SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2020

_______________________

BioLineRx Ltd.

(Translation of Registrant’s name into English)

_______________________

2 HaMa’ayan Street

Modi’in 7177871, Israel

(Address of Principal Executive Offices)

_______________________

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F ☑          Form 40-F ☐

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes ☐          No ☑

 

On May 20, 2020, the Registrant will issue a press release announcing its financial results for the three months ended March 31, 2020. The Registrant is also publishing its unaudited interim consolidated financial statements, as well as its operating and financial review, as of March 31, 2020 and for the three months then ended. Attached hereto are the following exhibits:

 

 

This Form 6-K, including all exhibits hereto, is hereby incorporated by reference into all effective registration statements filed by the registrant under the Securities Act of 1933.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: May 20, 2020

For Immediate Release

BioLineRx Reports First Quarter 2020 Financial Results

and Provides Corporate Update

 

 

- Management to hold conference call today, May 20, at 10:00 am EDT -

TEL AVIV, Israel, May 20, 2020 -- BioLineRx Ltd. (NASDAQ: BLRX) (TASE: BLRX), a late clinical-stage biopharmaceutical company focused on oncology, today reports its financial results for the quarter ended March 31, 2020 and provides a corporate update.

Highlights and achievements during the first quarter 2020 and subsequent period:

 

 

 

 

 

“The ongoing COVID-19 pandemic has caused an unprecedented disruption in business activities and continues to impact drug development timelines around the world,” stated Philip Serlin, Chief Executive Officer of BioLineRx. “During this crisis, we have remained in close contact with our principal investigators, and we remain on track to report important survival data from the triple combination arm of our ongoing Phase 2a COMBAT/KEYNOTE-202 study in advanced second-line pancreatic cancer mid-year, consistent with our prior guidance. The compelling and sustained preliminary response data on 22 evaluable patients that we reported in December give us hope that the combination of motixafortide, KEYTRUDA^® and chemotherapy could represent a significant breakthrough in one of the most difficult to treat cancers.

 

“We also continue to expect results from our ongoing BLAST Phase 2b study of motixafortide in consolidation therapy for AML patients and our GENESIS Phase 3 trial in stem cell mobilization for autologous transplantation in multiple myeloma patients by the end of this year.

 

“Development of our second clinical candidate, AGI-134, has been impacted by COVID-19, as enrollment in the Phase 1/2a trial has been temporarily suspended. We now expect data from that study in the second half of next year.

 

“We have taken swift actions in response to the pandemic to conserve cash and ensure that we can successfully navigate through this unprecedented time. But we remain as enthusiastic as ever about the broad therapeutic potential of motixafortide to treat a broad range of cancers, and we look forward to three important data readouts this year,” Mr. Serlin concluded.

 

Upcoming 2020 and 2021 Milestones

 

 

 

 

 

Financial Results for the Quarter Ended March 31, 2020

 

Research and development expenses for the quarter ended March 31, 2020 were $5.4 million, an increase of $1.0 million, or 23.5%, compared to $4.4 million for the comparable period in 2019. The increase resulted primarily from higher expenses associated with the motixafortide COMBAT clinical trial as well as an increase in share-based compensation.

 

Sales and marketing expenses for the quarter ended March 31, 2020 were $0.2 million, a decrease of $0.1 million, or 31.6%, compared to $0.3 million for the comparable period in 2019. The decrease resulted primarily from a decrease in payroll and related expenses.

 

General and administrative expenses for the quarter ended March 31, 2020 were $1.2 million, an increase of $0.3 million, or 33.7%, compared to $0.9 million for the comparable period in 2019. The increase resulted primarily from an increase in share-based compensation.

 

The Company's operating loss for the quarter ended March 31, 2020 amounted to $6.8 million, compared to an operating loss of $5.6 million for the comparable period in 2019.

 

Non-operating income amounted to $0.5 million for the quarter ended March 31, 2020, compared to non-operating expense of $0.3 million for the comparable period in 2019. Non-operating income for the three months ended March 31, 2020 primarily relates to fair-value adjustments of warrant liabilities on the Company’s balance sheet. Non-operating expenses for the three months ended March 31, 2019 primarily relate to warrant offering expenses offset by fair-value adjustments of warrant liabilities on the Company’s balance sheet.

 

Net financial expenses amounted to $0.3 million for the quarter ended March 31, 2020, compared to net financial expenses of $0.2 million for the comparable period in 2019. Net financial expenses for both periods primarily relate to interest paid on loans, offset by investment income earned on bank deposits.

