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INTRODUCTION
Certain Definitions
In this Annual Report
on Form 20-F, unless the context otherwise requires:
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references to “BioLineRx,” the “Company,” “us,” “we” and “our” refer
to BioLineRx Ltd., an Israeli company, and its consolidated subsidiaries; |
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references to “ordinary shares,” “our shares” and similar expressions refer to the Company’s ordinary
shares, NIS 0.10 nominal (par) value per share; |
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references to “ADS” or “ADSs” refer to the Company’s American Depositary Shares; |
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references to “dollars,” “U.S. dollars” and “$” are to United States Dollars; |
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references to “shekels” and “NIS” are to New Israeli Shekels, the Israeli currency; |
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references to the “Companies Law” are to Israel’s Companies Law, 5759-1999, as amended; |
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and references to the “SEC” are to the U.S. Securities and Exchange Commission. |
Forward-Looking Statements
Some of the statements
under the sections entitled “Item 3. Key Information – Risk Factors,” “Item 4. Information on the Company”
and “Item 5. Operating and Financial Review and Prospects” and elsewhere in this Annual Report on Form 20-F constitute forward-looking
statements. 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. In addition, the section of this Annual Report on Form 20-F entitled
“Item 4. Information on the Company” contains information obtained from independent industry and other sources that we have
not independently verified. 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. 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. Readers are encouraged to consult the Company’s filings
made on Form 6-K, which are periodically filed with or furnished to the SEC.
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:
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the initiation, timing, progress and results of our preclinical studies, clinical trials and other therapeutic candidate development
efforts; |
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our ability to advance our therapeutic candidates into clinical trials or to successfully complete our preclinical studies or clinical
trials; |
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our receipt of regulatory approvals for our therapeutic candidates and the timing of other regulatory filings and approvals;
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the clinical development, commercialization and market acceptance of our therapeutic candidates; |
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our ability to establish and maintain corporate collaborations; |
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our ability to integrate new therapeutic candidates and new personnel; |
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the interpretation of the properties and characteristics of our therapeutic candidates and of the results obtained with our therapeutic
candidates in preclinical studies or clinical trials; |
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the implementation of our business model and strategic plans for our business and therapeutic candidates; |
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the scope of protection we are able to establish and maintain for intellectual property rights covering our therapeutic candidates
and our ability to operate our business without infringing the intellectual property rights of others; |
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estimates of our expenses, future revenues, capital requirements and our needs for and ability to access sufficient additional financing;
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risks related to changes in healthcare laws, rules and regulations in the United States or elsewhere; |
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competitive companies, technologies and our industry; |
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risks related to unfavorable economic and market conditions and adverse developments with respect to financial institutions and associated
liquidity risk; and |
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statements as to the impact of the political and security situation in Israel on our business. |
PART
I.
ITEM 1. IDENTITY OF
DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS
AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. [Reserved]
B. Capitalization and
Indebtedness
Not applicable.
C. Reasons for the Offer
and Use of Proceeds
Not applicable.
D. Risk Factors
You should carefully
consider the risks we describe below, in addition to the other information set forth elsewhere in this Annual Report on Form 20-F, including
our consolidated financial statements and the related notes beginning on page F-1, before deciding to invest in our ordinary shares and
ADSs. These material risks could adversely impact our results of operations, possibly causing the trading price of our ordinary shares
and ADSs to decline, and you could lose all or part of your investment.
Summary Risk Factors
Investing in our ordinary
shares involves a high degree of risk, as fully described below. The principal factors and uncertainties that make investing in our ordinary
shares risky, include, among others:
Risks Related to Our Financial
Condition and Capital Requirements
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We are a pre-commercialization-stage biopharmaceutical development company with a history of operating losses, expect to incur additional
losses in the future and may never be profitable; |
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We cannot assure investors that our existing cash and investment balances will be sufficient to meet our future capital requirements.
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If we default under our secured loan agreement with Kreos, all or a portion of our assets could be subject to forfeiture. |
Risks Related to Our Business
and Regulatory Matters
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If we or our licensees are unable to obtain U.S. and/or foreign regulatory approval for our therapeutic candidates, in a timely manner
or at all, we will be unable to commercialize our therapeutic candidates. |
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We are executing on an independent commercialization plan for motixafortide in stem cell mobilization for autologous bone marrow
transplantation in multiple myeloma patients and historically have no experience selling, marketing or distributing products. |
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Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may
not be predictive of future trial results. |
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Even if we obtain regulatory approvals, our therapeutic candidates will be subject to ongoing regulatory review and if we fail to
comply with continuing U.S. and applicable foreign regulations, we could lose those approvals and our business would be seriously harmed.
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We may depend on out-licensing arrangements for late-stage development, marketing and commercialization of our therapeutic candidates.
