as will be
determined in the license agreement.
8.2 Due diligence - completion of a due diligence study of Dekel by the Company tot
eh Company's satisfaction.
8.3 Receipt of relevant approvals - receipt of the approvals of the parties' relevant
entities.
8.4 Regulatory approvals - receipt of the relevant regulatory approvals for the
completion of the approved outline, including the TASE's approval (and the ISA's
and OTC's approvals, if needed).
40
8.5
Investment - completing the investment both by Dekel and by others in one or
several transactions in a cumulative total of at least US$ 350 thousand.
9.
Exclusive dealing obligation - Dekel has undertaken towards the Company not to hold
any exclusive dealings for the entourage effect technology with other parties and to sign
a license agreement for a period of 90 days from the date of signing the approved
outline as above.
10. Expiration - according to the approved outline, it will expire at the earlier of: (1) notice
of failure to obtain shareholders' approval delivered by one of the parties to the other;
(2) signing and executing the final agreement; (3) the date of expiration of the approved
outline as agreed upon between the parties in writing.
11. Assignment of the option and/or the additional option for investing in the Company's
shares to third parties - Dekel will be entitled to assign its right (or part thereof) in the
option and/or the additional option for investing in the Company's shares to a third party
provided that the third party fully secures its investment pursuant to the option and/or
additional option. In the event that following the exercise of the option in the context of
such assignment the assignee will be granted 25% or more of the Company's entire
voting rights, the assignment will require the approval of the Company's Audit
Committee. For the purpose of this paragraph, the percentage of "voting rights" will be
calculated on a cumulative basis along with any assignee's other holdings in the
Company immediately prior to the assignment and collectively with any other previous
assignment as prescribed in this paragraph. In addition, any exercise of the option
and/or the additional option (or part thereof) will be governed by the provisions of
applicable law regarding purchase offers, under the circumstances.
It should be mentioned that during the period from the date of signing the previous term sheet
through the report date, the Company has initiated a due diligence study of Dekel (which has
not yet been completed) and has negotiated with Dekel regarding the final conditions of the
engagement between the parties.
The Company believes that the engagement with Dekel in the approved outline coincides with
the Company's business strategy49 and is potentially synergetic with (and advantageous to)
another operation which the Company has been exploring for some time in this field50.
As discussed above, as an exception and for prudence sake only, the approved outline will also
be brought for the approval of the general meeting of the Company's shareholders, pursuant to
Section 275(a) to the Companies Law. The Company's management will convene a general
meeting, among others with the agenda of approving the approved outline and will issue a
detailed transaction report accordingly51.
49
50
51
For details of the Company's business strategy as of the report date, see immediate report of March 30, 2014
(TASE reference: 2014-01-029448).
The Lara-Pharm transaction as discussed in the Company's immediate reports of April 2, 2014 (TASE reference:
2014-01-035922), May 8, 2014 (TASE reference: 2014-01-059022), May 21, 2014 (TASE reference: 2014-01-
069705), June 16, 2014 (TASE reference: 2014-01-091608), June 23, 2014 (TASE reference: 2014-01-097152)
and August 11, 2014 (TASE reference: 2014-01-131130).
It should be clarified that based on the approved outline, a detailed and final license agreement is expected to be
signed whose main terms will be based on the approved outline. Any material differences between the approved
outline and the final agreement that will be signed will be disclosed by the Company in a specified immediate
report.
41
Forward-looking information warning - the Company's information and evaluations
discussed above in connection with the completion of the approved outline and the
signing of a final and binding agreement, the fulfillment of any of the abovementioned
milestones, the integration of Dekel's activity in the Company's activities and its
contribution to the Company, including forecasts, dates, evaluations and/or plans of the
Company in connection therewith all represent forward-looking information, as this
term is defined in the Securities Law, which involves a great degree of uncertainty and is
based, among others, on outside factors (including information received from Dekel) and
numerous variables which are not necessarily under the Company's control and
therefore, the completion of the transaction and the fulfillment of the other suspending
conditions and milestones and/or their expected costs, dates and relevant schedules might
not materialize in practice and/or might not materialize in full and/or might materialize
in a manner that is materially different from that originally evaluated or anticipated.
Among the factors that are liable to cause the Company's information and evaluations
not to materialize as expected we should mention the discovery of material scientific data
that will significantly modify the terms and/or viability of the engagement, failure to
reach a final and binding detailed agreement (subject to the approval of the general
meeting of the Company's shareholders), failure to complete the R&D process of the
entourage effect technology (including in the context of pre-clinical and/or clinical trials
or non-compliance with such pre-clinical and/or clinical trial targets) and/or demands
for repeating clinical trials on products developed based on the entourage effect
technology, failure to obtain the necessary regulatory approvals from the authorities in a
timely manner and/or at all, or potential disputes with regulatory authorities and the
related consequences, change and/or aggravation of the approval policy of regulatory
authorities with respect to developed products, failure to obtain the additional financing
required for completion of development and/or entering into strategic collaboration
agreements for completing the development of Dekel's products, entry of other
competitors for Dekel's products into the market, change in the structure of the
competition in the target markets of Dekel's products and the realization of any of the
risk factors detailed in paragraph 23 to Chapter A (Description of the Corporation's
Business) to the Company's annual report for 2014. It should also be emphasized that
there is no certainty that pre-clinical and/or clinical trials of products developed on the
basis of the entourage effect technology will yield successful results, which in turn might
require making adjustments to the Company's R&D plans, budgets and timetables and
that the Company is exposed to additional risk factors, as described in paragraph 23 to
Chapter A (Description of the Corporation's Business) to the Company's annual report
for 2013, which might significantly affect the Company's evaluations as above either
jointly or severally.
42
19.3 A strategic Anti CD3 technology collaboration term sheet signed with a Chinese corporation
On December 18, 2014, a non-bonding term sheet ("the term sheet") was signed between
Orimmune Bio Ltd., a subsidiary of the Company52, and Nanjing BioSciKin Co. ("the
Chinese corporation"), a private Chinese company which acts as the investment vehicle of
Simcere Pharmaceutical Group53, in connection with strategic collaboration for developing
and manufacturing the Company's Anti CD3 antibody ("the antibody") and commercializing
it in the Chinese market (China, Taiwan, Hong Kong and Macau) ("the region"). This is in
keeping with the Company's report of May 4, 2014 regarding negotiations being held with the
Chinese company in the same issue54. According to the term sheet, the parties will act for
signing an exclusive license agreement for using Orimmune's patents and IP for the Chinese
corporation's researching, developing, manufacturing, commercializing and sublicensing
activities in the region in return for an amount of US$ 300 thousand in cash. Also according to
the term sheet, the Chinese corporation is expected to finance setting up a GMP-based
production line for the antibody and the Company will not be required to invest any amounts
in this context. Moreover, according to the term sheet, the parties will enter into a non-
exclusive supply agreement for the manufacturing the antibody (based on FDA standards) for
the purpose of clinical trials at a price that will be determined between the parties. The
Chinese corporation will bear all the payments in connection with and/or arising from the
commercialization of the antibody, including payments to the Chief Scientist, if any are
needed. The completion of the engagements is contingent on the fulfillment of several
conditions ("the suspending conditions"), including the completion of a due diligence study
to the Chinese corporation's satisfaction, filing patent applications for the antibody in China
and signing a final and binding agreement as discussed above within 60 days from the date of
signing the term sheet. As of the report date, the term sheet is no longer in effect and the
parties have not signed any binding and final agreement; nevertheless, it should be noted that
the parties are continuing to hold negotiations although as of the report date no significant
achievements have been made. The Company will report any major developments in this
context.
Forward-looking information warning - the Company's information and evaluations
discussed above in connection with the signing of final and binding agreements, the
fulfillment of any of the suspending conditions, including the signing of a final license
and/or supply agreement as discussed above, and including forecasts, dates, evaluations
and/or plans of the Company in connection therewith all represent forward-looking
information, as this term is defined in the Securities Law, which involves a great degree
of uncertainty and is based, among others, on outside factors and various variables
which are not necessarily under the Company's control and therefore it is possible that
the information regarding the signing of a final and binding agreement and the dates and
schedules relating to the fulfillment of the suspending conditions might not materialize in
practice and/or might not materialize in full and/or might materialize in a manner that is
materially different from that originally evaluated or anticipated. Among the factors that
are liable to cause the Company's information and evaluations not to materialize as
expected we should mention the failure to receive regulatory and/or government
approvals, including from the Chief Scientist and/or other government offices, the non-
fulfillment of any of the suspending conditions in a timely manner and/or at all, failure to
compete the negotiations between the parties and reach final and binding agreements
and the realization of any of the risk factors described in paragraph 23 to Chapter A
(Description of the Corporation's Business) to the Company's annual report.
52
53
54
Orimmune Bio Ltd. (formerly: Protea Vaccine Technologies Ltd.) is a subsidiary that is controlled by the
Company ("Orimmune"). As of the report date, the Company holds about 90% of Orimmune's issued and
outstanding share capital (about 90% on a fully diluted basis).
To the best of the Company's knowledge, Simcere is traded on the NYSE.
See the Company's immediate report of May 4, 2014 (TASE reference: 2014-01-056541).
43
19.4 Agreement for the return of the VaxiSome® technology to the technology owners
Until May 2013, the Company owned an adjuvant technology for the improvement of
preventive vaccinations and enhancement of their efficacy for developing a vaccine adjuvant
(agent that helps increase the immune response and improve antibody production in the human
body) that is delivered either by injection or through the intranasal route. On May 21, 2013,
the Company signed an agreement on the transfer of rights to the technology with Yissum
Research Development Company of the Hebrew University of Jerusalem ("Yissum") and Bio-
Lev Ltd. ("Bio Lev"), the owners of the technology ("the technology owners"), for no
immediate consideration, whereby the Company will be eligible for future payments from the
commercialization of the technology. According to said agreement, subject to obtaining the
approval of the Chief Scientist (on July 11, 2013, the Chief Scientist approved the transfer of
the technology rights), the VaxiSome® technology will be transferred to the technology
owners for no immediate consideration and the Company will be entitled to 25% of future
revenues from commercialization of the technology, less the technology owners' expenses, up
to a total amount of US$ 12.5 million. It was further agreed that if the license is given to
Novartis or to a related company thereto, the rate of payments will be 50% (instead of 25%)
and the ceiling of payments to the Company will be US$ 25 million (instead of US$ 12.5
million). According to the agreement, payments that will need to be delivered to the Chief
Scientist for grants the Company received with regards to the technology will be paid by the
technology owners. The agreement includes a provision according to which the parties release
each other from claims and allegations with regards to the original license agreement signed
between them in March 200555.
19.5
License agreement with Ramot - the BBS technology
In January 2014, the Company announced that it has received a letter from Ramot at Tel-Aviv
University Ltd., the Tel-Aviv University's technology transfer company ("Ramot"), in which
Ramot announces its intention to terminate the license and research agreement in connection
with the BBS technology (the Alzheimer's drug). The Company's position was (and remains)
that Ramot's announcement is illegitimate and groundless56. The parties negotiated the
disputes between them in order to promote a mutual solution, including on issues that pertain
to the Chief Scientist. In early October 2014, the parties agreed on an outline whereby the
Company will return the license to Ramot and grant Ramot an exclusive license for the use
and commercialization of the assets and knowhow accumulated in the Company during the
license period ("the Company's assets and knowhow") in return for future royalties (based
in said outline)57 on
the future
on
commercialization of the Company's assets and knowhow ("the agreed outline").
the scope, rates and conditions determined
55
56
57
See the Company's immediate report of May 22, 2013 (TASE reference: 2013-01-067867).
See the Company's immediate reports of January 13, 2014 (TASE reference: 2014-01-013072) and of January
29, 2014 (TASE reference: 2014-01-026068).
The agreed outline consists, among others, of the payment of royalties by Ramot to the Company based on
Ramot's receipts from the commercialization of the Company's assets and knowhow and limitation of the scope
of royalties to a predetermined cumulative amount (which in any event will not exceed US$ 9.5 million,
depending on the date of commercialization) and at a varying rate (which will be reduced pro rata to the
prolongation of the commercialization date).
44
Once the agreed outline becomes effective, the parties agreed that the license agreement will
become null and void as well as any other monetary and/or other liability outstanding between
the parties, including the Company's obligation to finance the registration and/or maintenance
of the patents effective from the date of cancellation and thereafter, and Ramot will bear those
payments from then onwards58. The agreed outline will become effective once the approvals of
the Chief Scientist and the Tmura Fund are obtained59 for the agreed outline and for the
parties' obligations and agreements60, in conformity with the R&D Law and its regulations.
In keeping with the Chief Scientist's approval in principle for the agreed outline from early
December 2014, on March 3, 2015, the Chief Scientist approved that the Company is in
compliance with the terms of the approval stipulated by the research committee and
accordingly, the agreed outline between Ramot and the Company (as disclosed in the previous
immediate report) became effective. The Company and Ramot will act in accordance with the
agreed outline for transferring the Company's developments based on the license agreement
from the Company to Ramot (including the transfer of the patents and other necessary issues
for completing the transfer of the license back to Ramot) and the license agreement shall
become null and void.
See a condensed description of the license from Ramot in paragraph 18.2 to Chapter A
(Description of the Corporation's Business) to the Company's annual report for 2013.
See details of an administrative proceeding taking place in this context in paragraph 20 below.
19.6
The license agreement with Hadasit - the Anti CD3 technology
On March 25, 2010, the Company entered into an exclusive global royalty-bearing license
agreement with Hadasit Medical Research Services & Development Ltd., the Technology
Transfer Company of Hadassah University Hospitals ("Hadasit") for the research,
development and commercialization of the immunotherapy treatment that uses the oral Anti
CD3 antibody to treat inflammatory, autoimmune and other diseases involving immune
control disorders.
In consideration for said rights, the Company undertook to finance the patent maintenance
with regards to the technology, including for past expenses, and to pay, beginning from the
third year of the license, the annual fixed license fees, all in amounts that are immaterial to the
Company.
58
59
60
For the removal of doubt it should be clarified that the Company's obligation towards a third party (a supplier) in
connection with the payment of future royalties for services rendered by that supplier at the rate agreed upon
between the Company and the supplier remains in effect and will continue to apply even after the license
agreement is cancelled. Furthermore, according to the agreement, Ramot is expected to pay the Company an
immaterial amount of approximately NIS 135 thousand for the return of the license.
Tmura – the Israeli Public Service Venture Fund at the Office of the Chief Scientist regulates issues of royalties
and operates by virtue of the Encouragement of Industrial Research and Development (Rate of Royalties and
Rules for the Payment thereof) Regulations, 1996 ("the Tmura Fund").
An approval in principle has been received from the Chief Scientist for the agreed outline on November 2, 2014
and was signed by the Company on December 3, 2014.
45
In addition, according to the agreement, the Company will practice reasonable commercial
diligence in developing and commercializing the products based on the technology. Without
derogating from the aforementioned, according to the agreement, the Company must meet
certain development milestones, including commencing Phase IIa clinical trials of any of the
technology-based products within a period of 12 months from the date of signing, Phase IIb
clinical trials of any of the technology-based products within a period of four years from the
date of signing and additional Phase IIb or Phase III clinical trials of any of the technology-
based products within a period of seven years from the date of signing. In addition, the
Company has undertaken to invest, by itself and/or through sub-licensees, an amount of
US$ 1.5 million in developing technology-based products in the first two years from the date
of signing in order to achieve the above milestones. It should be clarified that as of the report
date, the Company has not yet commenced any Phase IIb clinical trials. As of the report date,
the Company is acting in cooperation and transparency with Hadasit with respect to the project
and to the best of its knowledge is receiving full backup and cooperation from Hadasit.
The Company will also pay royalties from the sale of products that are based on the
technology in varying percentages based on the sold product, to the IP rights and accordingly
to the sum of the net revenues, at a rate between 2.25% and 4.5% of the sum of the net annual
revenues. "Net revenues" are defined in the agreement as sums to be actually received by the
Company, its related entities or holders of sublicenses, from the sale of products based on the
technology, following offset of accepted discounts, reimbursements, tax, insurance and
shipping costs.
The Company may grant sublicenses to partners in the research and development of the
technology and will pay Hadasit 30% of all revenues it will generate from the grant of the
sublicense provided that this amount is not higher than 5% of the net revenues of the holders
of the sublicense or lower than a percentage that ranges between 0.75% and 2.5% of its net
sales (depending on the territory in which the sales are made). The Company is entitled to
withdraw the license at any time before the launch of the drug, without having any additional
obligations imposed on it. In addition, it is hereby agreed that the Company will sign a
consulting agreement with scientists who spearheaded the development of the technology
according to which they will oversee the project with the Company in return for consulting
fees in a sum that is immaterial to the Company61.
In April 2010, the Company entered into consulting agreements with Hadasit and with Prof.
Howard Weiner for receiving consulting services in connection with this project according to
which they will advise the Company with regards to the project, oversee and plan the clinical
trials, etc. in consideration for allocation of the Company's stock options.
In August 2010, the Company entered into an agreement with Centocor Ortho Biotech
("Centocor"), manufacturers of the Anti CD3 antibodies, according to which Centocor will
supply the Company with the antibodies under preferential commercial conditions over market
prices, for use by the Company for clinical trials that the Company carried out and whose
results were published by the Company on March 21, 2011 (for trial results, see paragraph 8.3
below). In consideration, the Company granted Centocor exclusive rights for several months,
beginning on the date on which the Company delivers to Centocor the results of the
aforementioned clinical trial, to negotiate with the Company ahead of the license agreement
and/or partnership agreement with regards to the Anti CD3 technology. The results of the trial
were delivered to Centocor shortly after their date of publication by the Company. A similar
procedure is expected to be in place with regards to the results of the HCV trial.
61
For a description of this agreement, see the Company's immediate report of March 28, 2010 (TASE reference:
2010-01-432594).
46
On July 9, 2012, the Company reported that it completed the development of the humanized
monoclonal Anti CD3 antibody ("the antibody"), for which the Company submitted a patent
application.
19.7 Negotiations for the grant of an Anti CD3 antibody manufacturing and marketing license for
treating the NASH indication in the Chinese market and in the Far East
In the course of 2014, the Company held negotiations with Acebright Holding Limited
("Acebright"), a Chinese corporation which on the report date is an interested party in the
Company, regarding the grant of a license for manufacturing a humanized Anti CD3 antibody
and an exclusive right for marketing it for treating the NASH indication in the Chinese market
and the Far East (not including Japan)62. The negotiations discussed the possibility of
integrating the Anti CD3 development activities of the Chinese company and Acebright in
said markets or operating jointly with one of the two based on specific understandings. As of
the report date, the parties are still holding negotiations but there is no certainty that the
negotiations will yield any binding agreement and at what terms.