 

The Company's net loss for the quarter ended March 31, 2020 amounted to $6.6 million, compared with a net loss of $6.2 million for the comparable period in 2019.

 

The Company held $21.2 million in cash, cash equivalents and short-term bank deposits as of March 31, 2020.

 

Net cash used in operating activities was $6.7 million for the quarter ended March 31, 2020, compared with net cash used in operating activities of $4.6 million for the comparable period in 2019. The $2.1 million increase in net cash used in operating activities during the three-month period in 2020, compared to the three-month period in 2019, was primarily the result of changes in operating asset and liability items in the two periods, i.e., an increase in prepaid expenses and other receivables in 2020 versus a decrease in 2019, as well as higher decrease in accounts payable and accruals in 2020 versus 2019.

 

Net cash provided by investing activities was $6.2 million for the quarter ended March 31, 2020, compared to net cash used in investing activities of $9.3 million for the comparable period in 2019. The changes in cash flows from investing activities relate primarily to investments in, and maturities of, short-term bank deposits.

 

Net cash provided by financing activities was $0.4 million for the quarter ended March 31, 2020, compared to net cash provided by financing activities of $14.9 million for the comparable period in 2019. The decrease in cash flows from financing activities reflects the underwritten public offering completed in February 2019.

 

Conference Call and Webcast Information

 

BioLineRx will hold a conference call today, May 20, 2020 at 10:00 a.m. EDT. To access the conference call, please dial +1-888-668-9141 from the US or +972-3-918-0609 internationally. The call will also be available via webcast and can be accessed through the Investor Relations page of BioLineRx’s website. Please allow extra time prior to the call to visit the site and download any necessary software to listen to the live broadcast.

 

A replay of the conference call will be available approximately two hours after completion of the live conference call on the Investor Relations page of BioLineRx’s website. A dial-in replay of the call will be available until May 22, 2020; please dial +1-888-782-4291 from the US or +972-3-925-5928 internationally.

(Tables follow)

About BioLineRx

BioLineRx Ltd. (NASDAQ/TASE: BLRX) is a late clinical-stage biopharmaceutical company focused on oncology. The Company’s business model is to in-license novel compounds, develop them through clinical stages, and then partner with pharmaceutical companies for further clinical development and/or commercialization.

The Company’s lead program, motixafortide (BL-8040), is a cancer therapy platform currently being evaluated in a Phase 2a study for the treatment of pancreatic cancer in combination with KEYTRUDA^® and chemotherapy under a collaboration agreement with MSD. Motixafortide is also being evaluated in a Phase 2b study in consolidation AML and a Phase 3 study in stem cell mobilization for autologous bone-marrow transplantation.

BioLineRx is developing a second oncology program, AGI-134, an immunotherapy treatment for multiple solid tumors that is currently being investigated in a Phase 1/2a study.

For additional information on BioLineRx, please visit the Company’s website at www.biolinerx.com, where you can review the Company’s SEC filings, press releases, announcements and events. BioLineRx industry updates are also regularly updated on Facebook, Twitter, and LinkedIn.

Various statements in this release concerning BioLineRx’s future expectations constitute "forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include words such as "may,” "expects,” "anticipates,” "believes,” and "intends,” and describe opinions about future events. These forward-looking statements involve known and unknown risks and uncertainties that may cause the actual results, performance or achievements of BioLineRx to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Some of these risks are: changes in relationships with collaborators; the impact of competitive products and technological changes; risks relating to the development of new products; and the ability to implement technological improvements. These and other factors are more fully discussed in the "Risk Factors” section of BioLineRx’s most recent annual report on Form 20-F filed with the Securities and Exchange Commission on March 12, 2020. In addition, any forward-looking statements represent BioLineRx’s views only as of the date of this release and should not be relied upon as representing its views as of any subsequent date. BioLineRx does not assume any obligation to update any forward-looking statements unless required by law.

 

BioLineRx Ltd.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(UNAUDITED)

BioLineRx Ltd.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

BioLineRx Ltd.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

BioLineRx Ltd.

CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENTS

(UNAUDITED)

 

BioLineRx Ltd.

APPENDIX TO CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENTS

(UNAUDITED)

 

BioLineRx Ltd.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

AS OF MARCH 31, 2020

 

BioLineRx Ltd.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

AS OF MARCH 31, 2020

TABLE OF CONTENTS

BioLineRx Ltd.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

BioLineRx Ltd.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

BioLineRx Ltd.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

BioLineRx Ltd.

CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENTS

(UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

BioLineRx Ltd.

 APPENDIX TO CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENTS

(UNAUDITED)

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

NOTE 1 – GENERAL INFORMATION

BioLineRx Ltd. (“BioLineRx”), headquartered in Modi’in, Israel, was incorporated and commenced operations in April 2003. BioLineRx and its subsidiaries (collectively, the “Company”) are engaged in the development of therapeutics, primarily in clinical stages, with a focus on the field of oncology.

The Company’s American Depositary Shares (“ADSs”) are traded on the NASDAQ Capital Market, and its ordinary shares are traded on the Tel Aviv Stock Exchange (“TASE”).

In March 2017, the Company acquired Agalimmune Ltd. (“Agalimmune”), a privately held company incorporated in the United Kingdom, with a focus on the field of immuno-oncology.

Although it has generated revenues from out-licensing transactions in the past, the Company has incurred accumulated losses in the amount of $255 million through March 31, 2020 and cannot determine with reasonable certainty when and if it will have sustainable profits. Management believes that the Company’s current cash and other resources will be sufficient to fund its projected cash requirements into the second quarter of 2021. Accordingly, absent additional funding or the generation of cash flows from its operations, the Company may be unable to carry out its current operating activities planned for the next 12 months from the date of approval of these financial statements.

Management is in the process of evaluating various financing alternatives, including funding its clinical development activities via out-licensing or collaborations, and fundraising in the public or private equity markets. However, there is no certainty about the Company’s ability to obtain such funding. These factors raise substantial doubt as to the Company’s ability to continue as a going concern.

The financial information has been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. If the Company does not raise the requisite funds, it will need to curtail or cease operations. These financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.

The condensed consolidated interim financial statements of the Company as of March 31, 2020, and for the three months then ended, were approved by the Board of Directors on May 19, 2020, and signed on its behalf by the Chairman of the Board, the Chief Executive Officer and the Chief Financial Officer.

NOTE 2 – BASIS OF PREPARATION

 

The Company’s condensed consolidated interim financial statements as of March 31, 2020 and for the three months then ended (the “interim financial statements”) have been prepared in accordance with International Accounting Standard No. 34, “Interim Financial Reporting” (“IAS 34”). These interim financial statements, which are unaudited, do not include all disclosures necessary for a fair statement of financial position, results of operations, and cash flows in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). The condensed consolidated interim financial statements should be read in conjunction with the Company’s annual financial statements as of December 31, 2019 and for the year then ended and their accompanying notes, which have been prepared in accordance with IFRS. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year or for any other interim period.

In the process of preparing the interim financial statements, management makes estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity and expenses, as well as the related disclosures of contingent assets and liabilities. These inputs also consider, among other things, the implications of COVID-19 on the Company’s activities, and the resultant effects on critical and significant accounting estimates, most significantly in relation to the value of intangible assets. Future developments related to COVID-19 are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it, as well as its overall economic impact, and more specifically its effects on the financial markets. All estimates made by the Company related to the impact of COVID-19 in its financial statements may change in future periods. Actual results could differ from those estimates.

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

 

The accounting policies and calculation methods applied in the preparation of these interim financial statements are consistent with those applied in the preparation of the annual financial statements as of December 31, 2019 and for the year then ended.

NOTE 4 – AT-THE-MARKET (“ATM”) SALES AGREEMENT WITH BTIG

In October 2017, the Company entered into an at-the-market (“ATM”) sales agreement with BTIG, LLC (“BTIG”), pursuant to which the Company may, at its sole discretion, offer and sell through BTIG, acting as sales agent, ADSs having an aggregate offering price of up to $30.0 million throughout the period during which the ATM facility remains in effect. The Company will pay BTIG a commission of 3.0% of the gross proceeds from the sale of ADSs under the facility.

During the three months period ended March 31, 2020, the Company issued a total of 479,114 ADSs for total net proceeds of $1.1 million. From the effective date of the agreement through March 31, 2020, 2,725,916 ADSs were sold under the program for total gross proceeds of approximately $12.6 million, leaving an available balance under the facility of approximately $17.4 million as of March 31, 2020.