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If we cannot meet requirements under our in-license agreements, we could lose the rights to our therapeutic candidates, which could
have a material adverse effect on our business. |
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If we do not meet the requirements under our agreement with the Agalimmune selling shareholders, we could lose the rights to the
therapeutic candidates in Agalimmune’s pipeline, including, but not limited to, AGI-134. |
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We may seek to partner with third-party collaborators with respect to the development and commercialization of motixafortide, and
we may not succeed in establishing and maintaining collaborative relationships, which may significantly limit our ability to develop and
commercialize our product candidates successfully, if at all. |
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Modifications to our therapeutic candidates, or to any other therapeutic candidates that we may develop in the future, may require
new regulatory clearances or approvals or may require us or our licensees, as applicable, to recall or cease marketing these therapeutic
candidates until clearances are obtained. |
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If our competitors develop and market products that are more effective, safer or less expensive than our current or future therapeutic
candidates, our prospects will be negatively impacted. |
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Our business could suffer if we are unable to attract and retain key employees. |
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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 in the future impact our business. |
Risks Related to Our Industry
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Even if our therapeutic candidates receive regulatory approval or do not require regulatory approval, they may not become commercially
viable products. |
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Healthcare reforms and related reductions in pharmaceutical pricing, reimbursement and coverage by governmental authorities and third-party
payors may adversely affect our business. |
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If third-party payors do not adequately reimburse customers for any of our therapeutic candidates that are approved for marketing,
they might not be purchased or used, and our revenues and profits will not develop or increase. |
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Our business has a substantial risk of clinical trial and product liability claims. If we are unable to obtain and maintain appropriate
levels of insurance, a claim could adversely affect our business. |
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Significant disruptions of our information technology systems or breaches of our data security could adversely affect our business.
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We deal with hazardous materials and must comply with environmental, health and safety laws and regulations, which can be expensive
and restrict how we do business. |
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We are currently party to, and may in the future, become subject to litigation or claims arising in or outside the ordinary course
of business that could negatively affect our business operations and financial condition. |
Risks Related to Intellectual
Property
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Our access to most of the intellectual property associated with our therapeutic candidates results from in-license agreements with
biotechnology companies and academic institutions, the termination of which would prevent us from commercializing the associated therapeutic
candidates. |
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Patent protection for our products is important and uncertain. |
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If we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used by others
to compete against us. |
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Legal proceedings or third-party claims of intellectual property infringement may require us to spend substantial time and money
and could prevent us from developing or commercializing products. |
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We may be subject to other patent-related litigation or proceedings that could be costly to defend and uncertain in their outcome.
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Risks Related to our Ordinary
Shares and ADSs
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Our business, operating results and growth rates may be adversely affected by current or future unfavorable economic and market conditions
and adverse developments with respect to financial institutions and associated liquidity risk. |
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The market prices of our ordinary shares and ADSs are subject to fluctuation, which could result in substantial losses by our investors.
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Future sales of our ordinary shares or ADSs could reduce the market price of our ordinary shares and ADSs. |
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Raising additional capital by issuing securities may cause dilution to existing shareholders. |
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If we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our ADSs may be delisted and the price
of our ADSs stock and our ability to access the capital markets could be negatively impacted. |
Risks Related to our Operations
in Israel
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We conduct our operations in Israel and therefore our results may be adversely affected by political, economic and military instability
in Israel and its region. |
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Due to a significant portion of our expenses and revenues being denominated in non-dollar currencies, our results of operations may
be harmed by currency fluctuations. |
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We have received Israeli government grants for certain research and development expenditures. The terms of these grants may require
us to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. We may be required to
pay penalties in addition to repayment of the grants. |
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Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent
a change of control, even when the terms of such a transaction are favorable to us and our shareholders. |
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It may be difficult to enforce a U.S. judgment against us and our officers and directors in Israel or the United States, or to serve
process on our officers and directors. |
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Your rights and responsibilities as a shareholder will be governed by Israeli law, which may differ in some respects from the rights
and responsibilities of shareholders of U.S. companies. |
Risks Related to Our
Financial Condition and Capital Requirements
We
are a pre-commercialization-stage biopharmaceutical company with a history of operating losses, expect to incur additional losses in the
future and may never be profitable.
We are a pre-commercialization-stage
biopharmaceutical company that was incorporated in 2003. Since our incorporation, we have been mainly focused on research and development.
We have incurred losses since inception, principally as a result of research and development and general administrative expenses in support
of our operations. We recorded net losses of $30.0 million in 2020, $27.1 million in 2021 and $25.0 in 2022. As of December 31, 2022,
we had an accumulated deficit of $330.0 million. We anticipate that we will incur significant additional losses as we continue to focus
our resources on prioritizing, selecting and advancing our most promising therapeutic candidates. We may never be profitable, and we may
never achieve significant sustained revenues.
We
cannot assure investors that our existing cash and investment balances will be sufficient to meet our future capital requirements.
As of December 31, 2022,
we held cash and short-term investments of $51.1 million. Based on our current projected cash requirements, we believe that our existing
cash and investment balances and other sources of liquidity, not including potential milestone and royalty payments under potential out-licensing
and other collaboration agreements, will be sufficient to meet our capital requirements into the first half of 2024. We have funded our
operations primarily through public and private offerings of our securities, payments received under our strategic licensing and collaboration
arrangements and interest earned on investments. The adequacy of our available funds to meet our operating and capital requirements will
depend on many factors, including: the number, breadth, progress and results of our research, product development and clinical programs;
the costs and timing of obtaining regulatory approvals for any of our therapeutic candidates; the costs of commercializing any of our
therapeutic candidates; the terms and conditions of in-licensing and out-licensing therapeutic candidates; and costs incurred in enforcing
and defending our patent claims and other intellectual property rights
While we expect to continue
to explore alternative financing sources, including the possibility of future securities offerings and government funding, we cannot be
certain that in the future these liquidity sources will be available when needed on commercially reasonable terms or at all, or that our
actual cash requirements will not be greater than anticipated. We expect to also continue to seek to finance our operations through other
sources, including commercialization, if approved, in the United States for motixafortide, our lead therapeutic candidate, out-licensing
arrangements for the development and commercialization of our therapeutic candidates or other partnerships or joint ventures, as well
as grants from government agencies and foundations. If we are unable to obtain future financing through the methods we describe above
or through other means, we may be unable to complete our business objectives and may be unable to continue operations, which would have
a material adverse effect on our business and financial condition.