19.8 Agreements for the payment of royalties
Below is a list of royalties that the Company is required to pay63:
Identity of the
recipient of royalties
Ramot
Cause for eligibility for
royalties
License for BBS
technology
Means of
payment
Royalties from sales
Antitope
Hadasit
License for BBS-related
technology
Royalties from sales and
sublicenses
License for Anti CD3
technology
Royalties from sales and
sublicenses
Antitope
License for Anti CD3-
related technology
Royalties from sales and
sublicenses
Range of the
consideration
1% to 4% of net annual
revenues – for more
information, see paragraph
19.3 above
Approximately 0.5% of net
annual revenues up to
£ 6.375 million
Between 2.25% and 4.5%
of net annual revenues;
30% of the sums to be
received for the
sublicenses – for more
information , see paragraph
19.4 above
Approximately 0.5% of net
annual revenues
62
63
See the Company's immediate reports of September 3, 2013 (TASE reference: 2013-01-136041) and May 4,
2014 (TASE reference: 2014-01-056541).
In addition, the Company is required to pay the former shareholders of Protea certain amounts, subject to
compliance with certain milestones or as a percentage of certain revenues that the Company will generate from
the Protea technology. For more information – see the Company's immediate report regarding the Protea
acquisition transaction of January 19, 2009, whose content was included in this report by way of reference.
47
19.9
Engagement in agreements with Acebright
On September 2, 2013, the Company entered into certain investment agreements and a
memorandum of understandings with Acebright with a view to signing a license agreement.
The investment agreements
According to the investment agreements, Acebright will invest a sum of US$ 1 million in the
Company and its subsidiaries, in a manner that a sum of US$ 450 thousand will be invested in
the Company against allocation of 10,507,500 Company shares (approximately 8% of the
issued capital of the Company) and a sum of US$ 550 thousand will be invested in the
Company's subsidiaries to which the Company's Anti CD3 technology and BBS technology
will be transferred, against allocation of 10% of each subsidiary's issued capital. It should be
noted that the subsidiary that is designed to receive the Company's BBS technology has not
yet been set up and as such, the investment agreement with regards to this company has not
yet been signed. In addition, Acebright will be allocated options for 12 months to purchase up
to 26,268,750 additional Company shares against an additional investment of up to US$ 1,125
thousand in the Company. In addition, Acebright will be allocated options for the same period
for investment of up to US$ 1,375 thousand in the Company's subsidiaries, and all at the same
exercise prices as the original investment price in each company.
Completion of recruitment according to the allocation agreements was conditioned on several
suspending conditions, including the TASE's approval of the allocation of Company shares
and options as specified above and approval of the Chief Scientist.
As of the report date, the funds of the investment were transferred to the Company and
Acebright was allocated shares and options of the Company and of the subsidiary Orimmune
(formerly Protea), as specified in the immediate reports of December 23, 2013 (TASE
reference: 2013-01-104890) and December 25, 2013 (TASE reference: 2013-01-107896).
The memorandum of understandings for
commercialization ("MOU")
license agreement for development and
In addition to said investment agreements, on September 2, 2013, the Company entered into a
non-binding MOU with Acebright that specifies the main terms of the license agreement
which the parties plan on entering. According to the MOU, the Company will grant Acebright
an exclusive license for developing a product and for conducting clinical trials with the
Company's Anti CD3 technology in the NASH indication only in defined territories in the Far
East, including China, Hong Kong, India, Korea, the Philippines, Thailand and others (not
including Japan) and for the commercialization of said technology in these territories.
In consideration for the license, Acebright will pay the Company royalties at a rate equivalent
to 10% of total net sales of products based on the Company's Anti CD3 technology made by
Acebright in each country in the above territories in the first three years, and 5% of sales after
the said period. The final license agreement will establish minimum sums for periodic
royalties to be paid to the Company.
Development by Acebright will be performed in accordance with a development plan to be
approved by the Company and in compliance with predetermined quality requirements.
Acebright will bear all clinical trial costs and costs involved in compliance with regulatory
requirements in said territories.
48
The Company will own the intellectual property rights related to the Anti CD3 technology.
Acebright will be granted a license for using the intellectual property that will be developed
based on said technology for other indications as well. Certain IP rights relating to formulation
of the oral administration of Anti CD3 will be assigned to Acebright but the Company will be
granted exclusive license for said technology and Acebright will be prevented from granting
the license for said technology to any third party. As of the report date, the Company is
waiting for Acebright's response to the draft agreement that the Company sent it.
Expansion of cooperation with Prof. Howard Weiner with regards to the Anti CD3 antibody
In November 2013, the Company announced that it came to principle agreements with Prof.
Howard Weiner regarding expansion of cooperation with his laboratory. Prof. Weiner, a
member of the Company's Scientific Advisory Board, is an expert in multiple sclerosis as well
as neurological and autoimmune diseases, from the Harvard University School of Medicine
and from Brigham and Women's Hospital in Boston.
Prof. Howard Weiner serves as head of the Institute of Multiple Sclerosis and co-director of
the Center of Neurologic Diseases at Brigham and Women's Hospital in Boston. Prof. Howard
Weiner developed, along with other researchers in his laboratory, the Anti CD3 monoclonal
antibody treatment P.O. (by mouth) and nasal (through the nose) for a range of inflammatory
and autoimmune diseases while preventing suppression of the immune system in whole,
whose rights to this were acquired by the Company in 2010 from Hadasit and Brigham and
Women's Hospital in Boston.
As part of said expansion of cooperation, the Company and Prof. Weiner plan on studying a
new method of use of the Anti CD3 monoclonal antibody in nasal administration for the
treatment of Progressive Multiple Sclerosis. In addition, the Company and Prof. Weiner will
work towards cooperation in the formation of protocols for new clinical trials for the treatment
of juvenile diabetes and Type 2 diabetes through the Anti CD3 antibody P.O. in order to
accelerate development of immunotherapy treatment for both types of diabetes. Expansion of
the cooperation does not involve, at this stage, material financial investment on the part of the
Company.
Phase IIa clinical trial in the Anti CD3 antibody
On May 18, 2014, the Company reported that researchers in the Boston Children's Hospital,
Brigham and Women's Hospital in Boston and Harvard University in Boston announced the
success of a Phase IIa clinical trial for proof of concept of the oral administration of the Anti
CD3 antibody for treating ulcerative colitis. The clinical trial met its initial targets - testing the
safety of the treatment and changes in immunological parameters which might be an
indication for the treatment's efficacy. The Company was also informed that the secondary
target of the clinical trial has been achieved - testing the efficacy parameters in patients with
more severe degrees of UC. The clinical trial was conducted using an antibody extracted from
mice (OKT3). The Company has developed an analogous humanized OKT3 antibody with
reduced immunogenicity which is better adapted for long-term administration to humans. The
Company has clarified that the continued development of the humanized antibody will depend
on obtaining proof that the humanized version operates similarly to the mice version64.
64
See the Company's immediate report of May 18, 2014 (TASE reference: 2014-01-065805).
49
20. Legal proceedings
20.1
In keeping with the Company's previous reports from early 2014 in connection with Ramot's
notification to the Company65 that it intends to cancel the license granted to the Company for
Ramot's BBS technology ("the Ramot case")66, the Company reported that to the best of its
knowledge, the ISA is holding an administrative inquiry apparently regarding the dates for
reporting the Ramot case to the public and the quality of the disclosure provided by the
Company in connection with the technology's development status in the relevant periods
before Ramot issued said cancellation notice. The Company has no information of the stage of
the inquiry and/or cannot assess its outcome, if any. As of the report date, the Company is
fully cooperating with the ISA in the Ramot case and will report any material developments.
21. Business strategy and targets
Below is a review of Company targets with regards to its activity in ensuing years:
Product name and indication Development stage as
2015
2016
2017
Anti CD3 (antibody for
treating inflammatory and
autoimmune diseases)
Capital raisings
Expansion of the Company's
portfolio of cannabinoid
pharmaceutical technologies
of the report date
1. Completion of
creating a
proprietary
humanized
antibody
2. The development
of the antibody's
formulation for
pre-clinical use
has been
concluded
The Company has a
going concern notice in
its financial statements
- raising an amount of
approximately NIS 650
thousand in 2014 and
as of the report date
The Dekel and Lara-
Pharm technologies
Upgrading and development
of existing medicinal cannabis
related technologies
Licensing (binding
term sheet) for the
Dekel technologies and
investing in Lara-
Pharm
Commercial, research or
technological
collaboration
Subject to collaboration
and based on
predetermined terms, GMP
production of the
proprietary humanized
antibody and completion
of the product's
optimization - GMP
produced capsule/liquid
- Beginning bridge
trial;
- Concluding
bridge trial;
- Obtaining Phase
IIa clinical trial
results in other
indications
Raising capital of at least
US$ 1 million
Raising capital of at least
US$ 1 million
Raising capital of at
least US$ 1 million
Expanding the Company's
portfolio of cannabinoid
pharmaceutical
technologies
Clinical trials for proof of
concept
Technological
commercialization
Expanding the
Company's portfolio of
cannabinoid
pharmaceutical
technologies
- Completing the
licensing of the
entourage effect
technology (subject
to the required
approvals);
- Developing
proprietary
formulations to
prepare for clinical
trials
65
66
Ramot at Tel-Aviv University Ltd., the Tel-Aviv University's technology transfer company.
For details of Ramot's cancellation notification in the Company's immediate reports of January 13, 2014 (TASE
reference: 2014-01-013072) and January 29, 2014 (TASE reference: 2014-01-026068); see details of an
agreement for settling the disputes between the parties in the Ramot case in the Company's immediate reports of
December 3, 2014 (TASE reference: 2014-01-214758 and its amendment 20140-01-214758) and of March 4,
2015 (TASE reference: 2015-01-044713).
50
The information in the table above is forward looking information, as defined in the Securities Law,
whose materialization is not guaranteed and whose materialization depends, inter alia, on factors
outside the Company's control, such as developments in the vaccine markets and treatments of
diseases for which the Company's development is designed, position of the Company's business
partners in the various developments and their business and strategic decisions with regards to
these developments, the ability to raise funds to carry out other trials and manufacture antibodies;
the availability and willingness of patients to participate in trials, trial expenses, requirements of the
medical institutions where the trials will be carried out, acceptance of the Company's development
in the medical community, etc.
22. Predictions of developments for the next year
Below is a list of the plans that deviate from the ordinary course of business which the Company
decided to implement in the upcoming year that might materially impact the business status and
operating results:
a.
b.
c.
Identification of new companies to add to the Company portfolio.
Identification of pharma companies for possible cooperation and/or investment in the Company.
Identification of an entity that will cooperate with the subsidiary Orimmune to continue
development.
23. Risk factors
Investment in the Company's securities involves risks that characterize an investment in any new
biotechnology and pharmaceutical company. As of the report date, the Company does not have any
sales and there is no guarantee that the Company will be able to complete development of products
that it is currently developing and market the products on a commercial basis.
Below is information on the risk factors that might materially affect the Company's operations and
business results:
23.1 Development of the Company's products
The Company has not yet completed development of any product and there is no guarantee
that the Company will be able to complete development of any of its projects and products and
if and when they will be developed or that they will be effective and safe for use. In addition,
there is no guarantee that the Company will successfully complete development of its products
within the timeframe and/or within the budget it set for itself. A delay in the timetable or a
deviation from the budget might result in the Company incurring additional expenses with
regards to product development and might even prevent completion of their development.
In addition, a significant percentage of the Company's products have yet to be tested on human
subjects. There is therefore no guarantee that the developments that showed promising results
in animal trials will present similar results in human subjects as well.
23.2 Demand for the Company's products and product prices
There is no guarantee that the Company's products will have a demand that justifies their
commercial production and marketing. In addition, the Company has no guarantees with
regards to demand for its products, with regards to product pricing it suggests and the cost of
production of said products.
51
23.3 Need to manufacture Anti CD3 antibodies
To date, the Company acquired Anti CD3 antibodies that were used in its clinical trials from a
third party (J&J, Jenssen). These antibodies were created from mice and their manufacturing
was recently stopped. Continuing the clinical trials by the Company requires the use of
humanized antibodies whose manufacturing is being examined by the Company itself. There
is no guarantee that the Company will be able to manufacture these antibodies or what the cost
and/or continued production will be. A delay in manufacturing and extraordinary
manufacturing costs might hinder continued development of the Company's Anti CD3
technology.
23.4 Uncertainty regarding the receipt of patents
There is no guarantee that the patent registration applications that were submitted by the
Company with regards to the Company's technologies will result in patent registration. In the
event of failure to complete patent registration, the Company's developments will not be
proprietary, which might allow other entities to manufacture the Company's products and
compete with them.
23.5
IP protection
A third party might challenge the measures adopted by the Company to protect its IP. Failure
by the Company to protect its IP might hinder its ability to effectively compete and might
negatively impact its business.
23.6 Company operations based on third party licenses
The Company's development activity is based on licenses from third parties to develop
vaccines and other drugs in specific segments related to the immune system, as described in
this report. For more information about the license agreements, see paragraph 18 above.
23.7
Technological changes and competition
The pharmaceutical market is characterized by steady developments. The results of the
Company's operations depend on its ability to constantly develop new generations of products.
There is no guarantee that the Company's R&D activity will produce results and that it can
conduct research and development at the level required to successfully compete with
competing products.
Once regulation has been completed with regards to the Company's products, the third parties
might develop alternative products in which they introduce a technological modification that
would allow them to bypass the Company's patent-protected rights. In this case, the third
parties might develop competing products to the Company's products and not violate any
patent-protected rights. This would increase competition against Company products and lower
the Company's projected profit.
52
23.8 Changes in regulations, permits and international standardization; regulatory changes and
stricter medicinal cannabis policies
The Company's operations are subject to the relevant standards in the countries in which the
Company plans to operate (including European, American, Israeli and other standards).
Subsequently, the Company might be affected by regulatory developments. Changes in the
regulatory environment with regards to pharmaceutical marketing, including changes and/or
failure to comply by the Company and its manufacturers with the said regulatory provisions,
might result in various restrictions on imposed on the Company's operations, including on the
future grant of approvals for its products. For information about the standards and regulations
that apply to the Company's operations, see paragraph 17 above.
23.9 Delay in obtaining the necessary permits for marketing the Company's products, failure to
obtain permits and resulting expenses
Marketing of the Company's products is subject to regulatory approvals as specified in
paragraph 18.2 above. Obtaining said approvals might be time-consuming, which might delay
marketing of the Company's products and result in additional expenses for the Company with
regards to obtaining permits to market the Company's products on a commercial basis.
Furthermore, there is no guarantee that the Company will receive the necessary approvals to
market its products. Without these approvals, the Company will not be able to market its
products.
23.10 Limited financial resources
As a company that is engaged in research and development of medical products and in view of
the uncertainty that involves the success of development of any of the Company's various
technologies and/or introducing them into the relevant market, in the event of failure of the
development of any of the technologies and/or failure to obtain the required approvals for
marketing and selling any of the Company's technologies from the regulatory authorities
and/or introducing them into the relevant market, the Company's investment in the
development of any of the technologies might be lost. Moreover, as an R&D company, the
Company is required to raise capital to create permanent positive cash flows from the sale of
any of its medical products in order to finance its expenses. The Company records a going
concern notice in its financial statements and there is no guarantee that it will have the
financial resources needed for realizing its strategic targets.
23.11 Failure to sign collaboration agreements with leading pharma companies
Failure by the Company to sign significant collaboration agreements with leading pharma
companies or failure of such agreements to result in commercial engagements with such
pharma companies will on the one hand limit the Company's ability to develop and market its
products and core technologies and on the other hand force the Company to invest far more
resources in developing and marketing its products that will probably not be available to it.
23.12 Lack of additional funding resources to complete the R&D
The limited funding sources available to the Company might not be sufficient to finance the
operating costs and complete the R&D of products under development by the Company. The
Company's financing needs might materially change, due to results of the R&D and clinical
trials, competition, technological developments in the field as well as expenses incurred from
additional requirements from various regulatory authorities.
53
There is no way of guaranteeing that the Company will manage to raise additional funds, if
and when it is required to do so. The lack of suitable funding might result in the suspension of
Company operations.
23.13 Projected lack of profits over the next several years
The Company is currently in the development stage. It has no source of revenue from product
sales, manufacturing or R&D activity. There is no guarantee that it can develop these types of
sources of income, or that the activity will become profitable even if its products are
manufactured on a commercial basis.
23.14 Competition
The Company expects to be exposed to competition due to development of new therapeutic
methods and due to the introduction of new competition into the market.
23.15 Below is a table breaking down the risk factors that might impact the Company's operations
and business results and the Company's assessment of the degree of impact of these risk
factors on its entire operations:
The degree of the impact of the risk
factor on the Company's entire
operations
Moderate
impact
Slight
impact
Tremendous
impact
Specific risks
Development of the Company's products
Demand for the Company's products and their prices
Need to manufacture humanized Anti CD3 antibody
Limited financial resources
Changes in regulations, permits and international standardization
Delay in obtaining permits required to market the Company's
products, failure to obtain permits and resulting expenses
Projected lack of profitability in ensuing years
Lack of additional sources of funding to complete R&D
Company operations based on third party license
Failure to sign collaboration agreements with leading pharma
companies
Industry risks
Technological changes
Uncertainty regarding patent approval
Protection of intellectual property
Competition
X
X
X
X
X
X
X
X
X
X
X
X
X
X
54
THERAPIX BIOSCIENCES LTD.
CHAPTER B
BOARD OF DIRECTORS' REPORT
ON THE STATE OF THE CORPOTATION'S AFFAIRS
AS OF DECEMBER 31, 2014
55
THERAPIX BIOSCIENCES LTD.
CHAPTER B - BOARD OF DIRECTORS' REPORT ON THE STATE OF THE
CORPOTATION'S AFFAIRS
We are hereby pleased to present the Board of Directors' report on the state of affairs of Therapix
Biosciences Ltd. ("the Company") for 2014 ("the reporting year"), prepared in conformity with the Israeli
Securities Regulations (Periodic and Immediate Reports), 1970 ("the report").
a. The Board's explanations for the Company's financial position, operating results,
equity and cash flows
1. Material changes in the Company's operations and business and financial statement data in the
fourth quarter of 2014 and in 2014
1.1 Main results for the period of three months ended December 31, 2014 ("Q4 2014")
1.1.1
Net cash used in operating activities in Q4 2014 amounted to approximately
NIS 1,124 thousand, compared with net cash used in operating activities in the
amount of approximately NIS 2,488 thousand in the corresponding quarter of
2013. The decrease of NIS 1,364 thousand in net cash used in operating
activities in Q4 2014 mainly arises from personnel cutbacks and a significant
reduction in R&D costs following the suspension of clinical trials.
1.1.2
The comprehensive loss in Q4 2014 amounted to approximately NIS 1,824
thousand, compared with NIS 2,314 thousand in the corresponding quarter of
2013. The main decrease in loss is a result of the decrease in employment costs
and a reduction in additional R&D costs.