NOTE 5 – SHAREHOLDERS’ EQUITY

 

As of December 31, 2019 and March 31, 2020, share capital is composed of ordinary shares, as follows:

OPERATING AND FINANCIAL REVIEW

 

You should read the following discussion of our operating and financial condition and prospects in conjunction with the financial statements and the notes thereto included elsewhere in this 6-K, as well as in our Annual Report on Form 20-F filed on March 12, 2020 (the “Annual Report”).

 

Forward Looking Statements

 

The following discussion contains “forward-looking statements,” including statements regarding expectations, beliefs, intentions or strategies for the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms including “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions, and are subject to risks and uncertainties. You should not put undue reliance on any forward-looking statements. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those listed below as well as those discussed in the Annual Report (particularly those in “Item 3. Key Information – Risk Factors”). Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.

 

Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Factors

 

Except as set forth below, there are no material changes to the risk factors previously disclosed in our Annual Report on Form 20-F for the year ended December 31, 2019.

 

The widespread outbreak of an illness or any other communicable disease, or any other public health crisis, such as the COVID-19 pandemic, could adversely affect our business, results of operations and financial condition.

 

The novel coronavirus outbreak, or COVID-19, has affected segments of the global economy and may materially affect our operations, including potentially interrupting our supply chain, clinical trial and commercialization activities. COVID-19 originated in Wuhan, China, in December 2019 and was declared a pandemic by the World Health Organization in March 2020. The virus has since spread to multiple countries, including to the United States, Europe and Israel, where we currently have our therapeutic candidates manufactured and conduct our clinical trials. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. At present, we are not experiencing significant impacts or delays from COVID-19 on our clinical and development activities for our lead compound, motixafortide. However, we do expect a delay of between 6-12 months in the phase 1/2a study we are currently conducting for AGI-134, our second lead compound. The uncertainty surrounding the severity and continued spread of the coronavirus may result in a period of prolonged business disruption. COVID-19 may impact our future operations, including potential interruptions to supply chains, clinical trials, commercialization activities and regulatory reviews and approvals. COVID-19 may also affect our employees and employees and operations at suppliers that may result in delays or disruptions in supply. Any COVID-19 related disruption could have a material adverse impact on our business and our results of operation and financial condition. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our shares. Additionally, if the COVID-19 pandemic has a significant impact on our business and financial results for an extended period of time, our liquidity and cash resources could be negatively impacted. Capital and credit markets have been disrupted by the crisis and exchanges have experienced increased volatility. As a result, access to additional financing may be challenging and is largely dependent upon evolving market conditions and other factors. We have taken precautionary measures, and may take additional measures, intended to minimize the risk of COVID-19 to our employees and operations. The extent of the impact of COVID-19 on our operational and financial performance, including our ability to execute our business strategies in the expected time frame or at all, will depend on future developments, such as the duration and spread of the COVID-19 pandemic and related restrictions and implications, all of which are uncertain and cannot be predicted.

 

Overview

 

General

 

We are a clinical-stage biopharmaceutical development company with a strategic focus on oncology. Our current development and commercialization pipeline consists of two clinical-stage therapeutic candidates − motixafortide (BL-8040), a novel peptide for the treatment of solid tumors, hematological malignancies and stem cell mobilization, and AGI-134, an immuno-oncology agent in development for solid tumors. In addition, we have an off-strategy, legacy therapeutic product called BL-5010 for the treatment of skin lesions. We have generated our pipeline by systematically identifying, rigorously validating and in-licensing therapeutic candidates that we believe exhibit a high probability of therapeutic and commercial success. Our strategy includes commercializing our therapeutic candidates through out-licensing arrangements with biotechnology and pharmaceutical companies and evaluating, on a case by case basis, the commercialization of our therapeutic candidates independently.

 

Main Therapeutic Candidates

 

The following is a description of our main programs:

 

 

Solid tumors

 

 

 

AML

 

 

 

Stem cell mobilization

 

 

 

 

Other matters

 

 

 

 

 

Funding

 

We have funded our operations primarily through the sale of equity securities (both in public and private offerings), funding received from a government body which previously was called the Office of the Chief Scientist of the Israeli Ministry of the Economy (OCS) (and which in 2016 was replaced by the newly-established Israel Innovation Authority, or IIA), payments received under out-licensing arrangements, and interest earned on investments. We expect to continue to fund our operations over the next several years through our existing cash resources, potential future milestone and royalty payments that we may receive from our existing out-licensing agreement, potential future upfront, milestone or royalty payments that we may receive from out-licensing transactions for our other therapeutic candidates, interest earned on our investments and additional capital to be raised through public or private equity offerings or debt financings. As of March 31, 2020, we held $21.2 million of cash, cash equivalents and short-term bank deposits.