If
we default under our secured loan agreement with Kreos, all or a portion of our assets could be subject to forfeiture.
In
September 2022, we entered into a secured loan agreement, or the Loan Agreement, with Kreos Capital VII Aggregator SCSP, or Kreos VII
and together with Kreos V, Kreos Capital. Under the Loan Agreement, Kreos Capital will provide the Company with access to term loans in
an aggregate principal amount of up to $40 million in three tranches as follows: (a) a loan in the aggregate principal amount of up to
$10 million, available for drawdown upon closing of the Loan Agreement and until April 1, 2023, (b) a loan in the aggregate principal
amount of up to $20 million, available for drawdown upon achievement of certain milestones and until April 1, 2024, and (c) a loan in
the aggregate principal amount of up to $10 million, available for drawdown upon achievement of certain milestones and until October 1,
2024. We drew down the initial tranche of $10 million following execution of the agreement in September 2022.
Our ability to make the
scheduled payments under the Loan Agreement or to refinance our debt obligations with Kreos Capital depends on numerous factors including,
but not limited to, the amount of our cash reserves, our capital requirements and our ability to raise additional capital. We may be unable
to maintain a level of cash reserves sufficient to permit us to pay the principal and accrued interest on the loan. If our cash reserves,
cash flows and capital resources are insufficient to fund our debt obligations to Kreos Capital, we may be required to seek additional
capital, restructure or refinance our indebtedness, or delay or abandon our research and development projects or other capital expenditures,
which could have a material adverse effect on our business, financial condition, prospects or results of operations. There is no assurance
that we would be able to take any of such actions, or that such actions would permit us meet our scheduled debt obligations under the
Kreos Capital loan agreements. If we default on the Loan Agreement and are unable to cure the default pursuant to the terms of the Loan
Agreement or are unable to repay or refinance the loan when due, Kreos could take possession of any or all assets in which it holds a
security interest, and dispose those assets to the extent necessary to pay off the debts, which would have a material adverse effect on
our business, financial condition, prospects or results of operations.
Risks Related to Our
Business and Regulatory Matters
If we or our licensees
are unable to obtain U.S. and/or foreign regulatory approval for our therapeutic candidates in a timely manner or at all, we will be unable
to commercialize our therapeutic candidates.
To date, only one
of our products, BL-5010, a legacy asset for the treatment of benign skin lesions, has been approved for marketing and sale. Currently,
we have two clinical-stage therapeutic candidates in development: motixafortide (formerly referred to as BL-8040), a novel peptide for
the treatment of stem cell mobilization, solid tumors and hematological malignancies, and AGI-134, an immuno-oncology agent in development
for the treatment of solid tumors. Our therapeutic candidates are subject to extensive governmental regulations relating to development,
clinical trials, manufacturing and commercialization of drugs and devices. In September 2022, we submitted a New Drug Application, or
NDA, for our lead therapeutic candidate, motixafortide, as a novel stem-cell mobilization agent for autologous bone marrow transplantation
in multiple myeloma patients. In November 2022, the US Food and Drug Administration, or FDA, accepted for review and filed our NDA for
motixafortide in stem cell mobilization for autologous transplantation in multiple myeloma patients. Although the FDA has assigned the
NDA a Prescription Drug User Fee Act, or PDUFA, target action date of September 9, 2023, we may not obtain marketing approval of motixafortide
for stem cell mobilization from the FDA or for any other of our therapeutic candidates in a timely manner or at all. In the United States,
we are required to submit NDA to obtain FDA approval before marketing motixafortide or any of our therapeutic candidates. An NDA must
include extensive preclinical and clinical data and supporting information to establish the therapeutic candidate’s safety, purity
and potency, or efficacy, for each desired indication. The NDA must also include information regarding the product’s pharmacology,
toxicology, chemistry, manufacture and manufacturing controls. Obtaining approval of an NDA is a lengthy, expensive and uncertain process,
and approval may not be obtained. Upon submission of an NDA, the FDA must make an initial determination that the application is sufficiently
complete to accept the submission for filing. Although our NDA for motixafortide in stem cell mobilization for autologous transplantation
in multiple myeloma patients was accepted for review, we cannot be certain that any future submissions will be accepted for filing and
review by the FDA, or ultimately be approved. The FDA may require that we conduct additional clinical or preclinical trials, or take other
actions before it will approve or reconsider any application we make. If the FDA requires additional studies or data, we would incur increased
costs and delays in the marketing approval process, which may require us to expend more resources than we have available. In addition,
the FDA may not consider any additional information to be complete or sufficient to support approval.
In addition, in connection
with the clinical trials for motixafortide and AGI-134 and other therapeutic candidates that we may seek to develop in the future,
either on our own or through out-licensing or co-development arrangements, we face the risk that:
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a therapeutic candidate or medical device may not prove safe or efficacious; |
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the results with respect to any therapeutic candidate may not confirm the positive results from earlier preclinical studies or clinical
trials; |
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the results may not meet the level of statistical significance required by the U.S. Food and Drug Administration, or FDA, or other
regulatory authorities; and |
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the results will justify only limited and/or restrictive uses, including the inclusion of warnings and contraindications, which could
significantly limit the marketability and profitability of the therapeutic candidate. |
Any delay in obtaining,
or the failure to obtain, required regulatory approvals will materially and adversely affect our ability to generate future revenues from
a particular therapeutic candidate. Any regulatory approval to market a product may be subject to limitations on the indicated uses for
which we may market the product or may impose restrictive conditions of use, including cautionary information, thereby limiting the size
of the market for the product. We and our licensees, as applicable, also are, and will be, subject to numerous foreign regulatory requirements
that govern the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. The foreign
regulatory approval process includes all the risks associated with the FDA approval process that we describe above, as well as risks attributable
to the satisfaction of foreign requirements. Approval by the FDA does not ensure approval by regulatory authorities outside the United
States. Foreign jurisdictions may have different approval processes than those required by the FDA and may impose additional testing requirements
for our therapeutic candidates.