1.2 Main results for the year ended December 31, 2014
1.2.1
Net cash used in operating activities in 2014 amounted to approximately
NIS 7,358 thousand, compared with approximately NIS 9,543 thousand in
2013. The decrease in net cash used in operating activities in 2014 mainly arises
the gradual reduction in the number of employees in the course of the year
(partly offset by non-recurring severance pay costs) and the decrease in R&D
costs.
1.2.2
The comprehensive loss in 2014 amounted to approximately NIS 7,292
thousand, compared with income of NIS 209 thousand in 2013.
the respective Chief Scientist obligations
In 2013, the Company signed an agreement for the transfer of the VaxiSome®
technology and
to Yissum.
Accordingly, the Company wrote down the liability in respect of Government
grants attributed to the VaxiSome® adjuvant project in the second quarter of
2013 by a total of approximately NIS 7,206 thousand and recognized other
income in said amount in its financial statements. The comprehensive loss in
2014 includes other income in the amount of approximately NIS 115 thousand.
1.2.3
Net operating expenses in 2014 and 2013 amounted to approximately NIS 6,923
thousand and NIS 1,322 thousand, respectively. The increase in operating
expenses in 2014 stems from the cancellation of the liability to the Chief
Scientist in the amount of NIS 7,206 thousand in 2013, as discussed in
paragraph 1.2.2 above. In 2014, there was a decrease in net R&D expenses due
to a material decline in payroll and operating expenses and in R&D expenses
due to shortage of cash.
56
2.
The financial position
The Company's condensed consolidated balance sheets in NIS in thousands:
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Restricted cash
Accounts receivable
NON-CURRENT ASSETS:
Investment in company accounted for at equity
Property, plant and equipment
December 31,
2014
2013
614
44
102
760
187
70
257
5,122
327
122
5,571
-
318
318
Total assets
1,017
5,889
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables
Other accounts payable
Warrants
NON-CURRENT LIABILITIES:
Government grants
EQUITY (DEFICIT):
Share capital
Share premium
Capital reserve for share-based payment transactions
Capital reserve for translation of financial statements
of foreign operation
Warrants
Capital reserve from transactions with non-controlling
interests
Accumulated deficit
Non-controlling interests
Total liabilities and equity
1,182
132
-
1,314
156
156
1,841
80,460
15,215
10
4,981
1,556
343
396
2,295
128
128
1,410
78,276
15,071
-
4,377
941
(103,591)
941
(96,384)
(143)
(310)
1,017
3,691
(225)
5,889
57
2.1 Current assets
2.1.1
2.1.2
2.1.3
Cash and cash equivalents as of December 31, 2014 amounted to NIS 614
thousand, compared with NIS 5,122 thousand as of December 31, 2013. As of
December 31, 2014, the balance of restricted cash amounted to NIS 44
thousand, compared with NIS 327 thousand as of December 31, 2013. The cash
is pledged to secure the lease of the Company's offices. The decrease is due to
the relocation to a smaller leased space.
Accounts receivable as of December 31, 2014 amounted to NIS 102 thousand,
compared with NIS 122 thousand as of December 31, 2013.
Total current assets as of December 31, 2014 amounted to NIS 760 thousand,
compared with NIS 5,571 thousand as of December 31, 2013. The decrease is
mainly due to the decrease in the cash balance as described above.
2.2 Non-current assets
2.2.1
Property, plant and equipment, net as of December 31, 2014 amounted to
NIS 70 thousand, compared with NIS 318 thousand as of December 31, 2013.
The decrease is a result of the sale of most of the equipment used in research
due to the evacuation of the Ness Ziona premises and of depreciation in the
period.
2.2.2
The balance of the investment in Lara-Pharm amounted to NIS 187 thousand,
see Note 16d to the financial statements.
2.3 Current liabilities
2.3.1
2.3.2
Trade payables as of December 31, 2014 amounted to NIS 1,182 thousand,
compared with NIS 1,556 thousand as of December 31, 2013. The decrease is
mainly a result of the decrease in the Company's current liabilities due to cuts
made in work plans.
Other accounts payable as of December 31, 2014 amounted to NIS 132
thousand, compared with NIS 343 thousand as of December 31, 2013. The
balance of other accounts payable is mainly comprised of employees and
payroll accruals. The decrease is mainly a result of the reduction in the
Company's employee headcount.
2.3.3
Total current liabilities as of December 31, 2014 amounted to NIS 1,314
thousand, compared with NIS 2,295 thousand as of December 31, 2013.
2.4 Non-current liabilities
2.4.1
Liabilities in respect of Government grants as of December 31, 2014 amounted
to NIS 156 thousand, compared with NIS 128 thousand as of December 31,
2013.
58
2.5 Non-controlling interests
2.5.1
Non-controlling interests as of December 31, 2014 amounted to NIS 310
thousand, compared with NIS 225 thousand as of December 31, 2013. Non-
controlling interests represent the minority's share in Orimmune Ltd., the
subsidiary.
2.6 Equity (deficit)
2.6.1
The Company's equity deficit as of December 31, 2014 amounted to NIS 453
thousand, compared with equity of NIS 3,466 thousand as of December 31,
2013. The decrease in equity mainly stems from the current loss of NIS 7,292
thousand, offset by a capital issuance in a total of NIS 3,219 thousand.
3.
Operating results
3.1 The Company's condensed consolidated statements of profit or loss for the years ended
December 31, 2014, 2013 and 2012:
Research and development expenses, net
General and administrative expenses
Other income, net
Operating loss
Finance income
Finance expenses
2014
Year ended December 31,
2013
NIS in thousands
2012
(1,800)
(5,238)
(7,038)
115
(4,649)
(3,919)
(8,568)
7,246
(8,626)
(4,734)
(13,360)
336
(6,923)
(1,322)
(13,024)
401
(427)
1,603
(72)
235
(454)
(219)
Total finance income (expense)
(26)
1,531
Group's share of losses of company
accounted for at equity
Net income (loss) and total
comprehensive income (loss)
Attributable to:
Equity holders of the Company
Non-controlling interests
(343)
-
-
(7,292)
209
(13,243)
(7,207)
(85)
(7,292)
207
2
209
(13,243)
-
(13,243)
59
3.2 The condensed consolidated interim statements of profit or loss:
Three months ended
December 31,
2014
September 30,
2014
June 30,
2014
March 31,
2014
NIS in thousands
Research and development
expenses, net
General and administrative
expenses
(105)
(561)
(488)
(646)
(1,230)
(1,523)
(1,273)
(1,212)
Other income, net
(2)
84
33
-
Operating loss
(1,335)
(2,000)
(1,728)
(1,858)
Finance income
Finance expenses
Total finance income
(expense)
Group's share of losses of
company accounted for at
equity
Net income (loss) and total
comprehensive income
(loss)
Attributable to:
Equity holders of the
Company
Non-controlling interests
-
(395)
192
(171)
66
(39)
326
(5)
(395)
21
27
321
(92)
(251)
-
-
(1,824)
(2,230)
(1,701)
(1,537)
(1,798)
(26)
(2,191)
(39)
(1,656)
(45)
(1,562)
25
(1,824)
(2,230)
(1,701)
(1,537)
The Company is the development stage and does not generate any sales.
3.3 Research and development expenses, net
In the year ended December 31, 2014, research and development expenses, net amounted
to NIS 1,800 thousand, compared with NIS 4,649 thousand in 2013. In the three months
ended December 31, 2014, research and development expenses amounted
to
approximately NIS 105 thousand, compared with NIS 939 thousand in the corresponding
period of 2013. The Company's research and development expenses consist of wages,
subcontractors, patents, etc. which are used in the Company's research and development
activity in its various projects.
60
General and administrative expenses
In the year ended December 31, 2014, general and administrative expenses amounted to
NIS 5,238 thousand, compared with NIS 3,919 thousand in 2013. In 2014, the Company
completed the process of registering its Level 1 ADRs for trade on the OTCQB in the
United States. The main increase in general and administrative expenses in 2014 arises
from business development costs in the US relating to the registration process described
above.
to NIS 1,230
In the three months ended December 31, 2014, general and administrative expenses
amounted
the
corresponding period of 2013. These expenses consist of wages, professional services,
business development in the US, etc. The decrease in Q4 2014 compared to the
corresponding quarter of 2013 mainly arises from the reduction in the number of
employees and the decrease in lease expenses.
thousand, compared with NIS 1,474
thousand
in
3.4 Other income, net
In the year ended December 31, 2014, other income amounted to NIS 115 thousand,
compared with NIS 7,246 thousand in 2013. The income in 2014 derives mainly from the
sale of equipment after evacuating the labs and offices in Ness Ziona as opposed to the
income in 2013 which mainly derived from the decrease in the liability to the Chief
Scientist following the transfer of the VaxiSome® technology to Yissum.
3.5 Operating loss
In the year ended December 31, 2014, the operating loss amounted to NIS 6,923
thousand, compared with an operating loss of NIS 1,332 thousand in 2013. In the three
months ended December 31, 2014, the operating loss amounted to NIS 1,336 thousand,
compared with an operating loss of NIS 2,392 thousand in the corresponding period of
2013. The decrease in loss mainly arises from minimizing the R&D activity and the
number of employees.
3.6 Finance income/expenses, net
In the year ended December 31, 2014, finance expenses, net amounted to NIS 26
thousand, compared with finance income, net of NIS 1,531 thousand in 2013. In the three
months ended December 31, 2014, finance expenses, net amounted to NIS 395 thousand,
mainly due to the impairment of a financial instrument in the amount of NIS 350
thousand, compared with financial income, net of NIS 78 thousand in the corresponding
period of 2013.
Finance income in 2014 mainly derives from the decrease in the value of warrants in the
amount of NIS 396 thousand against finance expenses from the impairment of a financial
instrument in the amount of NIS 350 thousand. Last year, the income derived from a
change in the balance of the liability to the Chief Scientist following an adjustment of the
Company's forecasts in a total of approximately NIS 1,482 thousand.
61
3.7
Income (loss) for the period and comprehensive income (loss)
In the year ended December 31, 2014, net loss and comprehensive loss attributable to
equity holders of the Company amounted to NIS 7,292 thousand, compared with income
of NIS 209 thousand in 2013. In the three months ended December 31, 2014, net loss and
comprehensive loss amounted to NIS 1,824 thousand, compared with a loss of NIS 2,314
thousand in the corresponding period of 2013. The loss in the current year mainly arises
from the reduction of the Company's operations. Last year, the loss was offset by income
totaling NIS 7,240 thousand from the derecognition of the liability to the Chief Scientist
in respect of the VaxiSome® project following its transfer to Yissum in 2013.
3.8 Cash flows
Cash flows used in operating activities in the year ended December 31, 2014 amounted to
approximately NIS 7,358 thousand, compared with approximately NIS 9,543 thousand in
the year ended December 31, 2013. The decrease in cash flows is mostly due to
minimizing the Company's operations and employee downsizing.
Net cash used in investing activities in the year ended December 31, 2014 amounted to
NIS 396 thousand, compared with net cash provided by investing activities of NIS 41
thousand in the year ended December 31, 2013. The cash were used in investing activities
in Lara-Pharm (as described in paragraph 19 to Chapter A), offset by the proceeds from
sales of property, plant and equipment and a change in restricted cash. Last year, net cash
provided by investing activities derived from the sale of property, plant and equipment
Net cash provided by financing activities in the year ended December 31, 2014 amounted
to NIS 3,219 thousand, compared with NIS 11,749 thousand in the year ended December
31, 2013. The cash flows in the current year derive from funds raised by the Company
from the public and private sectors. See details in paragraph 4 below regarding cash flow
liquidity.
4.
Liquidity, cash flows and financial resources
Since its inception, the Company financed its activities using the capital raised from the public
in December 2005, in the context of which the Company's securities were listed for trade on the
Tel-Aviv Stock Exchange, and from private placements. In 2013, the Company completed a
raising round of approximately NIS 4.4 million by issuing shares to private investors. In July
2013, the Company raised, through a shelf prospectus, a gross amount of approximately NIS 4.6
million in return for the issuance of shares and options. In December 2013, the Company raised
approximately NIS 2.6 million in a private placement of shares and warrants.
On May 8, 2014, the Company raised a gross amount of approximately NIS 2.9 million from the
issuance of 3,009,400 ordinary shares, 3,009,400 warrants (series 3) and 3,009,400 warrants
(series 4) of the Company.
On November 19, 2014, the Company offered 1,300,000 Ordinary shares, 1,300,000 options
that vest immediately and 1,300,000 contingent options in a private placement. The immediate
gross proceeds from the offered securities total NIS 650 thousand.
The liquid financial assets available to the Company as of December 31, 2014 comprise cash
and cash equivalents totaling NIS 614 thousand. The Company invests its funds in solid
channels, mainly in NIS deposits.
As of December 31, 2014, the Company has a working capital deficiency of NIS 554 thousand,
compared with a positive working capital of NIS 3,276 thousand as of December 31, 2013.
62
As part of the Company's plan of offering improved accessibility to prospective foreign
investors, in early October 2014, the Company completed the process of registration of its Level
1 ADRs for trade on the OTCQB in the United States. Each ADR consists of 20 Ordinary shares
of the Company which are traded OTC in the US under the symbol of THXBY. The Company's
Board and Management are taking steps to ensure the Company's financial stability and
examining different financing options, including recruiting investors to invest in the Company
through private placements.
5.
Remuneration of interested parties and senior officers
On January 26, 2014, following several meetings and discussions held in the subject (and
following
the Company's Board
recommended approving the Company's officers' remuneration policy, which was approved on
March 24, 2014 ("the remuneration policy").
the Remuneration Committee's
recommendation),
In general and pursuant to the ISA Staff's position, the examination of the remuneration in terms
of its conditions, reasonableness and its correlation to the senior officers' and interested parties'
contribution to a company in conformity with the criteria in Regulation 21 to the Securities
Regulations (Periodic and Immediate Reports), 1970 ("the officers", "the Reporting
Regulations" and "Regulation 21", respectively) is performed for each officer separately and is
specifically discussed and approved by the Company's Board based on the data presented to it
which consists, among others, of details and data of the relevant experience of each officer, their
education, base salary, terms of employment and tenure, various bonuses received from the
Company in the reporting year, including grants and rewards in the Company's securities, the
degree of complexity of their position, the nature of their responsibilities, the efforts invested by
them in the period, the Company's profits and financial results, the scope and complexity of the
Company's business and the personal contribution of each officer to the success of the
Company's business. In addition, the Board receives comparative data of the salaries of similar
officers in other public companies with similar business scopes and/or areas of activity to those
of the Company. The Company has examined the employment terms of the officers and found
them to be in compliance with the remuneration policy's principles and provisions.
Based on the above data, the Board held meetings to discuss the tenure and remuneration terms
of the Company's officers and interested parties in keeping with Regulation 21 to the Reporting
Regulations. The Company's Board believes that each officer's remuneration in the reporting
year, as specified in Regulation 21 to Chapter D (Additional Information about the Corporation)
to this report properly reflects the officer's individual contribution to the Company and is
reasonable and fair and in compliance with the remuneration policy's principles and provisions.
See also Note 20 to the financial statements and see Regulation 21 to Chapter D (Additional
Information about the Corporation) to this report regarding remuneration.
The Board has also reexamined the remuneration terms of all the directors in the Company,
including directors who are (or might be viewed as) controlling shareholders or their relatives,
excluding external directors ("the directors who receive remuneration"). The remuneration is
based on the maximum amount that is paid to a (non-expert) external director ("the maximum
amount" or "the remuneration", as applicable) according to the Company's ranking pursuant
to the Companies Regulations (Rules of Remuneration of External Directors and Expenses to
External Directors), 2000 ("the External Director Remuneration Regulations"). The Board
has ruled that the remuneration adequately reflects the contribution of the directors who receive
remuneration to the Company, is reasonable and fair in relation to their contribution to the
Company's operations and business and in view of their active involvement in promoting the
Company's business, and does not exceed the remuneration paid to directors serving in
companies of the same size and sector as the Company and even coincides with the Company's
remuneration policy as issued to the public.
63
b. Corporate governance aspects
6.
Details of directors with accounting and financial expertise
6.1 The Company's Board has stipulated that the minimum number of directors with
accounting and financial expertise in the Company in accordance with Article 92(a)(12)
to the Israeli Companies Law, 1999 ("the Companies Law") will be one ("the minimum
number"). This stipulation was based, among others, on the Company's size, scope of
activity, areas of activity and degree of complexity of its financial reporting framework.
The Company believes that the minimum number is adequate and will allow the
Company's Board to meet its obligations pursuant to applicable law and the Company's
articles of association and fulfill its responsibility for inspecting the Company's financial
position and prepare and approve the financial statements.
6.2 As of the date of the periodic report, the Company is meeting the minimum number as
above. After evaluating the education, experience, qualifications and knowledge of the
members of the Board regarding accounting and financial statement issues, the Board
members who are viewed by the Board as possessing accounting and financial expertise
are Mr. Amit Berger, Mr. Zohar Heiblum and Mrs. Tamar Kfir.
6.3 See more details of the above directors in Regulation 26 to Chapter D (Additional
Information about the Corporation) to this report.
7.
Details of independent directors
As of the report date, the Company did not adopt in its articles of association the directive
regarding the rate of independent directors as defined Article 219(e) to the Companies Law.
8.
Details of the Company's internal auditor
8.1 Name of the internal auditor - Mr. Daniel Shapira.
8.2 Date of beginning of tenure - March 29, 2006.
8.3 The Company's internal auditor meets all the requirements of Articles 3(a) and 8 to the
Israeli Internal Audit Law, 1992 ("the Internal Audit Law") as well as the provisions of
Article 146(b) to the Companies Law; the internal auditor is not an interested party in the
Company or a relative of any interested party or officer in the Company and does not
serve as or on behalf of the Company's external auditor; the internal auditor does not hold
any securities of the Company or of a related entity thereto; the internal auditor does not
fill any other position in the Company in addition to the internal audit position and to the
nest of the Company's knowledge does not fill any position outside the Company that
creates or might potentially create a conflict of interests with his position as the
Company's internal auditor; to the best of the Company's knowledge, other than the
employment of the internal auditor and his team, the internal auditor has no other material
business or other relations of any kind or type with the Company or a related entity
thereto.
8.4 The internal auditor serves as a senior officer in the Company pursuant to applicable law.
64
8.5 The internal auditor's appointment: in its meeting of March 2006, the Company's Board
approved the appointment of the internal auditor pursuant to the Internal Audit Law,
based, among others, on the Company's nature, size and scope and complexity of its
financial activity. The internal auditor owns an accounting firm which specializes in
internal audits in a variety of industries. His firm has some 23 years of experience in
internal audits of public companies. The internal auditor holds a BA in Economics and
Accounting and is a CPA. He will act, among others, in keeping with the provisions of
the Companies Law and the Internal Audit Law to sustain the Company's internal audit.