 

Recent Company Developments

 

Motixafortide as therapy for COVID-19-induced inflammatory lung disorders, including acute respiratory distress syndrome (ARDS)

 

Over the last few months, we have been evaluating motixafortide as a potential therapy for COVID-19-induced inflammatory lung disorders, including ARDS. In this regard, substantial data is emerging regarding the involvement of neutrophils and macrophages in the development of COVID-19 lung symptoms, including severe complications such as ARDS; as well as the key involvement of CXCR4 as the primary mediator of those cells in the inflamed alveolar tissue of the lung. We believe that motixafortide will succeed in modulating neutrophils and macrophages via CXCR4 inhibition, thus reducing their retention in the lungs, potentially resulting in improved morbidity and mortality. We are currently determining the optimal pathway to obtain initial clinical data in the shortest time possible.

 

Motixafortide clinical development update – COMBAT/KEYNOTE-202 study

 

In January 2020, we completed patient recruitment in the triple combination arm of our ongoing Phase 2a COMBAT/KEYNOTE-202 study. A total of 43 patients diagnosed with unresectable stage IV metastatic pancreatic adenocarcinoma (PDAC), who have progressed following first-line gemcitabine-based therapy, were enrolled as planned in the triple combination arm focusing on second-line pancreatic cancer patients. Patients receive motixafortide monotherapy priming treatment for five days, followed by combination cycles of chemotherapy (Onivyde^®/5-fluorouracil/leucovorin), KEYTRUDA and motixafortide until progression. The primary endpoint of the study is the objective response rate (ORR). Secondary endpoints include overall survival, progression free survival, and disease control rate.

 

Regulatory matters

 

In January 2020, the EMA granted Orphan Drug Designation to motixafortide for the treatment of pancreatic cancer. The EMA grants orphan medicinal product designation to investigational drugs intended to treat, prevent or diagnose a life-threatening or chronically debilitating disease affecting fewer than five in 10,000 people in the EU and for which no satisfactory treatment is available or, if such treatment exists, the medicine must be of significant benefit to those affected by the condition. Orphan medicinal product designation provides regulatory and financial incentives for companies to develop and market therapies, including ten years of market exclusivity, protocol assistance, fee reductions and EU-funded research.

 

Patent Protection

 

In February 2020, the United States Patent and Trademark Office (USPTO) issued a Notice of Allowance for a patent application claiming the use of motixafortide combined with any PD-1 inhibitor for the treatment of any type of cancer. The PD-1 antagonist can be any agent that prevents and/or inhibits the biological function and/or expression of PD-1, such as KEYTRUDA. The targeted cancer can be solid, non-solid, and/or a cancer metastasis. This patent, when issued, will be valid until July 2036 with a possibility of up to five years patent term extension. Additional corresponding patent applications are pending in Europe, Japan, China, Canada, Australia, India, Korea, Mexico, Brazil and Israel.

 

Revenues

 

Our revenues to date have been generated primarily from milestone payments under previously existing out-licensing agreements.

 

We expect our revenues, if any, for the next several years to be derived primarily from future payments under our current out-licensing agreement with Perrigo and other potential collaboration arrangements, including future royalties on product sales.

 

Research and Development

 

Our research and development expenses consist primarily of salaries and related personnel expenses, fees paid to external service providers, up-front and milestone payments under our license agreements, patent-related legal fees, costs of preclinical studies and clinical trials, drug and laboratory supplies and costs for facilities and equipment. We primarily use external service providers to manufacture our product candidates for clinical trials and for the majority of our preclinical and clinical development work. We charge all research and development expenses to operations as they are incurred. We expect our research and development expense to remain our primary expense in the near future as we continue to develop our therapeutic candidates.

 

The following table identifies our current major research and development projects:

 

We expect that a large percentage of our research and development expense in the future will be incurred in support of our current and future preclinical and clinical development projects. Due to the inherently unpredictable nature of preclinical and clinical development processes and given the early stage of our preclinical product development projects, we are unable to estimate with any certainty the costs we will incur in the continued development of the therapeutic candidates in our pipeline for potential commercialization. Clinical development timelines, the probability of success and development costs can differ materially from expectations. We expect to continue to test our product candidates in preclinical studies for toxicology, safety and efficacy, and to conduct additional clinical trials for each product candidate. If we are not able to enter into an out-licensing arrangement with respect to any therapeutic candidate prior to the commencement of later stage clinical trials, we may fund the trials for the therapeutic candidate ourselves.