We
are executing on an independent commercialization plan for motixafortide in stem cell mobilization for autologous bone marrow transplantation
in multiple myeloma patients and historically have no experience selling, marketing or distributing products.
We are currently executing
on an independent commercialization plan for motixafortide in stem cell mobilization for autologous bone marrow transplantation in multiple
myeloma patients for launch in the U.S., subject to receipt of FDA approval. As part of our plan, we are developing our sales, marketing
and distribution capabilities. Historically we have not had experience in building a sales force or distribution capabilities. To be able
to commercialize any of our therapeutic candidates upon approval, if at all, we must either develop internal sales, marketing and distribution
capabilities, which is expensive and time-consuming, or enter into out-licensing arrangements with third parties to perform these services.
There are risks involved
with establishing our own sales, marketing and distribution capabilities. We must commit significant financial and managerial resources
to develop a marketing and sales force with technical expertise and with supporting distribution capabilities. Factors that may inhibit
our efforts to commercialize our products directly and without strategic partners include:
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our inability to recruit and retain adequate numbers of effective sales and marketing personnel; |
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the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe our therapeutic candidates;
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the inability to price our products at a sufficient price point to ensure an adequate and attractive level of profitability;
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the difficulty of obtaining reimbursement from governmental and commercial payers; |
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the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies
with more extensive product lines; and |
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unforeseen costs and expenses associated with creating and sustaining an independent sales and marketing organization. |
We may not be successful
in recruiting the sales and marketing personnel necessary to sell any of our therapeutic candidates upon approval, if at all, and, even
if we do build a sales force, we may not be successful in marketing our therapeutic candidates, which would have a material adverse effect
on our business, financial condition and results of operations.
If we are unable to establish
our own sales, marketing and distribution capabilities or enter into successful arrangements with third parties to perform these services,
any future product revenues and our profitability, may be materially adversely affected.
Clinical trials involve
a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial
results.
We have limited experience
in conducting and managing the clinical trials necessary to obtain regulatory approvals, including FDA approval. Clinical trials are expensive
and complex, can take many years and have uncertain outcomes. We cannot necessarily predict whether we or any licensee will encounter
problems with any of the completed, ongoing or planned clinical trials that will cause us, any licensee or regulatory authorities to delay
or suspend clinical trials, or to delay the analysis of data from completed or ongoing clinical trials. In addition, because some of our
clinical trials are investigator-initiated studies (i.e., we are not the study sponsor), we may have less control over these studies.
We estimate that clinical trials of certain of our advanced therapeutic candidates will continue for several years, but they may take
significantly longer to complete. Failure can occur at any stage of the testing, and we may experience numerous unforeseen events during,
or as a result of, the clinical trial process that could delay or prevent commercialization of our current or future therapeutic candidates,
including, but not limited to:
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delays in securing clinical investigators or trial sites for the clinical trials; |
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delays in obtaining institutional review board and other regulatory approvals to commence a clinical trial; |
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slower-than-anticipated patient recruitment and enrollment; |
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negative or inconclusive results from clinical trials; |
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unforeseen safety issues; |
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uncertain dosing issues; |
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an inability to monitor patients adequately during or after treatment; and |
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problems with investigator or patient compliance with the trial protocols. |
A number of companies
in the pharmaceutical, medical device and biotechnology industries, including those with greater resources and experience than us, have
suffered significant setbacks in advanced clinical trials, even after seeing promising results in earlier clinical trials. Despite the
results reported in earlier clinical trials for our therapeutic candidates, we do not know whether any Phase 3 or other clinical trials
we or our licensees may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market our therapeutic
candidates. If later-stage clinical trials of any therapeutic candidate do not produce favorable results, our ability to obtain regulatory
approval for the therapeutic candidate may be adversely impacted, which will have a material adverse effect on our business, financial
condition and results of operations.
Even
if we obtain regulatory approvals, our therapeutic candidates will be subject to ongoing regulatory review and if we fail to comply with
continuing U.S. and applicable foreign regulations, we could lose those approvals and our business would be seriously harmed.
Even if products we or
any licensee develops receive regulatory approval or clearance, we or any licensee, as applicable, will be subject to ongoing reporting
obligations, and the products and the manufacturing operations will be subject to continuing regulatory review, including FDA inspections.