8.6 The officer in the Company in charge of supervising the internal auditor is the CFO.
8.7 The method and scope of the work performed by the internal auditor and his team and
their remuneration: in 2014, the internal auditor and his team provided the Company
internal audit services at a scope of about 50 hours, a scope which has been deemed to
reflect the level of investment needed from the internal auditor and his team for the
purpose of carrying out the internal audit work in the reporting year.
8.8 The audit preparation: based on information delivered to the Company's Management by
the internal auditor, the audit is prepared according to generally accepted professional
internal audit standards, guidelines and policies, as approved and issued by the IIA and
pursuant to the Internal Audit Law. The Board has relied on the internal auditor's reports
of his compliance with said professional standards which underlie the internal audit.
8.9 Access to information: the internal auditor is granted constant and direct access to the
Company's documents and IT systems, including financial data, for the purpose of
conducting his work, as described in Article 9 to the Internal Audit Law.
8.10 The internal auditor's reports: the internal auditor's written reports are filed periodically
and discussed by the Company's Audit Committee and Management. In the reporting
year, the internal auditor filed two internal audit reports regarding credit cards and banks
and corporate governance issues.
8.11 The Board's evaluation of the internal auditor's work: the Board believes that the nature,
scope and consistency of the internal auditor's work and audit plan are reasonable under
the circumstances and fulfill the Company's internal audit targets.
8.12 Remuneration: in return for the internal auditor's work in the reporting year, the Company
paid the internal auditor fees based on actual labor hours. The Board believes that this
remuneration is reasonable and does not affect the internal auditor's professional
judgment when auditing the Company. The internal auditor did not receive any securities
as part of his employment terms.
9.
Details of the Company's external auditors
9.1 Details of professional fees and labor hours: on August 21, 2014, the general meeting of
the Company's shareholders approved the extension of the engagement with Kost Forer
Gabbay & Kasierer, CPAs (Ernst & Young Israel) as the Company's external auditors in
the reporting year and the Company's Management's authority to determine their
professional fee.
65
9.2 The Company's external auditors in 2013 and 2014 are as described above.
9.3 The following table specifies the professional fees paid to the Company's auditors in 2013
and 2014 for audit, audit related, tax and other professional services and the actual work
hours invested in these services:
Total expenses in respect of audit, tax and ISOX services (NIS)
Total expenses in respect of other services (NIS)
Total audit, tax and ISOX hours
Total hours in respect of other services
2014
210,000
25,000
1,654
40
2013
214,500
90,000
1,070
333
10. Details of the financial statement approval process
10.1 The Company's Board is in charge of entity-level controls in the Company and of the
approval of the financial statements.
10.2 The Board members as of the report date are: Dr. Ascher Shmulewitz, Mr. Avraham
Meizler, Mr. Amit Berger, Mr. Zohar Heiblum and Mrs. Tamar Kfir.
10.3 See details of the Board members as of the report date in Chapter D (Additional
Information about the Corporation) to this report.
10.4 Based on the provisions of the Companies Regulations (Provisions and Conditions
underlying the Financial Statement Approval Process), 2010 ("the Financial Statement
Approval Regulations"), the Company appointed a Financial Statement Review
Committee (in this section - "the Committee"). As of the report date, the Committee
consists of three members: (1) Mr. Amit Berger, external director and Chairman of the
Committee, (2) Mr. Zohar Heiblum, external director, and (3) Mrs. Tamar Kfir, director.
10.5 All the members of the Committee have the ability to read and understand financial
statements. Mrs. Tamar Kfir and Mr. Amit Berger have accounting and financial
expertise and prior to their appointment, all the members produced the certification that is
required in the Financial Statement Approval Regulations. See details of the members of
the Committee who have accounting and financial expertise,
their
qualifications, education, experience and knowledge based on which the Company
considers them as having the ability to read and understand financial statements in
Regulation 26 to Chapter D (Additional Information about the Corporation) to this report.
including
10.6 The approval of the financial statements involved two meetings as follows: (1) a meeting
of the Committee, which took place prior to the Board's meeting, and thoroughly
discussed the material issues and formulated its recommendations on the financial
statement approval process to the Board; (2) the Board's meeting which discussed the
recommendations of the Committee and the financial statements and approved them.
66
10.7 The Committee's meeting of March 26, 2015 which discussed and provided
recommendations regarding the approval of the financial statements for the reporting year
was also attended, in addition to all the Committee members, by the Company's external
auditors, officers and other holders of positions in the Company. In its meeting, the
Committee reviewed, among others, the evaluations and estimates used in connection
with the financial statements for the reporting year, the need for the continued adoption of
"small corporation exemptions", the integrity and adequacy of disclosures in the financial
statements for the reporting year, the accounting policies adopted and the accounting
treatment of the Company's material affairs, including in connection with subsidiaries and
related companies, the lack of need to attach the financial statements of associates and
any valuations (and their underlying assumptions and estimates) which served as a basis
for data in the financial statements for the reporting year. The Committee also examined
various aspects of control and risk management, both those reflected in the financial
statements for the reporting year and those that affect the reliability of the financial
statements through the detailed presentation of these issues by officers and other holders
of positions in the Company, including the CFO, and the external auditors addressed
those issues. A discussion was held by the Committee regarding the accounting policies
and the method of presentation and disclosure in the financial statements. The
Committee's recommendations were produced to the Board members on March 29, 2015,
including its recommendation to approve the financial statements, subject to making
certain adjustments and implementing certain comments made during the Committee's
meeting.
In its meeting of March 29, 2015, the Board discussed the Committee's recommendations,
reviewed the Company's financial position, operating results and cash flows and received
information of the Company's activities compared to previous periods. The Board
estimates that the Committee's recommendations were delivered to the Board within a
reasonable timeframe before the Board's meeting. The Company's Management was
asked to deliver the related materials to the meetings of the Committee and the Board in
advance. The Board meeting was attended by: Dr. Ascher Shmulewitz, Mr. Avraham
Meizler, Mr. Amit Berger, Mr. Zohar Heiblum and Mrs. Tamar Kfir. In this meeting, the
Company's CEO analyzed the Company's business operations and the CFO reviewed the
financial statements, including the balance sheets, operating results, cash flows and
financial position, the scope and balances of available cash and addressed material events
in the reporting period, the going concern notice included in the financial statements and
the auditors' drawing of attention, as used in the financial statements. Following said
discussion and the examination of the Committee's comments, after making additional
adjustments to the financial statements as required in the course of the meeting, and after
having been reassured that the financial statements properly reflect the Company's
business position and operating results, the Board unanimously adopted the Committee's
recommendation and approved the financial statements for the reporting year.
67
c. Disclosure of the Company's financial reporting framework
11. Disclosure of events after the date of the statement of financial position
11.1 To the best of the Company's knowledge, there have been no material events after the
date of the statement of financial position as mentioned in the periodic report and in the
financial statements other than as detailed below:
11.1.1 On January 12, 2015, the Company entered into a binding MOU under a new
outline (to replace the former outline for the acquisition of Dekel which
expired) for obtaining a license for Dekel's technology and granting an option
for investing in the Company.
11.1.2 On February 1, 2015, the Company's warrants (series 2) expired.
11.1.3 On March 4, 2015, the Company received the Chief Scientist's approval for the
outline of the transaction for returning the BBS technology license to Ramot.
11.1.4 On March 15, 2014, the Company completed a private placement to several
investors of 500,000 Ordinary shares of the Company at a price of NIS 0.5 per
share in return for approximately NIS 250 thousand and also granted them
1,000,000 options.
11.1.5 On March 15, 2015, the Company reported that to the best of its knowledge, the
ISA is conducting an administrative inquiry regarding the Company's reports on
the BBS technology and its then intention to cancel Ramot's license.
11.1.6 On March 15, 2015, the Company's Board approved the employment terms of
the Company's CEO effective from September 2014 (which had not been
approved as of the report date).
11.1.7 On March 29, 2015, the Company entered into a private placement agreement
with an unrelated private investor according to which the private investor will
invest an amount of NIS 2.2 million in return for 4,400,000 Ordinary shares of
the Company at a price of NIS 0.5 per share, which will represent about 18.87%
of the Company's issued and outstanding share capital immediately following
and subject to the completion of the investment (about 13.16% on a fully
diluted basis). The completion of the agreement is subject to the fulfillment of
several suspending conditions within 45 days from the date of signing,
including the receipt of the stock exchange's approval for listing the allocated
securities for trade.
12. Critical accounting estimates
As of the report date, there are no critical accounting estimates.
13. Significant gaps in estimates and forecasts underlying valuations
As of the report date, there are no significant gaps between the critical assumptions, estimates
and forecasts underlying valuations, including professional opinions (as this term is defined in
the Securities Regulations (Private Placement of Securities in a Listed Company), 2000 or in the
Securities Regulations (Transaction between a Company and the Controlling Shareholder
therein), 2001) which were attached to the Company's reports in the three years that precede the
report date, and their actual realization.
68
d. Repurchases
14.
In the reporting period and as of the report date, the Company has no plans to repurchase its
securities nor has it reported any such repurchase plans, based on the definition of the term
"purchase" in Regulation 10(b)(2)(i) to the Regulations.
The Company's Board wishes to thank the Company's employees and managers for their contribution to
promoting the Company.
Dr. Ascher Shmulewitz
Chairman of the Board
Jan Turek
CEO67
Date: March 29, 2015
67
Signed in the English version.
69
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2014
INDEX
Auditors' Report on the Audit of the Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Profit or Loss
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
2
3 - 4
5
6
7
8 - 9
10 - 46
- - - - - - - - - - -
70
Kost Forer Gabbay &
3 Aminadav St.
Tel-Aviv 6706703, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
Kasierer
AUDITORS' REPORT
To the Shareholders of
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
We have audited the accompanying consolidated balance sheets of Therapix Biosciences Ltd.
(formerly: NasVax Ltd.) ("the Company") as of December 31, 2014 and 2013, and the related consolidated
statements of profit or loss, comprehensive income, changes in equity and cash flows for each of the three
years in the period ended December 31, 2014. These financial statements are the responsibility of the
Company's board of directors and management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards in Israel, including
those prescribed by the Auditors' Regulations (Auditor's Mode of Performance), 1973. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the board of directors and management, as well
as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company and its subsidiaries as of December 31, 2014 and 2013, and
the results of their operations, changes in their equity and cash flows for each of the three years in the period
ended December 31, 2014, in conformity with International Financial Reporting Standards (IFRS) and with
the provisions of the Israeli Securities Regulations (Annual Financial Statements), 2010.
Without qualifying our above opinion, we draw attention to the matter discussed in Note 1c to the
financial statements. For the year ended December 31, 2014, the Company incurred losses totaling
NIS 7,292 thousand and negative cash flows from operating activities totaling NIS 7,358 thousand for the
year then ended. These factors, along with other factors detailed in that Note, raise substantial doubt as to the
Company's ability to continue as a going concern. Management's plans with respect to these matters are
discussed in Note 1c. The financial statements do not include any adjustments to the carrying amounts and
classifications of assets and liabilities that would result if the Company was unable to continue as a going
concern.
Haifa, Israel
March 29, 2015
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
- 71 -
CONSOLIDATED BALANCE SHEETS
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Restricted cash
Accounts receivable
NON-CURRENT ASSETS:
Investment in company accounted for at equity
Property, plant and equipment
December 31,
2014
2013
Note
NIS in thousands
5
16e
6
8
7
614
44
102
760
187
70
257
5,122
*) 327
*) 122
5,571
-
318
318
1,017
5,889
*)
Reclassified.
The accompanying notes are an integral part of the consolidated financial statements.
- 72 -
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Trade payables
Other accounts payable
Share options
NON-CURRENT LIABILITIES:
Liabilities for Government grants
EQUITY (DEFICIT):
Share capital
Share premium
Share options
Reserve from share-based payment transactions
Capital reserve from financial statements of foreign
operation
Capital reserve from transactions with non-controlling
interests
Accumulated deficit
Non-controlling interests
Total equity (deficit)
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
December 31,
2014
2014
Note
NIS in thousands
9
10
11
12
15
1,182
132
-
1,314
156
156
1,841
80,460
4,981
15,215
10
1,556
343
396
2,295
128
128
1,410
78,276
4,377
15,071
-
941
(103,591)
941
(96,384)
(143)
(310)
(453)
1,017
3,691
(225)
3,466
5,889
The accompanying notes are an integral part of the consolidated financial statements.
March 29, 2015
Date of approval of the
financial statements
Uri Ben-Or
CFO
Jan Turek
CEO
Asher Shmulevitz
Chairman of the Board
- 73 -
CONSOLIDATED STATEMENTS PROFIT OR LOSS
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
Year ended December 31,
2013
2012
2014
Note
NIS in thousands (except per share data)
Research and development expenses, net
General and administrative expenses
19a
19b
(1,800)
(4,649)
(8,626)
(5,238)
(3,919)
(4,734)
Other income, net
Operating loss
Finance income
Finance expenses
Group's share of losses of company accounted
for at equity
Net income (loss)
Attributable to:
Equity holders of the Company
Non-controlling interests
(7,038)
(8,568)
(13,360)
19d
115
7,246
336
(6,923)
(1,322)
(13,024)
19c
19c
401
(427)
1,603
(72)
235
(454)
(343)
-
-
(7,292)
209
(13,243)
(7,207)
(85)
(7,292)
207
2
209
(13,243)
-
(13,243)
Basic and diluted net earnings (loss) per share
attributable to equity holders of the Company
(in NIS)
20
(0.45)
0.02
(3.11)
The accompanying notes are an integral part of the consolidated financial statements.
- 74 -
CONSOLIDATED STATEMENTS COMPREHENSIVE INCOME
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
2014
Year ended December 31,
2013
NIS in thousands
2012
Net income (loss)
(7,292)
209
(13,243)
Amounts that will be reclassified or that are
reclassified to profit or loss when specific
conditions are met:
Adjustments arising from translating financial
statements of foreign operations
Total other comprehensive income
10
10
-
-
-
-
Total comprehensive income (loss)
(7,282)
209
(13,243)
Attributable to:
Equity holders of the Company
Non-controlling interests
(7,197)
(85)
(7,282)
207
2
209
(13,243)
-
(13,243)
The accompanying notes are an integral part of the consolidated financial statements.
- 75 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
Accumulated
deficit
Total
Non-
controlling
interests
Total
equity
(83,348)
3,312
(13,243)
-
-
-
(13,243)
1,557
202
763
(96,591)
(7,409)
207
-
-
-
-
(96,384)
(7,207)
-
(7,207)
-
-
207
9,768
338
941
(154)
3,691
(7,207)
10
(7,197)
3,219
144
-
-
-
-
-
-
2
-
-
(227)
-
(225)
(85)
-
(85)
-
-
3,312
(13,243)
1,557
202
763
(7,409)
209
9,768
338
714
(154)
3,466
(7,292)
10
(7,282)
3,219
144
3,414
-
-
202
-
3,616
-
963
(202)
-
-
4,377
-
-
-
604
-
-
-
-
-
-
-
-
-
-
941
-
941
-
-
-
-
-
4,981
941
(103,591)
(143)
(310)
(453)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to equity holders of the Company
Capital reserve
from
share-based
payment
transactions
Adjustments
arising from
translating
financial
statements of
foreign
operations
Capital reserve
from
transactions
with non-
controlling
interests
Share
options
NIS in thousands
Share
capital
Share
premium
Balance at January 1, 2012
404
68,464
14,378
Total comprehensive loss
Allocation of shares (1)
Allocation of share options (2)
Cost of share-based payment
Balance at December 31, 2012
Total comprehensive income
Allocation of shares (3)
Exercise of options into shares
Issue of shares to non-controlling interests
Cost of share-based payment
-
74
-
-
478
-
904
28
-
-
-
1,483
-
-
-
-
-
763
69,947
15,141
-
7,817
512
-
-
-
84
-
-
(154)
Balance at December 31, 2013
1,410
78,276
15,071
Loss
Total other comprehensive loss
Total comprehensive loss
Issue of shares and share options (4)
Cost of share-based payment
-
-
-
431
-
-
-
-
2,184
-
-
-
-
-
144
Balance at December 31, 2014
1,841
80,460
15,215
(1) Less issuance expenses of NIS 296 thousand.
(2) Less issuance expenses of NIS 79 thousand.
(3) Less issuance expenses of NIS 775 thousand.
(3) Less issuance expenses of NIS 290 thousand.
-
-
-
-
-
-
-
-
-
-
-
-
10
10
-
-
10
The accompanying notes are an integral part of the consolidated financial statements.
- 76 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
2014
Year ended December 31,
2013
NIS in thousands
2012
Cash flows from operating activities:
Net income (loss)
(7,292)
209
(13,243)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Adjustments to the profit or loss items:
Depreciation and amortization
Gain from sale of property, plant and equipment
Impairment of intangible asset
Change in employee benefit liabilities, net
Cost of share-based payment
Write down of liability to the Chief Scientist
Decrease (increase) in outstanding liability to the Chief
Scientist (including amounts recorded in research and
development expenses)
Finance income, net
Company's share of losses of company accounted for at
equity
Impairment of contingent consideration
Revaluation of liability for contingent consideration in a
business combination
Decrease in value of share options
Change in fair value of financial derivatives
Changes in operating asset and liability items:
Decrease in accounts receivable
Decrease in trade payable
Decrease in other accounts payable
Cash received during the year for:
146
(116)
-
-
144
-
28
(5)
343
-
-
(396)
350
170
(40)
-
(20)
(154)
(7,206)
(1,805)
(20)
-
-
-
(47)
-
285
(22)
465
(7)
763
-
(1,713)
(107)
-
(779)
191
-
-
494
(9,122)
(924)
20
(374)
(211)
(565)
53
(612)
(91)
(650)
256
(595)
(371)
(710)
Interest received
5
20
107
Net cash used in operating activities
(7,358)
(9,543)
(14,770)
The accompanying notes are an integral part of the consolidated financial statements.
- 77 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment
Movement in restricted cash, net
Purchase of property, plant and equipment
Investment in financial derivatives
Investment in company accounted for at equity
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Issue of share capital and share options (less issuance
expenses)
Issue of shares to non-controlling interests
Exercise of options into shares
Receipts from the Chief Scientist
Net cash provided by financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
2014
Year ended December 31,
2013
NIS in thousands
2012
220
283
(2)
(350)
(520)
(369)
3,219
-
-
-
3,219
(4,508)
5,122
614
45
-
(4)
-
-
41
10,211
714
338
486
11,749
2,247
2,875
5,122
25
-
(70)
-
-
(45)
1,759
-
-
3,361
5,120
(9,695)
12,570
2,875
The accompanying notes are an integral part of the consolidated financial statements.
- 78 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 1:- GENERAL
a.
On November 14, 2013, the Company's name was changed from NasVax Ltd. to
Therapix Biosciences Ltd.
Therapix Biosciences Ltd. (formerly: NasVax Ltd.) was incorporated in Israel and
commenced its operations on August 23, 2004. Until March 2014, the Company acted
mainly in developing several innovative immunotherapy products and it owns patents in
the immunotherapy field.
