Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulations S-T Rule 101(b)(1):_____

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulations S-T Rule 101(b)(7):_____

 

 

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Exhibit 1

For Immediate Release

BioLineRx Reports Second Quarter 2020 Financial Results

and Provides Corporate Update

- On track to report three significant data readouts in next few months -

 

- Management to hold conference call today, August 6, at 10:00 am EDT -

TEL AVIV, Israel, August 6, 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 June 30, 2020 and provides a corporate update.

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

 

 

 

 

“We continue to eagerly await important survival data from the triple combination arm of our COMBAT/KEYNOTE-202 clinical trial of motixafortide in combination with KEYTRUDA and chemotherapy in metastatic pancreatic cancer,” stated Philip Serlin, Chief Executive Officer of BioLineRx. “The compelling data on 22 patients that we reported in December give us conviction that this combination has the potential to be a real breakthrough in one of the most difficult to treat cancers. As this is an event-driven trial, we are obviously very pleased that there are still patients on study, although we now anticipate a modest delay of a few months in announcing the data from our original expectation.

 

“Turning to stem cell mobilization, this continues to be our most efficient path to registration. Given a significantly lower patient dropout rate than we had anticipated in our Phase 3 GENESIS trial, we now plan to conduct an interim analysis in the second half of this year. If the primary endpoint is met, we plan to immediately announce cessation of recruitment, without the need to enroll the full planned sample size. In order to maintain study blinding for all study endpoints, including those related to engraftment for a period of 100 days subsequent to transplantation, we expect to announce top-line results in the first half of 2021. At the same time, our Phase 2b BLAST consolidation study in AML is progressing, and we anticipate results from a planned interim analysis in the second half of this year.

 

“As we indicated last quarter, 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 have, however, recently begun activities to restart study recruitment and we expect data from that study in the second half of next year.

 

“The COVID-19 pandemic has caused significant disruptions in drug development timelines across the industry. We are pleased that we expect to report on three important and potentially value-creating data readouts by the end of the year, and with the additional $13.4 million that we raised during the second quarter, we have the resources to reach these important milestones. We believe the broad clinical utility of motixafortide across a wide range of cancer indications that we have observed in data generated to date highlight its potential as a promising new treatment option, and we look forward to reporting these data as they become available,” concluded Mr. Serlin.

 

Upcoming Expected 2020 and 2021 Milestones

 

 

 

 

 

Financial Results for the Second Quarter Ended June 30, 2020

 

Research and development expenses for the three months ended June 30, 2020 were $4.6 million, a decrease of $0.7 million, or 12.5%, compared to $5.3 million for the three months ended June 30, 2019. The decrease resulted primarily from lower expenses associated with the AGI-134 study, as well as a decrease in payroll and related expenses due to a Company-wide salary reduction related to the COVID-19 pandemic carried out in the second quarter of 2020. Research and development expenses for the six months ended June 30, 2020 were $10.1 million, an increase of $0.4 million, or 3.8%, compared to $9.7 million for the six months ended June 30, 2019. The increase resulted primarily from higher expenses associated with the motixafortide COMBAT and GENESIS clinical trials, offset by a decrease in expenses associated with the AGI-134 study.

 

Sales and marketing expenses for the three months ended June 30, 2020 were $0.2 million, similar to the comparable period in 2019. Sales and marketing expenses for the six months ended June 30, 2020 were $0.4 million, a decrease of $0.1 million, or 25.9%, compared to $0.5 million for the six months ended June 30, 2019. The decrease resulted primarily from a decrease in payroll and related expenses related to a decrease in share-based compensation from the 2019 period.

 

General and administrative expenses for the three months ended June 30, 2020 were $0.7 million, a decrease of $0.2 million, or 21.6% compared to $0.9 million for the three months ended June 30, 2019. The decrease resulted primarily from a decrease in payroll and related expenses due to a Company-wide salary reduction related to the COVID-19 pandemic carried out in the second quarter of 2020, as well as a decrease in professional fees. General and administrative expenses for the six months ended June 30, 2020 were $2.0 million, an increase of $0.1 million, or 5.7%, compared to $1.9 million for the six months ended June 30, 2019. The increase resulted primarily from an increase in share-based compensation.

 

The Company's operating loss for the three months ended June 30, 2020 amounted to $5.6 million, compared to an operating loss of $6.5 million for the three months ended June 30, 2019. The Company’s operating loss for the six months ended June 30, 2020 was $12.4 million, compared to $12.1 million for the comparable period in 2019.

 

Non-operating income (expenses) for the three and six months ended June 30, 2020 and for the three and six months ended June 30, 2019 primarily relate to fair-value adjustments of warrant liabilities on the Company’s balance sheet, offset by warrant offering expenses.