The outcome of this ongoing review may result in the withdrawal of a product from the market, the interruption of the manufacturing operations
and/or the imposition of labeling and/or marketing limitations. Since many more patients are exposed to drugs and medical devices following
their marketing approval, serious but infrequent adverse reactions that were not observed in clinical trials may be observed during the
commercial marketing of the product. In addition, the manufacturer and the manufacturing facilities we or our licensees, as applicable,
will use to produce any therapeutic candidate will be subject to periodic review and inspection by the FDA and other, similar foreign
regulators. Later discovery of previously unknown problems with any product, manufacturer or manufacturing process, or failure to comply
with regulatory requirements, may result in actions such as:
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restrictions on such product, manufacturer or manufacturing process; |
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warning letters from the FDA or other regulatory authorities; |
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withdrawal of the product from the market; |
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suspension or withdrawal of regulatory approvals; |
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refusal to approve pending applications or supplements to approved applications that we or our licensees submit; |
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voluntary or mandatory recall; |
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refusal to permit the import or export of our products; |
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product seizure or detentions; |
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injunctions or the imposition of civil or criminal penalties; or |
If we, or any licensee,
supplier, third-party contractor, partner or clinical investigator is slow to adapt, or are unable to adapt, to changes in existing regulatory
requirements or the adoption of new regulatory requirements or policies, we or any licensee may lose marketing approval for any of our
products, if any of our therapeutic products are approved, resulting in decreased or lost revenue from milestones, product sales or royalties.
We
generally rely on third parties to conduct our preclinical studies and clinical trials and to provide other services, and those third
parties may not perform satisfactorily, including by failing to meet established deadlines for the completion of such services.
We do not have the ability
to conduct certain preclinical studies and clinical trials independently for our therapeutic candidates, and we rely on third parties,
such as contract laboratories, contract research organizations, medical institutions and clinical investigators to conduct these studies
and clinical trials. Our reliance on these third parties limits our control over these activities. The third-party contractors may not
assign as great a priority to our clinical development programs or pursue them as diligently as we would if we were undertaking such programs
directly. Accordingly, these third-party contractors may not complete activities on schedule, or may not conduct the studies or our clinical
trials in accordance with regulatory requirements or with our trial design. If these third parties do not successfully carry out their
contractual duties or meet expected deadlines, or if their performance is substandard, we may be required to replace them or add more
sites to the studies. Although we believe that there are a number of other third-party contractors that we could engage to continue these
activities, replacement of these third parties will result in delays and/or additional costs. As a result, our efforts to obtain regulatory
approvals for, and to commercialize, our therapeutic candidates may be delayed. The third-party contractors may also have relationships
with other commercial entities, some of whom may compete with us. If the third-party contractors assist our competitors, our competitive
position may be harmed.
In addition, our ability
to bring future products to market depends on the quality and integrity of data that we present to regulatory authorities in order to
obtain marketing authorizations. Although we attempt to audit and control the quality of third-party data, we cannot guarantee the authenticity
or accuracy of such data, nor can we be certain that such data has not been fraudulently generated. The failure of these third parties
to carry out their obligations would materially adversely affect our ability to develop and market new products and implement our strategies.
We have in the past and
may in the future rely on out-licensing arrangements for late-stage development, marketing and commercialization of our therapeutic candidates.
Although we are executing
on an independent commercialization plan for motixafortide in stem cell mobilization for autologous bone marrow transplantation in multiple
myeloma patients, we have in the past and may in the future rely on out-licensing arrangements for late-stage development, marketing and
commercialization of our therapeutic candidates. Dependence on out-licensing arrangements subjects us to a number of risks, including
the risk that:
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we have limited control over the amount and timing of resources that a licensee devotes to our therapeutic candidates; |
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a licensee may experience financial difficulties; |
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a licensee may fail to secure adequate commercial supplies of our therapeutic candidates upon marketing approval, if at all;
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our future revenues depend heavily on the efforts of a licensee; |
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business combinations or significant changes in a licensee’s business strategy may adversely affect the licensee’s willingness
or ability to complete its obligations under any arrangement with us; |
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a licensee could move forward with a competing therapeutic candidate developed either independently or in collaboration with others,
including our competitors; and |
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out-licensing arrangements are often terminated or allowed to expire, which would delay the development and may increase the development
costs of our therapeutic candidates. |
If we or any licensee
breaches or terminates its agreement with us, or if any licensee otherwise fails to conduct its development and commercialization activities
in a timely manner or there is a dispute about their obligations, we may need to seek other licensees, or we may have to develop our own
internal sales and marketing capability for our therapeutic candidates. Our dependence on a licensee’s experience and the rights
of a licensee will limit our flexibility in considering alternative out-licensing arrangements for our therapeutic candidates. Any failure
to successfully develop these arrangements or failure by a licensee to successfully develop or commercialize any of our therapeutic candidates
in a competitive and timely manner will have a material adverse effect on the commercialization of our therapeutic candidates.
We depend on our ability
to identify and in-license technologies and therapeutic candidates.
We employ a number of
methods to identify therapeutic candidates that we believe are likely to achieve commercial success. In certain instances, disease-specific
third-party advisors evaluate therapeutic candidates as we deem necessary. However, there can be no assurance that our internal research
efforts or our screening system will accurately or consistently select among various therapeutic candidates those that have the highest
likelihood to achieve, and that ultimately achieve, commercial success. As a result, we may spend substantial resources developing therapeutic
candidates that will not achieve commercial success, and we may not advance those therapeutic candidates with the greatest potential for
commercial success.
An important element
of our strategy is maintaining relationships with universities, medical institutions and biotechnology companies in order to in-license
potential therapeutic candidates. We may not be able to maintain relationships with these entities, and they may elect not to enter into
in-licensing agreements with us or to terminate existing agreements. The existence of global companies with significantly greater resources
than we have may increase the competition with respect to the in-licensing of promising therapeutic candidates. We may not be able to
acquire licenses on commercially reasonable terms or at all. Failure to license or otherwise acquire necessary technologies could materially
and adversely affect our business, financial condition and results of operations.