 

While we are currently focused on advancing each of our product development projects, our future research and development expenses will depend on the clinical success of each therapeutic candidate, as well as ongoing assessments of each therapeutic candidate’s commercial potential. In addition, we cannot forecast with any degree of certainty which therapeutic candidates may be subject to future out-licensing arrangements, when such out-licensing arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

 

As we obtain results from clinical trials, we may elect to discontinue or delay clinical trials for certain therapeutic candidates or projects in order to focus our resources on more promising therapeutic candidates or projects. Completion of clinical trials by us or our licensees may take several years or more, but the length of time generally varies according to the type, complexity, novelty and intended use of a therapeutic candidate.

 

The cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others:

 

 

 

 

 

 

 

 

 

We expect our research and development expenses to remain our most significant cost as we continue the advancement of our clinical trials and preclinical product development projects and place significant emphasis on in-licensing new product candidates. The lengthy process of completing clinical trials and seeking regulatory approval for our product candidates requires expenditure of substantial resources. Any failure or delay in completing clinical trials, or in obtaining regulatory approvals, could cause a delay in generating product revenue and cause our research and development expenses to increase and, in turn, have a material adverse effect on our operations. Due to the factors set forth above, we are not able to estimate with any certainty when we would recognize any net cash inflows from our projects.

 

Sales and Marketing Expenses

 

Sales and marketing expenses consist primarily of compensation for employees in business development and marketing functions. Other significant sales and marketing costs include costs for marketing and communication materials, professional fees for outside market research and consulting, legal services related to partnering transactions and travel costs.

 

General and Administrative Expenses

 

General and administrative expenses consist primarily of compensation for employees in executive and operational functions, including accounting, finance, legal, investor relations, information technology and human resources. Other significant general and administration costs include facilities costs, professional fees for outside accounting and legal services, travel costs, insurance premiums and depreciation.

 

Non-Operating Expense and Income

 

Non-operating expense and income includes fair-value adjustments of liabilities on account of the warrants issued in equity financings we carried out in July 2017 and February 2019, as well as from debt financing we received in October 2018. These fair-value adjustments are highly influenced by our share price at each period end (revaluation date). Non-operating expense and income also includes the pro-rata share of issuance expenses from the placements related to the warrants, as well as the capital gain from realization of our investment in iPharma, a joint venture our holdings in which we sold in April 2018. Sales-based royalties and other revenue from the license agreement with Perrigo have also been included as part of non-operating income, as the out-licensed product is not an integral part of our strategy and the amounts are not material.

 

Financial Expense and Income

 

Financial expense and income consists of interest earned on our cash, cash equivalents and short-term bank deposits; interest on loans, bank fees and other transactional costs. In addition, it may also include gains/losses on foreign exchange hedging transactions, which we carry out from time to time to protect against a portion of our NIS-denominated expenses (primarily compensation) in relation to the dollar.

 

Significant Accounting Policies and Estimates

 

We describe our significant accounting policies more fully in Note 2 to our consolidated financial statements for the year ended December 31, 2019.

 

The discussion and analysis of our financial condition and results of operations is based on our financial statements, which we prepare in accordance with IFRS as endorsed by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

Results of Operations

 

Revenues

 

We did not record any revenues during each of the three-month periods ended March 31, 2020 and 2019.

 

Cost of revenues

 

We did not record any cost of revenues during each of the three-month periods ended March 31, 2020 and 2019.

 

Operating Results Comparison between Periods

 

Revenues and cost of revenues

 

See discussion under “Results of Operations.”

 

Research and development expenses

 

Research and development expenses for the three months ended March 31, 2020 were $5.4 million, an increase of $1.0 million, or 23.5%, compared to $4.4 million for the three months ended March 31, 2019. The increase resulted primarily from higher expenses associated with the motixafortide COMBAT clinical trial as well as an increase in share-based compensation.

Sales and marketing expenses

 

Sales and marketing expenses for the three months ended March 31, 2020 were $0.2 million, a decrease of $0.1 million, or 31.6%, compared to $0.3 million for the three months ended March 31, 2019. The decrease resulted primarily from a decrease in payroll and related expenses.