 

Net financial expenses for the three months ended June 30, 2020 amounted to $0.4 million compared to net financial expenses of $0.3 million for the three months ended June 30, 2019. Net financial expenses for both periods primarily relate to interest paid on loans, offset by investment income earned on bank deposits. Net financial expenses for the six months ended June 30, 2020 amounted to $0.6 million compared to net financial expenses of $0.5 million for the six months ended June 30, 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 three months ended June 30, 2020 amounted to $6.8 million, compared with a net loss of $5.5 million for the comparable period in 2019. The Company’s net loss for the six months ended June 30, 2020 amounted to $13.4 million, compared with a net loss of $11.6 million for the comparable period in 2019.

 

The Company held $27.3 million in cash, cash equivalents and short-term bank deposits as of June 30, 2020.

 

Net cash used in operating activities was $12.3 million for the six months ended June 30, 2020, compared with net cash used in operating activities of $11.1 million for the six months ended June 30, 2019. The $1.2 million increase in net cash used in operating activities during the six-month period in 2020 was primarily the result of changes in operating asset and liability items in 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 $0.6 million for the six months ended June 30, 2020, compared to net cash used in investing activities of $3.1 for the six months ended June 30, 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 $12.0 for the six months ended June 30, 2020, compared to net cash provided by financing activities of $15.7 million for the six months ended June 30, 2019. The cash flows in 2020 primarily reflect the May and June financings, and the net proceeds from the ATM facility, offset by repayments of the loan from Kreos Capital. The cash flows in 2019 primarily reflect the underwritten public offering completed in February 2019, as well as net proceeds from the ATM facility.

 

Conference Call and Webcast Information

 

BioLineRx will hold a conference call today, August 6, 2020 at 10:00 a.m. EDT. To access the conference call, please dial +1-888-668-9141 from the US or +972-3-918-0610 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 August 8, 2020; please dial +1-888-782-4291 from the US or +972-3-925-5921 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 INTERIM STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

BioLineRx Ltd.

CONDENSED 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)

---

---

Exhibit 2

BioLineRx Ltd.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

AS OF JUNE 30, 2020

 

BioLineRx Ltd.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

AS OF JUNE 30, 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 INTERIM STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

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

BioLineRx Ltd.

(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.

In February 2007, BioLineRx listed its ordinary shares on the Tel Aviv Stock Exchange (“TASE”) and they have been traded on the TASE since that time. Since July 2011, BioLineRx’s American Depositary Shares (“ADSs”) have also been traded on the NASDAQ Capital Market.

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 $261 million through June 30, 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 through the end of 2021. However, in the event that the Company does not begin to generate sustainable cash flows from its operating activities in the future, the Company will need to carry out significant cost reductions or raise additional funding. Management regularly evaluates 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.

The condensed consolidated interim financial statements of the Company as of June 30, 2020, and for the six months then ended, were approved by the Board of Directors on August 5, 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 June 30, 2020 and for the three and six 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 (“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 and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year or for any other interim period.

 

 

NOTE 2 –   BASIS OF PREPARATION (cont.)

 

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. The COVID-19 virus has spread to many countries throughout the world, including to the United States, Europe and Israel, where we currently have our therapeutic candidates manufactured and conduct our clinical trials. At present, we are experiencing some recruitment delays from the deepening and extended impact of COVID-19 on our clinical trials; however, at present, we do not believe these delays will significantly impact our clinical development plans. 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

 

NOTE 5 –   FINANCINGS

The warrants issued have been classified as a non-current financial liability due to a net settlement provision. This liability was initially recognized at its fair value on the date the contract was entered into and is subsequently accounted for at fair value at each balance sheet date. The fair value changes are charged to non-operating income and expense in the statement of comprehensive loss.

The warrants issued have been classified as a non-current financial liability due to a net settlement provision. This liability was initially recognized at its fair value on the date the contract was entered into and is subsequently accounted for at fair value at each balance sheet date. The fair value changes are charged to non-operating income and expense in the statement of comprehensive loss.

NOTE 6 –   SHAREHOLDERS’ EQUITY

 

F - 10

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Exhibit 3

 

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”), our Report on Form 6-K filed on May 20, 2020 (the “First Quarter Report”) and elsewhere in this Report on Form 6-K. 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 and our First Quarter Report.

 

Our business is subject to risks arising from a widespread outbreak of an illness or any other communicable disease, or any other public health crisis, such as the COVID-19 pandemic, which has impacted and could continue to impact our business.