If
we cannot meet requirements under our in-license agreements, we could lose the rights to our therapeutic candidates, which could have
a material adverse effect on our business.
We depend on in-licensing
agreements with third parties to maintain the intellectual property rights to our therapeutic candidates. We have in-licensed rights from
Biokine Therapeutics Ltd., or Biokine, with respect to our motixafortide therapeutic candidate; from the University of Massachusetts and
from Kode Biotech Limited, or Kode Biotech, with respect to our AGI-134 therapeutic candidate; and from Innovative Pharmaceutical Concepts,
Inc., or IPC, with respect to our BL-5010 therapeutic candidate. See “Item 4. Information on the Company — Business Overview
— In-Licensing Agreements.” Our in-license agreements require us to make payments and satisfy performance obligations in order
to maintain our rights under these agreements. The royalty rates and revenue sharing payments vary from case to case but range from 20%
to 29.5% of the consideration we receive from sublicensing the applicable therapeutic candidate and a substantially lower percentage (generally
less than 5%) if we elect to commercialize the subject therapeutic candidate independently. Due to the relatively advanced stage of development
of the compound licensed from Biokine, our license agreement with Biokine provides for royalty payments of 10% of net sales, subject to
certain limitations, should we independently sell products. These in-license agreements last either throughout the life of the patents
that are the subject of the agreements, or with respect to other licensed technology, for a number of years after the first commercial
sale of the relevant product.
In addition, we are responsible
for the cost of filing and prosecuting certain patent applications and maintaining certain issued patents licensed to us. If we do not
meet our obligations under our in-license agreements in a timely manner, we could lose the rights to our proprietary technology, which
could have a material adverse effect on our business, financial condition and results of operations.
If we do not meet the
requirements under our agreement with the Agalimmune selling shareholders, we could lose the rights to the therapeutic candidates in Agalimmune’s
pipeline, including, but not limited to, AGI-134.
In March 2017, we acquired
substantially all the outstanding shares of Agalimmune Ltd., or Agalimmune, a privately held company incorporated in the United Kingdom.
In conjunction with the acquisition, we entered into a development agreement with Agalimmune and its selling shareholders, or the Agalimmune
Development Agreement, which, among other things, grants us an option to purchase any remaining Agalimmune shares. If we do not exercise
this option within a certain period of time after achieving certain milestones or we commit a material breach of the Agalimmune Development
Agreement, the selling shareholders have a reversionary option to acquire all the Agalimmune shares we hold for nominal consideration.
If the exercise of this reversionary option is completed and our development work subsequently generates revenues for Agalimmune, we will
only be entitled to a percentage of Agalimmune’s net proceeds, until such time as we have recouped the expenses we incurred in connection
with the Agalimmune Development Agreement. Completion of the exercise of the reversionary option would result in the loss of our rights
in the proprietary technology held by Agalimmune, which could have a material adverse effect on our business, financial condition and
results of operations.
We
may seek to partner with third-party collaborators with respect to the development and commercialization of motixafortide and for any
other therapeutic candidate and we may not succeed in establishing and maintaining collaborative relationships, which may significantly
limit our ability to develop and commercialize our product candidates successfully, if at all.
Although we are currently
executing on an independent commercialization plan for motixafortide in stem cell mobilization for autologous bone marrow transplantation
in multiple myeloma patients, we collaborate with third parties with respect to the development of motixafortide in other indications
and may in the future seek a partner for any other therapeutic candidate. We compete with many other companies as we seek partners for
motixafortide and for any other therapeutic candidate and we may not be able to compete successfully against those companies. If we are
not able to enter into collaboration arrangements for motixafortide and for any other therapeutic candidate, we would be required to undertake
and fund further development, clinical trials, manufacturing and commercialization activities solely at our own expense and risk, as is
the case with motixafortide in stem cell mobilization for autologous bone marrow transplantation in multiple myeloma patients. If we are
unable to finance and/or successfully execute those expensive activities, or we delay such activities due to capital availability, our
business could be materially and adversely affected, and potential future product launch could be materially delayed, be less successful,
or we may be forced to discontinue clinical development of these product candidates. Furthermore, if we are unable to enter into a commercial
agreement for the development and commercialization of motixafortide and for any other therapeutic candidate, then this could have a material
adverse effect on our business, financial condition or results of operations.
The process of establishing
and maintaining collaborative relationships is difficult, time-consuming and involves significant uncertainty, including:
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a collaboration partner may shift its priorities and resources away from our therapeutic candidates due to a change in business strategies,
or a merger, acquisition, sale or downsizing; |
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a collaboration partner may seek to renegotiate or terminate their relationships with us due to unsatisfactory clinical results,
manufacturing issues, a change in business strategy, a change of control or other reasons; |
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a collaboration partner may cease development in therapeutic areas which are the subject of our strategic collaboration; |
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a collaboration partner may not devote sufficient capital or resources towards our therapeutic candidates; |
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a collaboration partner may change the success criteria for a therapeutic candidate thereby delaying or ceasing development of such
candidate; |
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a significant delay in initiation of certain development activities by a collaboration partner will also delay payment of milestones
tied to such activities, thereby impacting our ability to fund our own activities; |
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a collaboration partner could develop a product that competes, either directly or indirectly, with our therapeutic candidate;
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a collaboration partner with commercialization obligations may not commit sufficient financial or human resources to the marketing,
distribution or sale of a product; |
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a collaboration partner with manufacturing responsibilities may encounter regulatory, resource or quality issues and be unable to
meet demand requirements; |
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a partner may exercise a contractual right to terminate a strategic alliance; |
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a dispute may arise between us and a partner concerning the research, development or commercialization of a therapeutic candidate
resulting in a delay in milestones, royalty payments or termination of an alliance and possibly resulting in costly litigation or arbitration
which may divert management attention and resources; and |
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a partner may use our products or technology in such a way as to invite litigation from a third party. |
Any collaborative partners
we enter into agreements with may in the future shift their priorities and resources away from our therapeutic candidates or seek to renegotiate
or terminate their relationships with us. If any collaborator fails to fulfill its responsibilities in a timely manner, or at all, our
research, clinical development, manufacturing or commercialization efforts related to that collaboration could be delayed or terminated,
or it may be necessary for us to assume responsibility for expenses or activities that would otherwise have been the responsibility of
our collaborator. If we are unable to establish and maintain collaborative relationships on acceptable terms or to successfully transition
terminated collaborative agreements, we may have to delay or discontinue further development of one or more of our product candidates,
undertake development and commercialization activities at our own expense or find alternative sources of capital.