General and administrative expenses

 

General and administrative expenses for the three months ended March 31, 2020 were $1.2 million, an increase of $0.3 million, or 33.7%, compared to $0.9 million for the three months ended March 31, 2019. The increase resulted primarily from an increase in share-based compensation.

Non-operating income (expenses), net

 

We recognized net non-operating income of $0.5 million for the three months ended March 31, 2020, compared to net non-operating expense of $0.3 million for the three months ended March 31, 2019.

Non-operating income for the three months ended March 31, 2020 primarily relate to fair-value adjustments of warrant liabilities on our balance sheet. Non-operating expenses for the three months ended March 31, 2019 primarily relate to warrant offering expenses offset by fair-value adjustments of warrant liabilities on our balance sheet.

Financial income (expenses), net

 

We recognized net financial expenses of $0.3 million for the three months ended March 31, 2020 compared to net financial expenses of $0.2 million for the three months ended March 31, 2019. Net financial expenses for both periods primarily relate to interest paid on loans, offset by investment income earned on our bank deposits.

 

Liquidity and Capital Resources

 

The accompanying financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have incurred losses and cash flow deficits from operations since inception, resulting in accumulated losses, as of March 31, 2020, of $255 million. We believe that our existing cash and cash equivalents will only be sufficient to fund our projected cash needs into the second quarter of 2021. To meet future capital needs, we would need to raise additional capital through equity or debt financing or other strategic transactions. Management is in the process of evaluating various financing alternatives, including funding its clinical development activities through out-licensing or collaborations, and fundraising in the public or private equity markets.

 

Since inception, we have funded our operations primarily through public and private offerings of our equity securities, funding from the IIA, and payments received under our strategic licensing arrangements. At March 31, 2020, we held $21.2 million in cash, cash equivalents and short-term bank deposits. We have invested substantially all our available cash funds in short-term bank deposits.

 

Pursuant to our ATM Program with BTIG, LLC, or BTIG, we may sell, from time to time, and at our discretion, up to $30 million of our ADSs during the term of the program. During the three months ended March 31, 2020, we sold 479,114 ADSs under the program, resulting in net proceeds to BioLine of approximately $1.1 million (net of $34,200 in commissions paid to BTIG). As of the date of this report, we have an available balance under the program of approximately $17.4 million.

 

Net cash used in operating activities was $6.7 million for the three months ended March 31, 2020, compared with net cash used in operating activities of $4.6 million for the three months ended March 31, 2019. The $2.1 million increase in net cash used in operating activities during the three-month period in 2020, compared to the three-month period in 2019, was primarily the result of changes in operating asset and liability items in the two periods, i.e., an increase in prepaid expenses and other receivables in 2020 versus a decrease in 2019, as well as a larger decrease in accounts payable and accruals in 2020 versus 2019.

 

Net cash provided by investing activities was $6.2 million for the three months ended March 31, 2020, compared to net cash used in investing activities of $9.3 million for the three months ended March 31, 2019. The changes in cash flows from investing activities relate primarily to investments in, and maturities of, short-term bank deposits.

 

Net cash provided by financing activities was $0.4 million for the three months ended March 31, 2020, compared to net cash provided by financing activities of $14.9 million for the three months ended March 31, 2019. The decrease in cash flows from financing activities reflects the underwritten public offering completed in February 2019.

 

Developing drugs, conducting clinical trials and commercializing products is expensive and we will need to raise substantial additional funds to achieve our strategic objectives. Although we believe our existing cash and other resources will be sufficient to fund our projected cash requirements into the second quarter of 2021, we will require significant additional financing in the future to fund our operations. Additional financing may not be available on acceptable terms, if at all. Our future capital requirements will depend on many factors, including:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Until we can generate significant continuing revenues, we expect to satisfy our future cash needs through payments received under our collaborations, debt or equity financings, or by out-licensing other product candidates. We cannot be certain that additional funding will be available to us on acceptable terms, or at all.

 

If funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or our commercialization efforts.

 

Off-Balance Sheet Arrangements

 

Since inception, we have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

 

Share and per-share information in ADSs

 

On July 15, 2019, we implemented a change in the ratio of our ADSs to ordinary shares, from one ADS representing one ordinary share to a new ratio of one ADS representing 15 ordinary shares. Accordingly, presented below, for the convenience of the reader, is share and per-share information in ADSs, on the basis of the new ADS ratio.