 

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 experiencing some recruitment delays from the deepening and extended impact of COVID-19 on our GENESIS phase 3 study in stem-cell mobilization for our lead compound, motixafortide. However, we hope it will not significantly impact our clinical development plan for the compound, due to our decision to carry out an interim analysis on the study in the second half of this year. In addition, as previously reported, due to clinical operating issues associated with the COVID-19 pandemic, we expect a delay of approximately nine 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 continue to 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. 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, including, for example, a Company-wide salary reduction related to the COVID-19 pandemic carried out in the second quarter of 2020, 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. To date, except for BL-5010, none of our therapeutic candidates have been approved for marketing or sold commercially. 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

 

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Stem cell mobilization

 

 

 

 

As the trial has progressed, the continuing and deepening effect of the COVID-19 pandemic has had an effect on recruitment. On the other hand, we have seen a significantly lower drop-out rate than we had anticipated when calculating the original trial sample size. As a result of these factors, we made a decision to perform an interim analysis on the study. This analysis will be performed on approximately 65% of the original sample size. Recruitment for the interim analysis is almost complete, and the interim analysis is expected to be performed in the second half of 2020. In the event that the primary endpoint is reached in the interim analysis, we plan to announce the immediate cessation of recruitment (without the need for recruitment of the full planned sample size) and in order to maintain study blinding for all study endpoints, including those related to engraftment for a period of 100 days subsequent to transplantation, we expect to announce top-line results in the first half of 2021.

 

In the event that the primary endpoint is not reached in the interim analysis, we expect recruitment will continue until the originally planned sample size is met. Recent worsening of the COVID-19 outbreak, which is unfortunately expected to continue for the foreseeable future, has had, and is expected to continue to have, an effect on recruitment. Therefore, under this scenario, we expect top-line results will be announced in the second half of 2021.

 

Other matters

 

 

 

 

 

Funding

 

We have funded our operations primarily through the sale of equity securities (both in public and private offerings), funding received from the 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 June 30, 2020, we held $27.3 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 continuing to evaluate the optimal pathway to obtain initial clinical data in the shortest time possible.

 

Recent financings

 

In May 2020, we sold to certain institutional investors an aggregate of 5,142,859 ADSs in a registered direct offering at $1.75 per ADS, resulting in gross proceeds of approximately $9,000,000. In addition, we issued to the investors unregistered warrants to purchase up to an aggregate of 5,142,859 ADSs in a private placement. The warrants are immediately exercisable and will expire two and one-half years from issuance at an exercise price of $2.25 per ADS, subject to adjustment as set forth therein. We paid an aggregate of $630,000 in placement agent fees plus certain expenses and issued unregistered placement agent warrants to purchase up to an aggregate of 257,143 ADS on substantially the same terms as the warrants except they have an exercise price of $2.1875 per ADS.

 

In June 2020, we sold to certain institutional investors an aggregate of 2,510,286 ADSs in a registered direct offering at $1.75 per ADS, resulting in gross proceeds of approximately $4,400,000. In addition, we issued to the investors unregistered warrants to purchase up to an aggregate of 2,510,286 ADSs in a private placement. The warrants are immediately exercisable and will expire two and one-half years from issuance at an exercise price of $2.25 per ADS, subject to adjustment as set forth therein. We paid an aggregate of $308,000 in placement agent fees plus certain expenses and issued unregistered placement agent warrants to purchase up to an aggregate of 125,514 ADS on substantially the same terms as the warrants except they have an exercise price of $2.1875 per ADS.

 

 

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, 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 therapeutic candidates in preclinical studies for toxicology, safety and efficacy, and to conduct additional clinical trials for each therapeutic 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 therapeutic candidates. The lengthy process of completing clinical trials and seeking regulatory approval for our therapeutic 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, February 2019, May 2020 and June 2020, 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 and six-month periods ended June 30, 2020 and 2019.

 

Cost of revenues

 

We did not record any cost of revenues during each of the three-month and six-month periods ended June 30, 2020 and 2019.

 

Operating Results Comparison between Periods

 

Revenues and cost of revenues

 

See discussion under “Results of Operations - Overview” above.

 

Research and development expenses

 

Research and development expenses for the three months ended June 30, 2020 were $4.6 million, a decrease of $0.7 million, or 12.5%, compared to $5.3 million for the three months ended June 30, 2019. The decrease resulted primarily from lower expenses associated with the AGI-134 study, as well as a decrease in payroll and related expenses due to a Company-wide salary reduction related to the COVID-19 pandemic carried out in the second quarter of 2020.

Research and development expenses for the six months ended June 30, 2020 were $10.1 million, an increase of $0.4 million, or 3.8%, compared to $9.7 million for the six months ended June 30, 2019. The increase resulted primarily from higher expenses associated with the motixafortide COMBAT and GENESIS clinical trials, offset by a decrease in expenses associated with the AGI-134 study.

Sales and marketing expenses

 

Sales and marketing expenses for the three months ended June 30, 2020 were $0.2 million, similar to the comparable period in 2019.

Sales and marketing expenses for the six months ended June 30, 2020 were $0.4 million, a decrease of $0.1 million, or 25.9%, compared to $0.5 million for the six months ended June 30, 2019. The decrease resulted primarily from a decrease in payroll and related expenses related to a decrease in share-based compensation from the 2019 period.

 

  General and administrative expenses