Modifications to our therapeutic
candidates, or to any other therapeutic candidates that we may develop in the future, may require new regulatory clearances or approvals
or may require us or our licensees, as applicable, to recall or cease marketing these therapeutic candidates until clearances are obtained.
Modifications to our
therapeutic candidates, after they have been approved for marketing, if at all, or to any other pharmaceutical product or medical device
that we may develop in the future, may require new regulatory clearance or approvals, and, if necessitated by a problem with a marketed
product, may result in the recall or suspension of marketing of the previously approved and marketed product until clearances or approvals
of the modified product are obtained. The FDA requires pharmaceutical products and device manufacturers to initially make and document
a determination of whether a modification requires a new approval, supplement or clearance. A manufacturer may determine in conformity
with applicable regulations and guidelines that a modification may be implemented without pre-clearance by the FDA; however, the FDA can
review a manufacturer’s decision and may disagree. The FDA may also on its own initiative determine that a new clearance or approval
is required. If the FDA requires new clearances or approvals of any pharmaceutical product or medical device for which we or our licensees
receive marketing approval, if any, we or our licensees may be required to recall such product and to stop marketing the product as modified,
which could require us or our licensees to redesign the product and will have a material adverse effect on our business, financial condition
and results of operations. In these circumstances, we may be subject to significant enforcement actions.
If a manufacturer determines
that a modification to an FDA-cleared device could significantly affect the safety or efficacy of the device, would constitute a major
change in its intended use, or otherwise requires pre-clearance, the modification may not be implemented without the requisite clearance.
We or our licensees may not be able to obtain those additional clearances or approvals for the modifications or additional indications
in a timely manner, or at all. For those products sold in the European Union, or EU, we or our licensees, as applicable, must notify the
applicable EU Notified Body, an organization appointed by a member state of the EU either for the approval and monitoring of a manufacturer’s
quality assurance system or for direct product inspection, if significant changes are made to the product or if there are substantial
changes to the quality assurance systems affecting the product. Delays in obtaining required future clearances or approvals would materially
and adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would have a material adverse
effect on our business, financial condition and results of operations.
If
our competitors develop and market products that are more effective, safer or less expensive than our current or future therapeutic candidates,
our prospects will be negatively impacted.
The life sciences industry
is highly competitive, and we face significant competition from many pharmaceutical, biopharmaceutical and biotechnology companies that
are researching and marketing products designed to address the indications for which we are currently developing therapeutic candidates
or for which we may develop therapeutic candidates in the future. Specifically, we are aware of other companies that currently market
and/or are in the process of developing products that address stem cell mobilization and solid malignancies and skin lesions.
An important element
of our strategy for identifying future products is maintaining relationships with universities, medical institutions and biotechnology
companies in order to in-license potential therapeutic candidates, and we compete with respect to this in-licensing with a number of global
pharmaceutical companies. The presence of these global companies with significantly greater resources than we have may increase the competition
with respect to the in-licensing of promising therapeutic candidates. Our failure to license or otherwise acquire necessary technologies
could materially and adversely affect our business, financial condition and results of operations.
Our contract manufacturers
are, and will be, subject to FDA and other comparable agency regulations.
Our contract manufacturers
are, and will be, required to adhere to FDA regulations setting forth current good manufacturing practices, or cGMP, for drugs and Quality
System Regulations, or QSR, for devices. These regulations cover all aspects of the manufacturing, testing, quality control and recordkeeping
relating to our therapeutic candidates. Our manufacturers may not be able to comply with applicable regulations. Our manufacturers are
and will be subject to unannounced inspections by the FDA, state regulators and similar regulators outside the United States. The failure
of our third-party manufacturers to comply with applicable regulations could result in the imposition of sanctions on us, including fines,
injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our therapeutic candidates, delays, suspension
or withdrawal of approvals, license revocation, seizures or recalls of our candidates or products, operating restrictions and criminal
prosecutions, any of which could significantly and adversely affect regulatory approval and supplies of our therapeutic candidates, and
materially and adversely affect our business, financial condition and results of operations.
Our business could suffer
if we are unable to attract and retain key employees.
Our success depends upon
the continued service and performance of our senior management and other key personnel. The loss of the services of these personnel could
delay or prevent the successful completion of our planned clinical trials or the commercialization of our therapeutic candidates or otherwise
affect our ability to manage our company effectively and to carry out our business plan. We do not maintain key-man life insurance. Although
we have entered into employment agreements with all of the members of our senior management team, members of our senior management team
may resign at any time. High demand exists for senior management and other key personnel in the pharmaceutical industry. There can be
no assurance that we will be able to continue to retain and attract such personnel.