In late March 2014, the Company revised its business strategy according to which it will
focus on identifying and investing in promising bio-pharma technologies while
emphasizing technologies based on a known biological mechanism that are in the post-
proof of concept stage and provide responses for major medical needs in the market and
involve investing up to US$ 2 million for achieving a significant milestone. The
Company's objective
in developing
immunotherapy technologies in order to help these technologies in achieving a significant
milestone within a relative short periods of time (within few years) in a manner that will
allow their commercialization and/or the introduction of strategic partners all while
continuing to promote the Company's existing technologies.
its capabilities and experience
to use
is
b.
Definitions:
In these financial statements:
The Company
- Therapix Biosciences Ltd.
The Group
- the Company and its subsidiaries.
Subsidiaries
- companies that are controlled by the Company (as defined
in IFRS 10) and whose accounts are consolidated with
those of the Company: Ormaion Bio Ltd. (formerly:
Protea Vaccine Technologies Ltd.) ("Protea") and NasVax
Inc. (inactive).
Related parties
- as defined in IAS 24.
Interested parties and
- as defined in the Israeli Securities Regulations (Annual
controlling shareholders
Financial Statements), 2010.
Dollar
U.S. dollar.
c.
For the year ended December 31, 2014, the Company incurred losses totaling NIS 7,292
thousand, negative cash flows from operating activities totaling NIS 7,358 thousand for
the year then ended and working capital deficit of NIS 554 thousand as of that date. Also,
the Company had accumulated deficit totaling NIS 103,591 thousand and recurring
operating losses. The balance of cash at the Company's hands may not be sufficient to
finance its operating activities in the period beyond 12 months after the date of the
approval of the financial statements.
- 79 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 1:- GENERAL (Cont.)
These factors raise substantial doubt as to the Company's ability to continue as a "going
concern".
The Company finances its operations by raising capital from private and institutional
sources and by collaborating with leading multinational corporations in the industry. The
Company's management is focusing on securing the Company's financial stability, among
others, by exploring one or more of the above alternatives.
The financial statements do not include any adjustments to the carrying amounts and
classifications of assets and liabilities that would result if the Company was unable to
continue as a going concern.
d.
Based on the Company Board's decision of May 2014, the Company completed the
process of registering its Level 1 American Depository Receipts ("ADRs") for over-the-
counter (OTC) trade in the United States, as detailed above. The ADRs are aimed at
exposing the Company's securities to US and other foreign investors. Each ADR consists
of 20 Ordinary shares of the Company. The trade of the ADRs in the US began in
October 2014.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been applied consistently in the financial statements for
all periods presented, unless otherwise stated.
a.
Basis of presentation of the financial statements:
These financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS). Furthermore, the financial statements have been prepared in
conformity with the provisions of the Israeli Securities Regulations (Annual Financial
Statements), 2010.
The Company's financial statements have been prepared on a cost basis, except for:
financial assets which are presented at fair value through profit or loss.
The Company has elected to present the profit or loss items using the function of expense
method.
b.
The operating cycle:
The operating cycle of the Company is one year.
- 80 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
c.
Consolidated financial statements:
The consolidated financial statements comprise the financial statements of companies that
are controlled by the Company (subsidiaries). Control is achieved when the Company is
exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. The consolidation of
the financial statements commences on the date on which control is obtained and ends
when such control ceases.
The financial statements of the Company and of the subsidiaries are prepared as of the
same dates and periods. The consolidated financial statements are prepared using uniform
accounting policies by all companies in the Group. Significant intragroup balances and
transactions and gains or losses resulting from intragroup transactions are eliminated in
full in the consolidated financial statements.
Non-controlling interests in subsidiaries represent the equity in subsidiaries not
attributable, directly or indirectly, to a parent. Non-controlling interests are presented in
equity separately from the equity attributable to the equity holders of the Company.
Losses are attributed to non-controlling interests even if they result in a negative balance
of non-controlling interests in the consolidated statement of financial position.
d.
Functional currency and foreign currency:
1.
Functional currency and presentation currency:
The financial statements are presented in NIS since the Company believes that
financial statements in NIS provide more relevant information to the investors and
users of the financial statements who are located in Israel.
The Group determines the functional currency of each Group entity, including
companies accounted for at equity.
2.
Transactions, assets and liabilities in foreign currency:
Transactions denominated in foreign currency (other than the functional currency)
are recorded upon initial recognition at the exchange rate at the date of the
transaction. After initial recognition, monetary assets and liabilities denominated in
foreign currency are translated at each reporting date into the functional currency at
the exchange rate at that date. Exchange rate differences are recognized in profit or
loss. Non-monetary assets and liabilities denominated in foreign currency and
measured at cost are translated at the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign currency and measured
at fair value are translated into the functional currency using the exchange rate
prevailing at the date when the fair value was determined.
- 81 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
e.
Investments in associate:
The Group's investment in associate is accounted for using the equity method.
Under the equity method, the investment in the associate is presented at cost with the
addition of post-acquisition changes in the Group's share of net assets, including other
comprehensive income of the associate. Gains and losses resulting from transactions
between the Group and the associate are eliminated to the extent of the interest in the
associate.
Goodwill relating to the acquisition of an associate is presented as part of the investment
in the associate, measured at cost and not systematically amortized. Goodwill is evaluated
for impairment as part of the investment in the associate as a whole.
The financial statements of the Company and of the associate are prepared as of the same
dates and periods.
f.
Cash equivalents:
Cash equivalents are considered as highly liquid investments, including unrestricted
short-term bank deposits with an original maturity of three months or less from the date
of investment or with a maturity of more than three months, but which are redeemable on
demand without penalty and which form part of the Group's cash management.
g.
Financial instruments:
1.
Financial assets:
Financial assets within the scope of IAS 39 are initially recognized at fair value
plus directly attributable transaction costs.
After initial recognition, the accounting treatment of financial assets is based on
their classification as follows:
Receivables:
The Group has receivables that are financial assets (non-derivative) with fixed or
determinable payments that are not quoted in an active market. After initial
recognition, receivables are measured at amortized cost using the effective interest
method taking into account directly attributable transaction costs, if any. Gains and
losses are recognized in the statement of comprehensive income when the
receivables are derecognized or impaired as well as through the systematic
amortization process.
- 82 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
2.
Financial liabilities:
Financial liabilities are initially recognized at fair value. Loans and other liabilities
measured at amortized cost are presented less direct transaction costs.
After initial recognition, the accounting treatment of financial liabilities is based on
their classification as follows:
a)
Financial liabilities at amortized cost:
After initial recognition, loans and other liabilities are measured based on
their terms at amortized cost less directly attributable transaction costs using
the effective interest method.
b)
Financial liabilities at fair value through profit or loss:
Financial liabilities at fair value through profit or loss include financial
liabilities classified as held for trading and financial liabilities designated
upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired for
the purpose of sale in the near term. Gains or losses on liabilities held for
trading are recognized in profit or loss.
3.
Offsetting financial instruments:
Financial assets and financial liabilities are offset and the net amount is presented
in the statement of financial position if there is a legally enforceable right to set off
the recognized amounts and there is an intention either to settle on a net basis or to
realize the asset and settle the liability simultaneously.
The right of set-off must be legally enforceable not only during the ordinary course
of business of the parties to the contract but also in the event of bankruptcy or
insolvency of one of the parties. In order for the right of set-off to be currently
available, it must not be contingent on a future event, there may not be periods
during which the right is not available, or there may not be any events that will
cause the right to expire.
4.
Issue of a unit of securities:
The issue of a unit of securities involves the allocation of the proceeds received
(before issuance expenses) to the securities issued in the unit based on the
following order: financial derivatives and other financial instruments measured at
fair value in each period. Then fair value is determined for financial liabilities that
are measured at amortized cost. The proceeds allocated to equity instruments are
determined to be the residual amount. Issue costs are allocated to each component
pro rata to the amounts determined for each component in the unit.
- 83 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
5.
Derecognition of financial instruments:
a)
Financial assets:
A financial asset is derecognized when the contractual rights to the cash
flows from the financial asset expire or the Company has transferred its
contractual rights to receive cash flows from the financial asset or assumes
an obligation to pay the cash flows in full without material delay to a third
party and has transferred substantially all the risks and rewards of the asset,
or has neither transferred nor retained substantially all the risks and rewards
of the asset, but has transferred control of the asset.
b)
Financial liabilities:
A financial liability is derecognized when it is extinguished, that is when the
obligation is discharged or cancelled or expires. A financial liability is
extinguished when the debtor (the Group) discharges the liability by paying
in cash, other financial assets, goods or services; or is legally released from
the liability.
6.
Impairment of financial assets:
The Group assesses at each reporting date whether there is any objective evidence
of impairment of a financial asset or group of financial assets as follows:
Financial assets carried at amortized cost:
Objective evidence of impairment exists when one or more events that have
occurred after initial recognition of the asset have a negative impact on the
estimated future cash flows. The amount of the loss recorded in profit or loss is
measured as the difference between the asset's carrying amount and the present
value of estimated future cash flows (excluding future credit losses that have not
yet been incurred) discounted at the financial asset's original effective interest rate.
If the financial asset has a variable interest rate, the discount rate is the current
effective interest rate. In a subsequent period, the amount of the impairment loss is
reversed if the recovery of the asset can be related objectively to an event occurring
after the impairment was recognized. The amount of the reversal, up to the amount
of any previous impairment, is recorded in profit or loss.
h.
Leases:
The criteria for classifying leases as finance or operating leases depend on the substance
of the agreements and are made at the inception of the lease in accordance with the
following principles as set out in IAS 17.
- 84 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Group as lessee - operating lease:
Leases in which substantially all the risks and rewards of ownership of the leased asset
are not transferred to the Group are classified as operating leases. Lease payments are
recognized as an expense in profit or loss on a straight-line basis over the lease term.
i.
Property, plant and equipment:
Property, plant and equipment are measured at cost, including direct acquisition costs,
less accumulated depreciation, accumulated impairment losses and any related investment
grants and excluding day-to-day servicing expenses. Cost includes spare parts and
auxiliary equipment that are used in connection with plant and equipment.
Depreciation is calculated on a straight-line basis over the useful life of the assets at
annual rates as follows:
Lab equipment
Computers
Office furniture and equipment
%
15
33
6
Leasehold improvements are depreciated on a straight-line basis over the shorter of the
lease term (including the extension option held by the Group and intended to be
exercised) and the expected life of the improvement.
The useful life, depreciation method and residual value of an asset are reviewed at least
each year-end and any changes are accounted for prospectively as a change in accounting
estimate. As for testing the impairment of property, plant and equipment, see k below.
Depreciation of an asset ceases at the earlier of the date that the asset is classified as held
for sale and the date that the asset is derecognized.
j.
Research and development expenditures:
Research expenditures are recognized in profit or loss when incurred.
The conditions enabling capitalization of development costs as an asset have not yet been
met and, therefore, all expenditures are recognized in profit or loss when incurred.
- 85 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
k.
Impairment of non-financial assets:
The Company evaluates the need to record an impairment of the carrying amount of non-
financial assets (property, plant and equipment, goodwill and knowhow) whenever events
or changes in circumstances indicate that the carrying amount is not recoverable. If the
carrying amount of non-financial assets exceeds their recoverable amount, the assets are
reduced to their recoverable amount. The recoverable amount is the higher of fair value
less costs of sale and value in use.
l.
Government grants:
Government grants are recognized when there is reasonable assurance that the grants will
be received and the Company will comply with the attached conditions.
Government grants received from the Office of the Chief Scientist in Israel are
recognized upon receipt as a liability if future economic benefits are expected from the
research project that will result in royalty-bearing sales.
A liability for the loan is first measured at fair value using a discount rate that reflects a
market rate of interest. The difference between the amount of the grant received and the
fair value of the liability is accounted for as a Government grant and recognized as a
reduction of research and development expenses. After initial recognition, the liability is
measured at amortized cost using the effective interest method. Royalty payments are
treated as a reduction of the liability. If no economic benefits are expected from the
research activity, the grant receipts are recognized as a reduction of the related research
and development expenses. In that event, the royalty obligation is treated as a contingent
liability in accordance with IAS 37.
In each reporting date, the Company evaluates whether there is reasonable assurance that
the liability recognized, in whole or in part, will not be repaid (since the Company will
not be required to pay royalties) based on the best estimate of future sales and using the
original effective interest method and, if so, the appropriate amount of the liability is
derecognized against a corresponding reduction in research and development expenses.
Amounts paid as royalties are recognized as settlement of the liability.
m.
Taxes on income:
Current or deferred taxes are recognized in profit or loss, except to the extent that they
relate to items which are recognized in other comprehensive income or equity.
- 86 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
1.
Current taxes:
The current tax liability is measured using the tax rates and tax laws that have been
enacted or substantively enacted by the reporting date as well as adjustments
required in connection with the tax liability in respect of previous years.
2.
Deferred taxes:
Since there is no expectation that the Company will generate taxable income in the
future, no deferred tax assets were recognized in the financial statements in respect
of carryforward tax losses and other temporary differences. In each reporting date,
temporary differences (such as carryforward tax losses) for which deferred tax
assets had not been recognized are reviewed and a respective deferred tax asset is
recognized to the extent that their utilization is probable. Such recognition is
carried to the item taxes on income.
n.
Share-based payment transactions:
The Company's employees and other service providers are entitled to remuneration in the
form of equity-settled share-based payment transactions ("equity-settled transactions").
Equity-settled transactions:
The cost of equity-settled transactions with employees is measured at the fair value of the
equity instruments granted at grant date. The fair value is determined using an acceptable
option pricing model, see additional information in Note 18. In estimating fair value, the
vesting conditions (consisting of service conditions and performance conditions other
than market conditions) are not taken into account. The only conditions taken into
account in estimating fair value are market conditions and non-vesting conditions.
As for other service providers, the cost of the transactions is measured at the fair value of
the goods or services received as consideration for equity instruments granted.
The cost of equity-settled transactions is recognized in profit or loss together with a
corresponding increase in equity, during the period which the performance or service
conditions are to be satisfied, ending on the date on which the relevant employees become
fully entitled to the award ("the vesting period"). The cumulative expense recognized for
equity-settled transactions at the end of each reporting period until the vesting date
reflects the extent to which the vesting period has expired and the Group's best estimate
of the number of equity instruments that will ultimately vest. No expense is recognized
for awards that do not ultimately vest.
- 87 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
o.
Employee benefit liabilities:
The Group has several employee benefit plans:
1.
Short-term employee benefits:
Short-term employee benefits are benefits that are expected to be settled wholly
before twelve months after the end of the annual reporting period in which the
employees render the related services. These benefits include salaries, paid annual
leave, paid sick leave, recreation and social security contributions and are
recognized as expenses as the services are rendered. A liability in respect of a cash
bonus or a profit-sharing plan is recognized when the Group has a legal or
constructive obligation to make such payment as a result of past service rendered
by an employee and a reliable estimate of the amount can be made.
2.
Post-employment benefits:
The plans are normally financed by contributions to insurance companies and
classified as defined contribution plans or as defined benefit plans.
The Group has defined contribution plans pursuant to section 14 to the Severance
Pay Law under which the Group pays fixed contributions and will have no legal or
constructive obligation to pay further contributions if the fund does not hold
sufficient amounts to pay all employee benefits relating to employee service in the
current and prior periods. Contributions to the defined contribution plan in respect
of severance or retirement pay are recognized as an expense when contributed
concurrently with performance of the employee's services.
Also, for an employee (who terminated employment at the end of 2013), the
Company operates a defined benefit plan in respect of severance pay pursuant to
the Severance Pay Law. According to the Law, employees are entitled to severance
pay upon dismissal or retirement.
p.
Revenue recognition:
The Group has not yet generated any revenues from the sale of goods or from the
rendering of services.
q.
Finance income and expenses:
Finance income comprises interest income on amounts invested and exchange rate gains.
Interest income is recognized as it accrues using the effective interest method.
Finance expenses comprise changes in the fair value of financial liabilities measured at
fair value through profit or loss and exchange rate losses. Borrowing costs are recognized
in profit or loss using the effective interest method.
- 88 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
r.
Earnings (loss) per share:
Earnings (loss) per share is calculated by dividing the net income (loss) attributable to
equity holders of the Company by the weighted number of Ordinary shares outstanding
during the period.
Basic loss per share only includes shares that were outstanding during the period.
Potential Ordinary shares are only included in the computation of diluted earnings per
share when their conversion increases loss per share from continuing operations.
NOTE 3:- SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS
In the process of applying the significant accounting policies, the Group has made the following
judgments which have the most significant effect on the amounts recognized in the financial
statements:
a.
Judgments:
-
Classification of leases:
In order to determine whether to classify a lease as a finance lease or an operating
lease, the Company evaluates whether the lease transfers substantially all the risks
and rewards incidental to ownership of the asset. In this respect, the Company
evaluates such criteria as the existence of a bargain purchase option, the lease term
in relation to the economic life of the asset and the present value of the minimum
lease payments in relation to the fair value of the asset.
-
Determining the fair value of share-based payment transactions:
The fair value of share-based payment transactions is determined upon initial
recognition by an acceptable option pricing model. The inputs to the model include
share price and exercise price and assumptions regarding expected volatility,
expected life of share option, expected dividend and risk-free interest rate.
b.
Estimates and assumptions:
The preparation of the financial statements requires management to make estimates and
assumptions that have an effect on the application of the accounting policies and on the
reported amounts of assets, liabilities, revenues and expenses. Changes in accounting
estimates are reported in the period of the change in estimate.
- 89 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 3:- SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS (Cont.)
The key assumptions made in the financial statements concerning uncertainties at the
reporting date and the critical estimates computed by the Group that may result in a
material adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
-
Grants from the Chief Scientist:
Government grants received from the Chief Scientist at the Ministry of Industry,
Trade and Labor ("the Chief Scientist") are recognized as a liability if future
economic benefits are expected from the research and development activity that
will result in royalty-bearing sales. There is uncertainty regarding the estimated
future cash flows and estimated discount rate used to measure the amount of the
liability.
NOTE 4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR
ADOPTION
IFRS 9, "Financial Instruments":
In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments"
("IFRS 9"), which replaces IAS 39, "Financial Instruments: Recognition and Measurement".
IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies
to all assets in the scope of IAS 39.
According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In
subsequent periods, debt instruments are measured at amortized cost only if both of the
following conditions are met:
-
-
the asset is held within a business model whose objective is to hold assets in order to
collect the contractual cash flows.
the contractual terms of the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount outstanding.
Subsequent measurement of all other debt instruments and financial assets should be at fair
value. IFRS 9 establishes a distinction between debt instruments to be measured at fair value
through profit or loss and debt instruments to be measured at fair value through other
comprehensive income.
Financial assets that are equity instruments should be measured in subsequent periods at fair
value and the changes recognized in profit or loss or in other comprehensive income (loss), in
accordance with the election by the Company on an instrument-by-instrument basis. If equity
instruments are held for trading, they should be measured at fair value through profit or loss.
- 90 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR
ADOPTION (Cont.)
According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to
financial liabilities for which the fair value option has not been elected.
According to IFRS 9, changes in fair value s of financial liabilities which are attributable to the
change in credit risk should be presented in other comprehensive income. All other changes in
fair value should be presented in profit or loss.
IFRS 9 also prescribes new hedge accounting requirements.
IFRS 9 is to be applied for annual periods beginning on January 1, 2018. Early adoption is
permitted.
The Company is evaluating the possible impact of IFRS 9 but is presently unable to assess its
effect, if any, on the financial statements.
NOTE 5:- CASH AND CASH EQUIVALENTS
Cash for immediate withdrawal
Cash equivalents - short-term deposits
NOTE 6:- ACCOUNTS RECEIVABLE
Prepaid expenses
Government authorities
Other receivables
December 31,
2014
2013
NIS in thousands
614
-
614
3,665
1,457
5,122
December 31,
2014
2013
NIS in thousands
27
73
2
102
35
74
13
122
- 91 -
NOTE 7:- PROPERTY, PLANT AND EQUIPMENT
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
2014:
Cost:
Balance at January 1, 2014
Additions during the year
Sales and disposals during the year
Balance at December 31, 2014
Accumulated depreciation:
Balance at January 1, 2014
Additions during the year
Sales and disposals during the year
Balance at December 31, 2014
Depreciated cost at December 31,
2014
2013:
Cost:
Balance at January 1, 2013
Additions during the year
Sales and disposals during the year
Balance at December 31, 2013
Accumulated depreciation:
Balance at January 1, 2013
Additions during the year
Sales and disposals during the year
Balance at December 31, 2013
Depreciated cost at December 31,
2013
Computers
Lab
equipment
Office
furniture
and
equipment
NIS in thousands
Leasehold
improvements
Total
310
-
(98)
212
246
19
(78)
187
857
-
(585)
272
808
34
(580)
262
25
10
161
2
(97)
66
60
8
(37)
31
35
374
-
(374)
1,702
2
(1,154)
-
550
270
85
(355)
1,384
146
(1,050)
-
-
480
70
Computers
Lab
equipment
Office
furniture
and
equipment
NIS in thousands
Leasehold
improvements
335
2
(27)
310
238
33
(25)
246
1,038
-
(181)
857
875
111
(178)
808
161
-
-
161
51
9
-
60
382
2
(10)
374
263
17
(10)
270
Total
1,916
4
(218)
1,702
1,427
170
(213)
1,384
64
49
101
104
318
- 92 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 8:- INVESTMENT IN ASSOCIATE
a. Movement in investment during the year:
Cost of shares
Post-acquisition losses
Foreign currency translation reserve
Balance at December 31, 2014
b.
Additional information:
NIS in
thousands
520
(
343)
10
187
On April 2, 2014, the Company entered into an investment agreement with LaraPharm
Ltd. ("Lara"), an Israeli company that operates in the field of medical cannabis and is
developing a synthesized formulation that is based on cannabinoids (active components
found in the cannabis plant) to be administered through an inhaler. On June 15, 2014, a
final investment agreement was signed between the parties which determines, among
others, that the Company will invest in Lara up to a total of US$ 1.5 million, subject to
the fulfillment of several prerequisites (completion of related agreements and the
completion of various operating and monetary information and etc.). The Company will
transfer to Lara an initial investment amount of US$ 800 thousand against shares that will
represent about 48% of Lara's issued and outstanding share capital (26% on a fully
diluted basis including options to employees and consultants). The agreement also
stipulates that the percentage of the Company's holdings in Lara's shares (48% of the
issued and outstanding share capital) will be reduced pro rata to the amounts that will be
transferred if the Company fails to provide the remaining payments on the predetermined
dates. The agreement further stipulates that the total amount that the Company will invest
in Lara will be US$ 1.5 million (including the initial investment amount), subject to the
fulfillment of certain milestones and according to predetermined timetables. Assuming
that Lara successfully meets all the milestones determined in the agreement and the
Company invests the entire investment amount, the Company will hold 49% of Lara's
issued and outstanding share capital (on a fully diluted basis). On August 10, 2014, all the
prerequisites for completing the initial stage were met. As of December 31, 2014, the
Company holds 3,538 shares that represent about 48.21% of Lara's issued and
outstanding share capital (26.13% on a fully diluted basis). The Company paid US$ 250
thousand and is committed to pay additional US$ 550 thousand. As aforementioned, as of
the reporting date, only the first payment was made and the date for the second payment
has arrived but not yet paid to Lara. According to the provisions of this agreement, Lara
has the right to reduce the percentage of the Company's holdings in Lara's shares pro rata
to the amounts that will be transferred in such a manner that at the date of these financial
statements, if Lara realizes its right, the Company will be diluted and hold 15% of Lara's
issued and outstanding share capital (8.1% on a fully diluted basis including options to
employees and consultants).
- 93 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 8:- INVESTMENT IN ASSOCIATE (Cont.)
The purchase consideration was determined by an external appraiser to be NIS 870
thousand and comprised cost of shares of NIS 520 thousand and cost of acquiring a
financial instrument to increase the percentage of holdings of approximately NIS 350
thousand.
As of December 31, 2014, an emphasis of matter paragraph relating to going concern was
included in the auditors' report in Lara's financial statements. The fair value of the
financial instrument has been revalued at the end of the reporting period and its entire
balance has been derecognized.
NOTE 9:- TRADE PAYABLES
Open accounts
Accrued expenses
NOTE 10:- OTHER ACCOUNTS PAYABLE
Employees and payroll accruals
Accrued vacation
NOTE 11:- SHARE OPTIONS
Share options
- 94 -
December 31,
2014
2013
NIS in thousands
296
886
1,182
474
1,082
1,556
December 31,
2014
2013
NIS in thousands
101
31
132
289
54
343
December 31,
2014
2013
NIS in thousands
-
396
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 11:- SHARE OPTIONS (Cont.)
On December 25, 2013, in the framework of the investment agreement described in
Note 17e(5), the Company issued Acebright 18,500,000 non-marketable options for a period of
12 months after closing that are exercisable into up to 18,500,000 additional shares of the
Company in consideration of the exercise increment of US$ 0.0428 per share.
The fair value of the options was calculated using the B&S model. In September 2014, these
options expired.
NOTE 12:- LIABILITIES FOR GOVERNMENT GRANTS
Balance at January 1,
Grants received in cash during the year
Amounts carried to financing in the statement of profit or
loss
Amounts carried to research and development expenses
in the statement of profit or loss
Write down of liability to the Chief Scientist
Change in accrued income
Balance at December 31,
Presented in the consolidated balance sheets in:
December 31,
2014
2013
NIS in thousands
128
-
57
-
(29)
-
156
8,862
486
(1,527)
(278)
(7,206)
(209)
128
Non-current liabilities
156
128
The Group received research and development participation grants from the Chief Scientist and,
in return, undertook to pay the Chief Scientist royalties at the rates prescribed by law and the
Regulations for Encouragement of Industrial Research and Development (Rate of Royalties and
Tools for their Implementation), 1996 and the procedures of the Industrial Research and
Development Administration (at a rate of 3% in the first three years and 3.5% from the fourth
year on sales of products resulting from the sponsored research and development as above), all
until the full repayment of the grant. The grant is linked to the dollar and bears interest
according to the Chief Scientist's terms.
Total grants received from the Chief Scientist through December 31, 2014 amounted to
NIS 15,394 thousand. No royalties have been paid yet. The amount comprises payment in
respect of VaxiSome which have been refunded to Yissum.
In 2013, the Group wrote down the liability to the Chief Scientist in respect of the transfer of
technology, as described in Note 16b.
- 95 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 13:- FINANCIAL INSTRUMENTS
a.
Classification of financial assets and financial liabilities:
The financial assets and financial liabilities in the balance sheet are classified by groups
of financial instruments pursuant to IAS 39:
Financial assets:
Cash and cash equivalents
Accounts receivable
Restricted cash
Financial liabilities:
Financial liabilities carried at amortized cost
Share options
December 31,
2014
2013
NIS in thousands
614
102
44
760
1,314
-
1,314
5,122
87
327
5,536
1,899
396
2,295
b.
Financial risk factors:
The Group's activities expose it to various financial risks such as market risks (foreign
currency risk and interest risk), credit risk and liquidity risk. The Group's comprehensive
risk management plan focuses on activities that reduce to a minimum any possible
adverse effects on the Group's financial performance.
Risk management is performed by management in accordance with the policies approved
by the Board. The Board establishes written principles for the overall risk management
activities as well as specific policies with respect to certain exposures to risks such as
exchange rate risk, interest rate risk, credit risk, the use of derivative financial instruments
and non-derivative financial instruments and the investments of surplus funds.
1. Market risks:
Foreign currency risk:
The Group is exposed to exchange rate risk resulting from the exposure to different
currencies, mainly the dollar. Exchange rate risk arises from recognized liabilities
that are denominated in a foreign currency other than the functional currency.
- 96 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 13:- FINANCIAL INSTRUMENTS (Cont.)
2.
Credit risks:
All cash and cash equivalents are held in three banks in Israel which are considered
financially solid.
3.
Liquidity risk:
The Group monitors the risk of a shortage of funds on a regular basis and acts to
raise funds to satisfy its liabilities.
The table below presents the maturity profile of the Group's financial liabilities
based on contractual undiscounted payments (including interest payments):
December 31, 2014:
Trade payables
Other accounts payable
Liability for Government grants
December 31, 2013:
Trade payables
Other accounts payable
Liability for Government grants
*)
Reclassified.
Less than
one year
Over four
years
NIS in thousands
Total
1,182
132
-
1,314
-
-
4,254
4,254
1,182
132
4,254
5,568
Less than
one year
Over four
years
NIS in thousands
Total
1,556
343
-
1,899
-
-
*) 4,338
1,556
343
*) 4,338
4,338
6,237
The carrying amounts of cash and cash equivalents, accounts receivable, trade
payables, other accounts payable and the liability to the Chief Scientist
approximate their fair value.
- 97 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 13:- FINANCIAL INSTRUMENTS (Cont.)
4.
Sensitivity tests and principal work assumptions:
The selected changes in the relevant risk variables were determined based on
management's estimate as to reasonable possible changes in these risk variables.
The Company has performed sensitivity tests of principal market risk factors that
are liable to affect its reported operating results or financial position. The
sensitivity tests present the profit or loss (before tax) in respect of each financial
instrument for the relevant risk variable chosen for that instrument as of each
reporting date. The test of risk factors was determined based on the materiality of
the exposure of the operating results or financial condition of each risk with
reference to the functional currency and assuming that all the other variables are
constant.
NOTE 14:- EMPLOYEE BENEFIT LIABILITIES
Employee benefits consist of short-term benefits and post-employment benefits.
Post-employment benefits:
According to the labor laws and Severance Pay Law in Israel, the Company is required to pay
compensation to an employee upon dismissal or retirement or to make current contributions in
defined contribution plans pursuant to section 14 to the Severance Pay Law, as specified below.
The Company's liability is accounted for as a post-employment benefit. The computation of the
Company's employee benefit liability is made in accordance with a valid employment contract
based on the employee's salary and employment term which establish the entitlement to receive
the compensation.
The post-employment benefits are normally financed by contributions classified as defined
benefit plans or as defined contribution plans as detailed below.
Defined contribution plans:
Section 14 to the Severance Pay Law, 1963 applies to a substantial part of the compensation
payments, pursuant to which the fixed contributions paid by the Group into pension funds
and/or policies of insurance companies release the Group from any additional liability to
employees for whom said contributions were made. These contributions and contributions for
compensation represent defined contribution plans.
2014
Year ended December 31,
2013
NIS in thousands
2012
Expenses in respect of defined contribution
plans
114
176
274
- 98 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 15:- TAXES ON INCOME
b.
Tax rates applicable to the Company:
The Israeli corporate tax rate was 26.5% in 2014 and 25% in 2012 and 2013.
A company is taxable on its real (non-inflationary) capital gains at the corporate tax rate
in the year of sale.
On August 5, 2013, the Law for Changing National Priorities (Legislative Amendments
for Achieving Budget Targets for 2013 and 2014), 2013 ("the Budget Law") was issued,
which consists, among others, of fiscal changes whose main aim is to enhance the
collection of taxes in those years.
These changes include, among others, increasing the corporate tax rate from 25% to
26.5%, cancelling the reduction in the tax rates applicable to privileged enterprises (9% in
development area A and 16% elsewhere) and, in certain cases, increasing the rate of
dividend withholding tax within the scope of the Law for the Encouragement of Capital
Investments to 20% effective from January 1, 2014. There are also other changes such as
taxation of revaluation gains effective from August 1, 2013. The provisions regarding
revaluation gains will become effective only after the publication of regulations defining
what should be considered as "retained earnings not subject to corporate tax" and
regulations that set forth provisions for avoiding double taxation of overseas assets. As of
the date of approval of these financial statements, these regulations have not been issued.
b.
Tax assessments:
The assessments of the Company are deemed final through the 2010 tax year.
c.
Carryforward tax losses and other temporary differences:
The Company has carryforward tax losses totaling approximately NIS 76 million as of
December 31, 2014.
No deferred tax asset relating to carryforward losses and to other temporary differences
has been recognized because its utilization in the foreseeable future is not probable.
d.
Theoretical tax:
The gap between the tax and other temporary differences calculated in respect of the pre-
tax loss at the regular corporate tax rate applicable to the Company and the tax amount
recorded in the statement of comprehensive income in all reporting periods (zero) mainly
arises from losses for tax purposes for which no deferred taxes were recognized because
their utilization in the foreseeable future is not probable.
- 99 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 16:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES
a.
Commitments - Anti-CD3 oral immunotherapy:
1.
2.
3.
4.
5.
6.
On March 26, 2010, the Company entered into a license agreement with Hadasit
Medical Research Services and Development Ltd. ("Hadasit"), the technology
transfer company of Hadassah University Hospital, for the research, development
and commercialization of
is
immunotherapy using
administered orally to treat inflammatory, autoimmune and other diseases relating
to immune suppression. The Company has the right to return the license at any
time before the drug is launched without incurring an additional liability.
the Anti-CD3 which
In 2012 and 2011, the Company reported the success of the Phase 2a clinical trial
of orally administered Anti-CD3 in subjects with NASH (fatty liver) who also have
diabetes and Hepatitis C.
On November 19, 2012, the Company reported that it had applied for an orphan
drug status for the Anti-CD3 treatment of patients with Primary Sclerosing
Cholangitis (a chronic disease of the liver).
On September 2, 2013, the Company entered into a non-binding term sheet with
Acebright which outlines the key conditions of a license agreement that the parties
intend to sign. According to the term sheet, the Company will grant Acebright an
exclusive license for developing a product and conducting clinical trials using the
Company's Anti-CD3 technology for the NASH indication only in specific
territories in the Far East. In return for the license, Acebright will pay royalties
amounting to 10% of the net total sales of products based on the Company's Anti-
CD3 technology in the first three years and 5% of sales thereafter.
As of the reporting date, no progress was made in the negotiations between the
parties.
In November 2013, the Company reported that it reached agreements in principle
with Prof. Howard Weiner regarding the extended collaboration with his lab. In the
extended collaboration, the Company and Prof. Wiener intend to explore a new
method of delivery of the Anti-CD3 and collaborate on designing protocols for
clinical trials for treating diabetes with the antibody. Intensifying the collaboration
does not involve significant financial investments from the Company at this stage.
On May 18, 2014, the Company updated that the Phase IIA clinical trial for
proving feasibility of oral Anti-CD3 technology for the treatment of ulcerative
colitis patients was successful and met its primary endpoints - examining the safety
of the treatment and testing changes in immunological markers that may form
indication of treatment efficacy. Also, it was reported to the Company that the
secondary endpoint of the trial was achieved - testing markers efficacy in patients
with moderate to severe UC.
- 100 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 16:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES (Cont.)
The trial was conducted on mice induced cells (OKT3). The Company developed
for OKT3 which underwent humanization and
an analogous antibody
immunogenetic reduction and which is more suitable to give to human patients for
a long period of time. The Company made it clear that as a condition for the
continued development of the humanized antibody, as above, evidence is required
that the above human therapy acts similarly to mice induced therapy.
Commitments - adjuvant technology for enhancing the immunogenicity of vaccines and
b.
immunotherapeutics:
On May 20, 2013, the Company entered into an agreement with Yissum Research
Development Company of the Hebrew University of Jerusalem ("Yissum") and Bio-Lev
("Bio-Lev") the owners of the technology ("the technology owners") according to which,
subject to the approval of the Chief Scientist, adjuvant technology (VaxiSome) will be
transferred to the technology owners for no immediate consideration with the Company
being entitled to 25% of future revenue from commercialization of the technology less
expenses of the technology owners, up to a total of US$ 12,500 thousand (approximately
NIS 45 million). It is further agreed that if the technology owners give a license to
Novartis (in the past the Company had cooperated with it in this technology) or to its
related company, the payment will be 50% (instead of 25%) and the ceiling of payments
to the Company will be US$ 25,000 thousand (approximately NIS 90 million). According
to the agreement, payments to be made to the Chief Scientist for grants the Company
received in connection with the technology will be paid by the technology owners. The
agreement contains a provision in which the parties release each other from claims and
demands relating to the original license agreement between them from March 2005.
On May 29, 2013, the Company's Board decided that even if the Chief Scientist approval
to transfer the VaxiSome technology is not obtained, the Company does not intend to
continue to develop it and, accordingly, it will not generate royalty-bearing income.
Accordingly, during 2013, the Company wrote down an amount of NIS 7,206 thousand
relating its liability to the Chief Scientist in respect of this technology in the item other
income net in the statement of comprehensive income.
On July 11, 2013, the Chief Scientist approval to transfer the rights and obligations to the
technology was obtained.
c.
Commitments - BBS technology:
In January 2014, the Company reported that it received a letter from Ramot at Tel-Aviv
University Ltd. ("Ramot"), the Tel-Aviv University's technology transfer company, in
which Ramot announces its intention to terminate the license and research agreement in
connection with the BBS technology (the Alzheimer's drug). The Company's position was
(and still is) that Ramot's announcement is illegitimate and groundless. The parties are
negotiating the disputes between them in order to reach an agreed solution including in
matters related to the Chief Scientist at the Ministry of Economics.
- 101 -
NOTE 16:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES (Cont.)
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
At the beginning of 2014, the parties reached agreements on an outline according to
which the Company will return the license to Ramot, including the exclusive license to
use and commercialize the assets and knowhow gained at the Company during the period
of the license ("the Company's assets and knowhow") and, in return, if the Company's
assets and knowhow are being commercialized, the Company will receive royalties in the
future (in the scope, percentages and conditions as determined) ("the agreed outline").
After the agreed outline became effective, the parties agree that the license agreement
will become null and void and that any monetary and/or another liability between the
parties will become null and void including the Company's undertaking to bear the costs
of registration and/or maintaining the patents effective from the cancellation date as
above and thereafter in such a manner that Ramot will be responsible for such debts.
In furtherance to the in-principle approval of the Chief Scientist at the Ministry of
Economics to the agreed outline at the beginning of December 2014, the Company and
Ramot will act according to the agreed outline to transfer the Company's developments
under the license agreement from the Company to Ramot (including the transfer of
patents and all necessary to return the license to Ramot) and the license agreement will
become null and void.
On March 15, 2015, the Company reported that to the best of its knowledge the Securities
Authority is conducting an administrative clarification in connection with the Company
reports regarding the BBS technology and the intention to cancel Ramot's license to the
technology.
As a result of the above agreement, a liability to the Chief Scientist of NIS 29 thousand
was written down from the Company's accounts.
d.
Commitments - Dekel Pharmaceuticals Ltd.:
On September 30, 2014, the Company and Dekel Pharmaceuticals Ltd. ("Dekel") signed a
non-binding term sheet for the acquisition of the entire share capital of Dekel (on a fully
diluted basis) in return for the allocation of shares in the Company. Dekel is a privately-
held company incorporated in Israel that is mainly engaged in the research and
development of drug therapies based on synthetic cannabinoid substances for treating
chronic pain and inflammation. In addition, to the best of the Company's knowledge,
Dekel holds the rights to a disposable, patent-protected dose-controlled inhalation device,
which can be used in the delivery of steroids and/or cannabinoids. Dekel's shareholders
include Dr. Asher Shmulevitz, who, at the reporting date, serves as Chairman of the
Company's Board and an interested party therein by the capacity of its holdings.
The Company's audit committee discussed and approved on January 7, 2015 and the
Company's Board discussed and approved on January 11, 2015 a binding term sheet for
the above license agreement with Dekel and its key elements have been agreed ("the
approved outline"), as determined
the Company's
representatives and Dekel's representatives and which will be brought before the
Company's' relevant organs for approval.
in the negotiations between
- 102 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 16:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES (Cont.)
The approved outline determines conditions for
technology
simultaneously with an equity investment in Dekel (by itself and/or others). The purpose
of the commitment between the parties is to enable the Company to develop Dekel's
technology using the license agreement and, simultaneously, raise the necessary funds.
licensing Dekel's
The Company is of the opinion that the commitment with Dekel pursuant to the approved
outline adheres to the business strategy of the Company and may have synergistic
interaction (and even constitute a strengthening) with an additional activity that the
Company has recently examined in this field.
e.
Operating lease commitments:
1.
The Company signed an agreement with a third party for the lease of offices in
Azrieli towers with area of 100 sq.m. through July 31, 2015 for lease fees of
approximately NIS 18 thousand per month, linked to the Israeli CPI.
Future minimum lease fees for existing lease contracts as of December 31, 2014
are as follows:
NIS in
thousands
128
2015
2.
Charges:
To secure the Company's liabilities for the lease of the building, the Company
received a bank guarantee of NIS 44 thousand. To secure the bank guarantee, a
charge was recorded on this amount in the Company's bank account.
NOTE 17:- EQUITY
a.
Composition of share capital:
December 31, 2014
December 31, 2013
Authorized
Issued and
outstanding
Authorized
Issued and
outstanding
Number of shares
Ordinary shares of NIS 0.01 par
value each
100,000,000
18,410,648
1,000,000,000
141,012,488
On August 19, 2013, the general meeting of the Company's shareholders approved to
increase the authorized capital of the Company by 800,000,000 Ordinary shares of
NIS 0.01 par value each such that the authorized capital of the Company comprises
1,000,000,000 Ordinary shares of NIS 0.01 par value each.
- 103 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 17:- EQUITY (Cont.)
Capital consolidation:
On January 1, 2014, a special meeting approved to consolidate the authorized share
capital and the issued and outstanding share capital such that any existing 10 Ordinary
shares of NIS 0.01 par value each in the authorized share capital and the issued and
outstanding share capital of the Company will be consolidated into one Ordinary share of
the Company of NIS 0.1 par value. The number of the share options that exist in the
Company's equity was adjusted accordingly.
b. Movement in share capital:
Issued and outstanding share capital:
Number of
shares
NIS
par value
Balance at January 1, 2013
47,770,997
477,710
Issue of share capital
Exercise of options
90,445,091
2,796,400
904,451
27,964
Balance at December 31, 2013
141,012,488
1,410,125
Consolidation of share capital
Issue of share capital
(126,911,240)
4,309,400
-
430,940
Balance at December 31, 2014
18,410,648
1,841,065
c.
Rights attached to shares:
1.
Voting rights at the general meeting, right to dividends, rights upon liquidation of
the Company and right to nominate the directors in the Company.
2.
Quoted on the Tel-Aviv Stock Exchange.
d.
Capital management in the Company:
The Company's capital management objectives are
to preserve the Group's ability
to ensure business continuity thereby creating a return for the shareholders, investors and
other interested parties.
The Group is not under any minimal equity requirements nor is it required to attain a
certain level of capital return.
- 104 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 17:- EQUITY (Cont.)
e.
Issue of shares:
1.
2.
3.
4.
5.
On September 6, 2012, the Company completed a capital raising round of
NIS 1,703 thousand from interested parties and the public pursuant to a shelf
offering report based on the Company's shelf prospectus of August 8, 2012. In said
capital raising round, the Company issued an aggregate number of 6,812,800
Ordinary shares of NIS 0.01 par value each for a price of NIS 0.25 per share.
Issuance expenses amounted to approximately NIS 275 thousand.
On October 17, 2012, 192,308 shares were issued to one of the shareholders in
consideration of NIS 50 thousand and on November 18, 2012, 384,615 shares were
issued to the other shareholder in consideration of NIS 100 thousand. Issuance
expenses amounted to approximately NIS 21 thousand.
On February 10, 2013, the general meeting of the Company's shareholders
approved the Company's engagement in private placement agreements according to
which it allocated 40,000,000 Ordinary shares of NIS 0.01 par value each to
Gillbood Trading SA and to Incumed SPV in consideration of NIS 4,000 thousand
(NIS 3,768 thousand net).
On April 24, 2013, the Company issued in a private placement agreement
4,000,000 Ordinary shares of NIS 0.01 par value each in consideration of NIS 400
thousand (NIS 390 thousand net).
On July 17, 2013, the Company published a shelf offering report based on the
Company's shelf prospectus of August 8, 2012 according to which the Company
issued to the public 359,375 units each comprises 100 Ordinary shares of NIS 0.01
par value each and 250 marketable share options (series 2). The gross proceeds
from the issuance amounted to NIS 4,600 thousand (NIS 4,067 thousand net). Also,
according to the shelf offering report, on August 26, 2013, the Company allocated
5,660,156 marketable share options (series 2) to the issuance coordinator whose
value at that date was estimated at approximately NIS 84 thousand.
On December 25, 2013, in furtherance to investment agreements signed between
the Company and Acebright Holding Limited ("Acebright"), Acebright invested
US$ 450 thousand (approximately NIS 1,569 thousand) in consideration of the
allocation of 10,507,500 shares of the Company and non-marketable options for a
period of 12 months after closing that are exercisable into up to 18,500,000
additional shares of the Company for the exercise increment of US$ 0.0428 per
share (up to US$ 1,125 thousand). Moreover, Acebright invested US$ 300
thousand (approximately NIS 1,046 thousand) in the subsidiary to which the Anti-
CD3 technology would be transferred in consideration of the allocation of 10% of
the issued capital of the Company and non-marketable options for a period of 12
months after closing that are exercisable into up to 80,265 additional shares of the
Company for the exercise increment of US$ 13.487 per share.
- 105 -
NOTE 17:- EQUITY (Cont.)
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
6.
7.
On May 8, 2014, the Company raised approximately NIS 2.9 million (gross) in the
issuance of 3,009,400 Ordinary shares, 3,009,400 share options (series 3) and
3,009,400 share options (series 4) of the Company pursuant to a shelf offering
report that the Company published on May 8, 2014 and a shelf prospectus of
August 8, 2012. On May 15, 2014, the Company allocated 406,269 share options
(series 4) to Clal Finance Underwriting Ltd. as part of raising costs.
On November 19, 2014, the Company entered into a private placement agreement
according to which 1,300,000 Ordinary shares of NIS 0.1 par value each, 1,300,000
fully vested options and 1,300,000 conditional options were offered. The fully
vested options are exercisable at 1 to 1 ratio for the exercise price of NIS 0.5 from
the date of allocation over a period of three years. The conditional options are
exercisable at 1 to 1 ratio subject to the exercise of the fully vested options. The
fair value of the options was estimated at approximately NIS 3 thousand.
The total gross proceeds from the offered securities were NIS 650 thousand (net
proceeds - NIS 631 thousand).
f.
Share options:
1.
2.
3.
On May 1, 2011, in the framework of a private placement, the Company issued
2,553,956 non-marketable share options (series 4) that are exercisable into
2,553,956 Ordinary shares of NIS 0.01 par value each for an unlinked exercise
increment of NIS 1.12. The share options were classified as equity. They are
exercisable for a period of 30 months from the date of allocation. The options
expired on October 31, 2013.
On December 23, 2012, in the framework of the Company's shelf prospectus of
August 8, 2013, the Company issued 27,240,000 marketable share options (series
1) that are exercisable into 27,240,000 Ordinary shares of NIS 0.01 par value each
for an unlinked exercise increment of NIS 0.13. The share options were classified
as equity. They are exercisable until March 28, 2013. A total of NIS 202 thousand
has been received (less issuance expenses of NIS 79 thousand).
During the period, 2,796,491 share options (series 1) were exercised into 2,796,491
Ordinary shares of NIS 0.01 par value each in consideration of a net amount of
approximately NIS 338 thousand.
On July 18, 2013, in the framework of the Company's shelf prospectus of August 8,
2012, the Company issued 89,843,750 marketable share options (series 2) that are
exercisable into 89,843,750 Ordinary shares of NIS 0.01 par value each for an
unlinked exercise increment of NIS 0.19 through June 30, 2013 and for an unlinked
exercise increment of NIS 0.25 from July 1, 2013 to January 31, 2015. The gross
proceeds from the issuance amounted to NIS 4,600 thousand (NIS 4,067 thousand
net).
- 106 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 17:- EQUITY (Cont.)
4.
On August 26, 2013, based on a shelf offering, the Company allocated 5,660,156
marketable share options (series 2) that are exercisable into 5,660,156 Ordinary
shares of NIS 0.01 par value for an unlinked exercise increment of NIS 0.19
through June 30, 2013 and for an unlinked exercise increment of NIS 0.25 from
July 1, 2013 to January 31, 2015. The value of the options at that date was
estimated at approximately NIS 84 thousand.
5.
On November 9, 2014, the Company's share options (series 3) expired.
NOTE 18:- SHARE-BASED PAYMENT TRANSACTIONS
a.
The expense recognized in the financial statements:
The expense (income) recognized in the Group's financial statements for services
received from employees and consultants is shown in the following table:
2014
Year ended December 31,
2013
NIS in thousands
2012
Equity-settled share-based payment
plans
144
(154)
763
The share-based payment transactions that the Company granted to its employees and
consultants are described below. There have been no modifications or cancellations to
any of the employee benefit plans during 2012 to 2014.
b.
Share-based payment transactions with the Company's employees:
1.
In furtherance to Note 16a, on March 26, 2010, the Company entered into a license
agreement with Hadasit. As part of the payment for the license, Hadasit and Prof.
Howard Weiner were allocated 345,000 unlisted options of the Company that are
exercisable into 345,000 Ordinary shares of the Company of NIS 0.1 par value
each for an exercise price of NIS 0.1 per share. The options vest in three equal
portions after the fulfillment of each of the following milestones: the beginning of
Phase 2A, the beginning of Phase 2B and the beginning of Phase 3 for using the
Anti-CD3.
The options will expire at the end of 15 years from the grant date. Any options that
are not exercised by the expiration date mentioned above will expire and not confer
any rights whatsoever.
As of the reporting date, the first portion of 1,150,000 has become vested and is
exercisable for an exercise price of NIS 0.1 per share.
- 107 -
NOTE 18:- SHARE-BASED PAYMENT TRANSACTIONS (Cont.)
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
2.
On October 26, 2012, the Company's Board approved the allocation of options to
the Company's management as follows: a company owned by the outgoing CEO
was allocated 439,680 options, the CTO was allocated 408,000 options and the
CFO was allocated 98,400 options. These options are exercisable into up to
946,080 Ordinary shares of NIS 0.01 par value each for an exercise price of
NIS 0.25 per share. The options will vest over a period of six months from
November 27, 2012. The CTO was also granted 200,000 options for the same
exercise price which have become vested at the grant date.
The fair value at the grant date was estimated at approximately NIS 126 thousand,
calculated using the binomial model based on annual standard deviations of
68.97%-76.11% at the grant date, a price per share of NIS 0.219 at the grant date,
annual discount rates of 1.9%-6.53% at the grant date and a forfeiture rate of 10%.
The options will expire at the end of ten years from the grant date. Any options that
are not exercised by the expiration date mentioned above will expire and not confer
any rights whatsoever.
As a result of termination of employment of the CEO in March 2014, 439,680
options granted to him expired.
On August 26, 2013, the Company granted to a company owned by the outgoing
CEO, Mr. Ari Aminetzah, 1,500,000 options that are exercisable into 1,500,000
Ordinary shares of the Company for an exercise price of NIS 0.1 per option. The
fair value of the options at the date of appointment was estimated at approximately
NIS 79 thousand. The options vest over three years in two equal portions so that
every three months an equal portion of options vests. If by May 31, 2013, the
Company raises a total of NIS 7,500 thousand, the vesting period will be shorten
by six months. The options were allocated on August 26, 2013.
During 2013, 2,267,879 employee options that may be exercised into 2,267,879
Ordinary shares expired.
On March 24, 2014, the general meeting of shareholders approved payment of
compensation to the Company's Chairman: (1) for September-December 2013 -
monthly payment of US$ 10 thousand (2) from January 8, 2014 - monthly payment
of NIS 50 thousand (3) allocation of 423,037 unlisted share options of the
Company at exercise price of not less than the share market price in the 30 days
before the allocation plus 10%. The options vest over three years in equal portions
on a quarterly basis. Also, the general meeting approved the Company's
remuneration policy. The options were allocated on April 1, 2014.
3.
4.
5.
- 108 -
NOTE 18:- SHARE-BASED PAYMENT TRANSACTIONS (Cont.)
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
The fair value at the grant date was estimated at approximately NIS 181 thousand.
The compensation was calculated using the binomial model based on expected
share price volatility of 71.44% at the grant date, a price per share of NIS 0.791 at
the grant date, exercise price of NIS 0.789 per share, risk free interest rates of
0.7%-5.74% per year computed at the grant date and a forfeiture rate of 0%.
6.
On May 4, 2014, in furtherance to the decision of the Company's Board, the
Company allocated to the VP of Strategic and Business Development 266,242
unlisted options that are exercisable into 266,242 Ordinary shares of the Company.
The options vest over a period of four years from the date of allocation in equal
portions on a quarterly basis. The fair value at the grant date was estimated at
approximately NIS 149 thousand. The compensation was calculated using the
binomial model based on expected share price volatility of 72.47% at the grant
date, a price per share of NIS 0.978 at the grant date, exercise price of NIS 0.99 per
share that represents the average share market price in the 30 days before the
allocation plus 10%, risk free interest rates of 3.69% computed at the grant date
and a forfeiture rate of 0%.
7.
On February 16, 2014, the Company and the CEO, Mr. Ari Aminetzah, reached
understandings regarding the termination of his tenure as the Company's CEO at
the end of March 2014. During April-May 2014, Mr. Aminetzah rendered business
development services to the Company.
On May 14, 2014, following the termination of the role of Mr. Ari Aminetzah as
the CEO, 112,500 options were forfeited.
c. Movement during the year:
The following table lists the number of share options, the weighted average exercise
prices of share options and modifications in employee and supplier option plans during
the current year:
2014
2013
Number of
options
Weighted
average
exercise
price
NIS
Number of
options
Weighted
average
exercise
price
NIS
Share options outstanding at beginning
of year
Consolidation of options as a result of
capital consolidation
Share options granted during the year
Share options forfeited or expired during
8,019,255
(7,217,329)
689,279
0.73
0.73
0.86
8,787,134
-
1,500,000
the year
(280,762)
13.62
(2,267,879)
Share options outstanding at end of year
1,210,443
Share options exercisable at end of year
377,914
4.39
5.45
8,019,255
3,547,936
1.05
-
0.1
1.55
0.73
0.79
- 109 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 18:- SHARE-BASED PAYMENT TRANSACTIONS (Cont.)
d.
e.
f.
The weighted average remaining contractual life of the share options outstanding as of
December 31, 2014 was 8.64 years (December 31, 2013 - 8.72 years).
The weighted average fair value of the share options granted in 2014 was NIS 0.86 (2013
- NIS 0.10 before capital consolidation of 1 to 10).
The range of exercise prices of share options as of December 31, 2014 was NIS 0.1-
NIS 44.58 (December 31, 2013 - NIS 0.01-NIS 4.46 before capital consolidation of 1 to
10).
NOTE 19:- ADDITIONAL INFORMATION TO THE ITEMS OF PROFIT OR LOSS
a.
Research and development expenses,
net:
Wages and related expenses
Materials
Cost of share-based payment
Consultants and subcontractors
Depreciation
Patents
Other expenses
Participation in research and
development expenses
Chief Scientist income
b.
General and administrative expenses:
Wages, salaries and related expenses
Share-based payment
Professional services including business
development
Insurance and directors' fees
Depreciation
Office maintenance and rent and other
2014
Year ended December 31,
2013
NIS in thousands
2012
506
25
8
582
49
284
375
(29)
-
1,759
95
66
1,594
131
598
684
-
(278)
3,253
249
(52)
5,506
239
723
516
(74)
(1,734)
1,800
4,649
8,626
1,581
136
2,562
244
100
615
5,238
1,789
(220)
1,247
334
39
730
3,919
2,181
815
721
371
46
600
4,734
- 110 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 19:- ADDITIONAL INFORMATION TO THE ITEMS OF PROFIT OR LOSS (Cont.)
2014
Year ended December 31,
2013
NIS in thousands
2012
c.
Finance income (expenses):
Finance income:
Interest income on bank deposits
Change in fair value of share options
Finance income from revaluation of
liability to the Chief Scientist
Exchange rate differences
Finance expenses:
Finance expenses from interest and
commissions
Finance expenses from revaluation of
liability to the Chief Scientist
Revaluation of contingent consideration
in a business combination
Exchange rate differences
Impairment of financial instrument
d.
Other income (expenses):
Adjustment of contingent consideration
recorded in statement of
comprehensive income
Impairment of intangible asset
Write down of liability to the Chief
Scientist (Note 16b)
Capital gain
5
396
-
-
401
13
56
-
8
350
427
-
-
-
115
115
20
47
1,527
9
1,603
28
-
-
44
-
72
-
-
7,206
40
7,246
107
-
-
128
235
94
21
191
148
-
454
779
(465)
-
22
336
- 111 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 20:- EARNINGS (LOSS) PER SHARE
a.
Details of the number of shares and income (loss) used in the computation of earnings
(loss) per share:
2014
Year ended December 31,
2013
2012
Weighted
number of
shares
In
thousands
Weighted
number of
shares
In
thousands
Weighted
number of
shares
In
thousands
Loss
NIS in
thousands
Income
NIS in
thousands
Loss
NIS in
thousands
Number of shares and
income (loss) used in
the computation of
basic and diluted
earnings (loss) per
share
16,072
(7,292)
10,178
209
4,256
(13,243)
b.
The computation of diluted earnings (loss) per share did not include the following
convertible securities since their inclusion would decrease the diluted earnings (loss) per
share compared to the basic net earnings (loss) per share (anti-dilutive effect):
1.
2.
3.
3.
1,210,443 options to employees, officers and consultants.
9,550,391 marketable share options (series 1).
3,415,669 non-marketable share options (series 4).
1,850,000 non-marketable share options to investor.
c.
Earnings per share was adjusted retroactively for consolidation of shares that took effect
in 2013 after the reporting date (see Note 17a).
NOTE 21:- OPERATING SEGMENTS
The Company applies the principles of IFRS 8 regarding operating segments. The segment
reporting is based on internal management reports of the Company's management which are
regularly reviewed by the chief operating decision maker to make decisions about resources to
be allocated and assess performance ("the management approach"). According to the principles
of IFRS 8, management determined that the Company has one reportable segment in the field of
Anti-CD3 which is administered orally to treat inflammatory diseases.
- 112 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 22:- TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
a.
Balances with interested and related parties:
December 31, 2014:
Other accounts payable
December 31, 2013:
Other accounts payable
b.
Transactions with interested and related parties:
Year ended December 31, 2014:
Key
management
personnel
Interested
and other
related
parties
NIS in thousands
120
84
Key
management
personnel
Interested
and other
related
parties
NIS in thousands
83
77
Key
management
personnel
Interested
and other
related
parties
NIS in thousands
General and administrative expenses
2,323
-
Year ended December 31, 2013:
Research and development expenses
General and administrative expenses
Key
management
personnel
Interested
and other
related
parties
NIS in thousands
1,043
1,341
-
410
- 113 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 22:- TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
(Cont.)
c.
Benefits to key management personnel (including directors) who are not employed by the
Company:
Short-term benefits
Share-based payment (see Note 18)
2014
Year ended December 31,
2013
NIS in thousands
2012
1,321
111
1,462
1,391
(239)
1,152
287
-
287
d.
Benefits to key management personnel who are employed by the Company:
Short-term benefits
Share-based payment (see Note 18)
Number of individuals to whom the
salary and benefits relate:
Related and interested parties who are
employed by or on behalf of the
Company
Interested parties and directors who
are not employed by the Company
2014
Year ended December 31,
2013
NIS in thousands
2012
844
17
861
2
12
14
2,424
(201)
2,223
2,559
895
3,454
2
10
12
3
7
10
e. Material agreements signed with interested and related parties:
1.
2.
On January 8, 2014, the Company's Board appointed Mr. Asher Shmulevitz as
active Chairman of the Company's Board.
On February 16, 2014, the Company and the CEO, Mr. Ari Aminetzah, reached
understandings regarding the termination of his tenure as the Company's CEO at
the end of March 2014. During April-May 2014 Mr. Aminetzah rendered business
development services to the Company.
- 114 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
NOTE 22:- TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
(Cont.)
3.
On March 24, 2014, the general meeting of shareholders approved payment of
compensation to the Company's Chairman: (1) for September-December 2013 -
monthly payment of US$ 10 thousand (2) from January 8, 2014 - monthly payment
of NIS 50 thousand (3) allocation of 423,037 unlisted share options of the
Company at exercise price of not less than the share market price in the 30 days
before the allocation plus 10%. The options vest over three years in equal portions
on a quarterly basis. Also, the general meeting approved the Company's
remuneration policy. The options were allocated on April 1, 2014.
4.
On September 22, 2014, the Company's Board named Mr. Jan Turek as the
Company's CEO. On March 15, 2014, the Company's Board approved the
conditions to which the Company's CEO is entitled to for his employment at the
Company since September 2014 (to date, the conditions have not been approved).
NOTE 23:- EVENTS AFTER THE REPORTING DATE
a.
b.
c.
d.
As for entering into a binding term sheet with Dekel Pharmaceuticals Ltd., see Note 16d.
On February 1, 2015, the Company's share options (series 2) expired.
On March 15, 2015, the Company completed a private placement to several investors of
about 500,000 shares at the price of NIS 0.5 per Ordinary share of the Company in
consideration of NIS 250 thousand and also 1,000,000 options were granted to the
investors.
On March 29, 2015, the Company entered into a private placement agreement with a
private investor (who is unrelated to the Company) for an investment of NIS 2.2 million
in consideration of 4,400,000 Ordinary shares of the Company at the price of NIS 0.5 per
share which will represent about 18.87% of the Company's issued and outstanding share
capital immediately after and subject to the completion of the investment (about 13.16%
on a fully diluted basis). The closing of the above agreement is subject to the fulfillment
of several prerequisites within 45 days after closing, including the approval of the stock
exchange for listing the securities allocated as above.
- - - - - - - - - - -
- 115 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
THERAPIX BIOSCIENCES LTD.
FINANCIAL DATA FROM THE CONSOLIDATED FINANCIAL STATEMENTS
ATTRIBUTABLE TO THE COMPANY
AS OF DECEMBER 31, 2014
- 116 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
THERAPIX BIOSCIENCES LTD.
FINANCIAL DATA FROM THE CONSOLIDATED FINANCIAL STATEMENTS
ATTRIBUTABLE TO THE COMPANY
AS OF DECEMBER 31, 2014
INDEX
Special Auditors' Report
Special Report in accordance with Regulation 9c
Financial Data from the Consolidated Statements of Financial Position
Attributable to the Company
Financial Data from the Consolidated Statements of Profit or Loss
Attributable to the Company
Financial Data from the Consolidated Statements of Cash Flows
Attributable to the Company
Additional Information
Page
2
3
4
5
6 - 7
8 - 12
- 117 -
Kost Forer Gabbay &
Kasierer
1.
3 Aminadav St.
2.
Tel-Aviv 6706703, Israel
3.
4.
Tel: +972-3-6232525
Fax: +972-3-5622555
7.
ey.com
5.
6.
To
The Shareholders of Therapix Biosciences Ltd. (formerly: NasVax Ltd.)
Dear Sirs/ Mmes.,
Re: Special auditors' report regarding separate financial information in accordance with
Regulation 9c to the Securities Regulations (Periodic and Immediate Reports), 1970
We have audited the separate financial information presented pursuant to regulation 9c to the
Securities Regulations (Periodic and Immediate Reports), 1970 of Therapix Biosciences Ltd.
(formerly: NasVax Ltd.) ("the Company") as of December 31, 2014 and 2013 and for each of the three
years, the last of which ended December 31, 2014, which was included in the Company's periodic
report. The Company's board of directors and management are responsible for the separate financial
information. Our responsibility is to express an opinion on the separate financial information based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards in Israel, including
those prescribed by the Auditor's Regulations (Auditor's Mode of Performance), 1973. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
separate financial information is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the separate financial information. An audit
also includes assessing the accounting principles used and significant estimates made by the board of
directors and management, as well as evaluating the overall separate financial information
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the separate financial information referred to above is prepared, in all material respects,
in conformity with Regulation 9c to the Israeli Securities Regulations (Periodic and Immediate
Reports), 1970.
Without qualifying our above opinion, we draw attention to the matter discussed in a to the additional
information to the financial data and separate financial information attributable to the Company itself
out of the Group's consolidated financial statements. For the year ended December 31, 2014, the
Company incurred losses totaling NIS 7,207 thousand and negative cash flows from operating
activities totaling NIS 5,747 thousand for the year then ended. These factors raise substantial doubt as
to the Company's ability to continue as a going concern. Management's plans with respect to these
matters are discussed in the above paragraph. The financial data and separate financial information
attributable to the Company itself out of the Group's consolidated financial statements do not include
any adjustments to the carrying amounts and classifications of assets and liabilities that would result if
the Company was unable to continue as a going concern.
Haifa, Israel
March 29, 2015
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
- 118 -
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
Special Report in accordance with Regulation 9c
Financial Data and Financial Information from the
Consolidated Financial Statements Attributable to the Company
Below is financial data and separate financial information attributable to the Company itself from the
Group's consolidated financial statements as of December 31, 2014, published as part of the periodic reports
("the consolidated financial statements"), presented in accordance with Regulation 9c to the Securities
Regulations (Periodic and Immediate Reports), 1970.
The significant accounting policies applied in presenting this financial information are elaborated in Note 2
to the consolidated financial statements.
Investees - as defined in Note 1 to the consolidated financial statements.
- 119 -
Financial Data from the Consolidated Statements of Financial Position
Attributable to the Company
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Restricted cash
Accounts receivable
NON-CURRENT ASSETS:
Receivables from subsidiaries
Investment in associate
Property, plant and equipment
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Trade payables
Other accounts payable
Share options
NON-CURRENT LIABILITIES:
Government grants
Liabilities less assets attributable to subsidiaries
EQUITY (DEFICIT) ATTRIBUTABLE TO THE COMPANY
December 31,
2014
2013
NIS in thousands
594
44
98
736
4,680
187
69
4,936
5,672
973
132
-
1,105
156
4,554
4,710
(143)
5,672
3,510
*) 327
*) 110
3,947
4,720
-
297
5,017
8,964
1,216
343
81
1,640
128
3,505
3,633
3,691
8,964
*)
Reclassified.
The accompanying additional information is an integral part of the financial data and separate financial
information.
Date of approval of the
financial statements
Uri Ben-Or
CFO
Jan Turek
CEO
Asher Shmulevitz
Chairman of the Board
- - 120 -
-
Financial Data from the Consolidated Statements of Profit or Loss
Attributable to the Company
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
Research and development expenses
General and administrative expenses
2014
Year ended December 31,
2013
NIS in thousands
2012
914
4,910
5,824
4,632
3,903
8,535
7,574
4,552
12,126
Other income
(109)
(7,240)
(487)
Operating income (loss)
(5,715)
(1,295)
(11,639)
Finance income
Finance expenses
333
(433)
1,831
(67)
451
(388)
Company's share of losses of investees (including
impairment of goodwill), net
(1,392)
(262)
(1,667)
Income (loss) attributable to the Company
(7,207)
207
(13,243)
The accompanying additional information is an integral part of the financial data and separate financial
information.
- - 121 -
-
Financial Data from the Consolidated Statements of Cash Flows
Attributable to the Company
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
Cash flows from the Company's operating activities:
Income (loss) attributable to the Company
(7,207)
207
(13,243)
2014
Year ended December 31,
2013
NIS in thousands
2012
Adjustments to reconcile income (loss) to net cash used in
the Company's operating activities:
Adjustments to the Company's profit and loss items:
Depreciation and amortization
Loss (gain) from sale of property, plant and equipment
Change in employee benefit liabilities, net
Cost of share-based payment
Decrease in value of share options
Decrease (increase) in outstanding liability to the Chief
Scientist (including amounts recorded in research and
development expenses)
Write down of liability to the Chief Scientist
Finance expenses (income), net
Impairment of contingent consideration
Impairment of intangible asset
Revaluation of liability for contingent consideration in a
business combination
Company's share of losses of investees, net
Impairment of financial derivatives
Changes in the Company's asset and liability items:
Decrease (increase) in accounts receivable
Decrease in trade payable
Decrease in other accounts payable
Cash received by the Company during the year for:
67
(38)
-
144
(81)
28
-
(5)
-
-
-
1,392
350
1,871
52
(243)
(211)
(402)
160
(34)
(20)
(154)
(30)
(1,805)
(7,206)
(20)
-
-
-
262
-
(8,847)
(143)
(177)
(53)
(373)
255
(4)
(7)
763
-
(1,305)
-
(107)
(779)
296
191
1,667
-
970
(466)
(843)
(222)
(1,531)
Interest received
5
20
107
Net cash used in the Company's operating activities
(5,747)
(8,993)
(13,697)
The accompanying additional information is an integral part of the financial data and separate financial
information.
- - 122 -
-
Financial Data from the Consolidated Statements of Cash Flows
Attributable to the Company
THERAPIX BIOSCIENCES LTD.
(Formerly: NasVax Ltd.)
Cash flows from the Company's investing activities:
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Movement in restricted cash
Investment in company accounted for at equity
Net cash provided by (used in) the Company's investing
activities
Cash flows from the Company's financing activities:
Exercise of options into shares
Issue of share capital and share options (less issuance
expenses)
Receipts from the Chief Scientist
Net cash provided by the Company's financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
2014
Year ended December 31,
2013
NIS in thousands
2012
201
(2)
283
(870)
(388)
-
3,219
-
3,219
(2,916)
3,510
594
34
(6)
-
-
28
338
9,879
486
10,703
1,738
1,772
3,510
5
(70)
-
-
(65)
-
1,759
2,612
4,371
(9,391)
11,163
1,772
The accompanying additional information is an integral part of the financial data and separate financial
information.
- - 123 -
-
a.
General
For the year ended December 31, 2014, the Company had negative cash flows from operating
activities totaling NIS 5,747 thousand and accumulated deficit totaling NIS 103,380 thousand and
recurring operating losses.
The balance of cash at the Company's hands may not be sufficient to finance its operating activities in
the period beyond 12 months after the date of the approval of the financial statements.
These factors raise substantial doubt as to the Group's ability to continue as a "going concern".
The Company finances its operations by raising capital from private and institutional sources and by
collaborating with leading multinational corporations in the industry. The Company's management is
focusing on securing the Company's financial stability, among others, by exploring one or more of the
above alternatives.
The financial data and separate financial information attributable to the Company itself out of the
Group's consolidated financial statements do not include any adjustments to the carrying amounts and
classifications of assets and liabilities that would result if the Company was unable to continue as a
going concern.
b.
Balance of cash and cash equivalents attributable to the Company (excluding amounts in respect
of investees):
December 31, 2014:
Cash equivalents
December 31, 2013:
Cash
Cash equivalents
Unlinked
Total
NIS in thousands
594
594
Linked to
US dollar
Unlinked
NIS in thousands
Total
-
1,457
1,457
2,053
-
2,053
2,053
1,457
3,510
- 124 -
c.
Disclosure of financial assets attributable to the Company (excluding amounts in respect of
investees):
1.
Details of material investments attributable to the Company by groups of financial assets
pursuant to IAS 39:
Cash and cash equivalents
Restricted cash
Accounts receivable
December 31,
2014
2013
NIS in thousands
594
44
98
3,510
327
110
The expected date of realization of accounts receivable is up to one year. Accounts receivable
and cash are unlinked.
2.
Liquidity risk attributable to the Company:
The table below presents the maturity profile of the Group's financial liabilities based on
contractual undiscounted payments (including interest payments):
December 31, 2014:
Trade payables
Other accounts payable
Government grants
December 31, 2013:
Trade payables
Other accounts payable
Share options
Government grants
*)
Reclassified.
Less than
one year
Over four
years
NIS in thousands
Total
973
132
-
1,105
-
-
4,254
4,254
973
132
4,254
5,359
Less than
one year
Over four
years
NIS in thousands
Total
1,216
343
81
-
1,640
-
-
-
4,338
4,338
1,216
343
81
*) 4,338
5,978
- 125 -
d.
Disclosure of balances of deferred tax assets and liabilities attributable to the Company
(excluding amounts in respect of investees) and disclosure of tax income or expense attributable
to the Company (excluding amounts in respect of investees):
Taxes on income attributable to the Company:
1.
Tax laws applicable to the Company:
As for the tax laws applicable to the Company, see Note 13a to the consolidated financial
statements.
2.
Tax rates applicable to the Company:
As for the tax rates applicable to the Company, see Note 13a to the consolidated financial
statements.
3.
Tax assessments attributable to the Company:
The assessments of the Company are deemed final through the 2010 tax year.
4.
Carryforward tax losses and other temporary differences attributable to the Company:
The Company has tax losses in Israel that can be carried forward indefinitely totaling
approximately NIS 76 million.
No deferred tax assets relating to carryforward business losses and other temporary differences
have been recognized because their utilization in the foreseeable future is not probable.
e. Material loans, balances and commitments with investees:
Balances and transactions with investees:
1.
Balances with investees:
Receivables from subsidiaries
4,680
4,720
December 31,
2014
2013
NIS in thousands
- 126 -
e. Material loans, balances and commitments with investees: (Cont.)
2.
Transactions with investees:
2014
Year ended December 31,
2013
NIS in thousands
2012
Participation in investees' expenses
133
262
261
3.
Commitments:
a)
On June 27, 2007, the Company founded NasVax Inc., a U.S. subsidiary whose main
activity is to provide business and marketing consulting services to the parent company.
Therapix Biosciences Ltd. (formerly: NasVax Ltd.) and the subsidiary, NasVax Inc.,
signed a service agreement which determines the following:
1)
2)
3)
The subsidiary will provide Therapix Biosciences Ltd. (formerly: NasVax Ltd.)
services as specified in the agreement.
NasVax Inc. has no authority to bind the Company by any contractual obligations
to third parties.
All the rights and assets in the subsidiary or generated by it are exclusively owned
by the Company.
b)
Payment for services:
In consideration for the services, Therapix Biosciences Ltd. (formerly: NasVax Ltd.) will
pay its subsidiary for the costs of rendering the services specified in the agreement plus a
5% margin of total costs (cost + 5%).
Shareholders' loan:
NasVax Inc. will pay the Company annual interest of 5.25% on shareholders' loan. As of
the reporting date, the subsidiary has no employees.
c)
On July 12, 2009, the Company acquired the entire issued share capital of Ormaion Bio
Ltd. (formerly: Protea Vaccine Technologies Ltd.) ("Ormaion"). In September 2013, as
part of the investment agreement, the Company allocated to the Chinese company,
Acebright Holding Limited, 10% of the issued and outstanding capital of Ormaion.
- 127 -
e. Material loans, balances and commitments with investees: (Cont.)
d)
e)
f)
On October 13, 2013, the Company founded Brain Bright Ltd. As of the reporting date,
the subsidiary has no activity and it has no employees.
As for information regarding the investment agreement between the Company and
LaraPharm Ltd., see Note 13d to the consolidated financial statements.
As for information regarding a binding term sheet between the Company and Dekel
Pharmaceuticals Ltd., see Note 13e to the consolidated financial statements.
f.
Events after the reporting date
See Note 23 to the consolidated financial statements.
- - - - - - - - - - - - - -
- 128 -