Our growth and success
also depend on our ability to attract and retain additional highly qualified scientific, technical, sales, managerial and finance personnel.
We experience intense competition for qualified personnel, and the existence of non-competition agreements between prospective employees
and their former employers may prevent us from hiring those individuals or subject us to suit from their former employers. In addition,
if we elect to independently commercialize any therapeutic candidate, we will need to expand our marketing and sales capabilities. While
we attempt to provide competitive compensation packages to attract and retain key personnel, many of our competitors are likely to have
greater resources and more experience than we have, making it difficult for us to compete successfully for key personnel. If we cannot
attract and retain sufficiently qualified technical employees on acceptable terms, we may not be able to develop and commercialize competitive
products. Further, any failure to effectively integrate new personnel could prevent us from successfully growing our company.
We
rely upon third-party manufacturers to produce therapeutic supplies for the clinical trials, and commercialization, of our therapeutic
candidates. If we manufacture any of our therapeutic candidates in the future, we will be required to incur significant costs and devote
significant efforts to establish and maintain manufacturing capabilities.
We do not currently have
laboratories that are compliant with cGMP and therefore cannot independently manufacture drug products for our current clinical trials.
We rely on third-party manufacturers to produce the therapeutic supplies that will enable us to perform clinical trials and, if we choose
to do so, commercialize therapeutic candidates ourselves. We have limited personnel with experience in drug or medical device manufacturing
and we lack the resources and capabilities to manufacture any of our therapeutic candidates on a commercial scale. The manufacture of
pharmaceutical products and medical devices requires significant expertise and capital investment, including the development of advanced
manufacturing techniques and process controls. Manufacturers of pharmaceutical products and medical devices often encounter difficulties
in production, particularly in scaling up initial production. These problems include difficulties with production costs and yields and
quality control, including stability of the therapeutic candidate.
We do not currently have
any long-term agreements with third-party manufacturers that guarantee the supply of any of our therapeutic candidates. When we require
additional supplies of our therapeutic candidates to complete our clinical trials or if we elect to commercialize our products independently,
we may be unable to enter into agreements for clinical or commercial supply, as applicable, with third-party manufacturers, or may be
unable to do so on acceptable terms. Even if we enter into these agreements, it is likely that the manufacturers of each therapeutic candidate
will be single-source suppliers to us for a significant period of time.
Reliance on third-party
manufacturers entails risks to which we would not be subject if we manufactured therapeutic candidates ourselves, including:
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reliance on the third party for regulatory compliance and quality assurance; |
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limitations on supply availability resulting from capacity and scheduling constraints of the third parties; |
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impact on our reputation in the marketplace if manufacturers of our products, once commercialized, fail to meet customer demands;
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the possible breach of the manufacturing agreement by the third party because of factors beyond our control; and |
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the possible termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that
is costly or inconvenient for us. |
The failure of any of
our contract manufacturers to maintain high manufacturing standards could result in injury or death of clinical trial participants or
patients being treated with our products. Such failure could also result in product liability claims, product recalls, product seizures
or withdrawals, delays or failures in testing or delivery, cost overruns or other problems, which would have a material adverse effect
on our business, financial condition and results of operations.
Increasing
scrutiny of, and evolving expectations for, sustainability and environmental, social, and governance, or ESG, initiatives could increase
our costs or otherwise adversely impact our business.
Public companies are
facing increasing scrutiny related to ESG practices and disclosures from certain investors, capital providers, shareholder advocacy
groups, other market participants and other stakeholder groups. With this increased focus, public reporting regarding ESG practices
is becoming more broadly expected. Such increased scrutiny may result in increased costs, enhanced compliance or disclosure obligations,
or other adverse impacts on our business, financial condition or results of operations. If our ESG practices and reporting do
not meet investor or other stakeholder expectations, which continue to evolve, we may be subject to investor or regulator engagement regarding
such matters. In addition, new sustainability rules and regulations have been adopted and may continue to be introduced in various states
and other jurisdictions. For example, the SEC has published proposed rules that would require companies to provide significantly expanded
climate-related disclosures in their periodic reporting, which may require us to incur significant additional costs to comply and impose
increased oversight obligations on our management and board of directors. Our failure to comply with any applicable rules or regulations
could lead to penalties and adversely impact our reputation, access to capital and employee retention. Such ESG matters may
also impact our third-party contract manufacturers and other third parties on which we rely, which may augment or cause additional impacts
on our business, financial condition, or results of operations.
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 and other pandemics, which has impacted and could in the future impact our business.
The novel coronavirus
outbreak, or COVID-19, has affected segments of the global economy. Due to clinical operating issues associated with the COVID-19 pandemic,
during 2020, we temporarily suspended enrollment to the phase 1/2a study for AGI-134, our second lead compound. If there is a resurgence,
COVID-19 could 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 any resurgence 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 in the past taken precautionary measures, including,
for example, a Company-wide salary reduction related to the COVID-19 pandemic carried out in the second and third quarters 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
any resurgence of COVID-19 or other pandemics 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 and
other pandemics and related restrictions and implications and the effectiveness of actions taken to contain and treat the diseases, all
of which are uncertain and cannot be predicted. The impact of any resurgence of the COVID-19 pandemic or another pandemic may also have
the effect of heightening many of the other risks described in the “Risk Factors” section of this Annual Report on Form 20-F
Risks Related to Our
Industry
Even if our therapeutic
candidates receive regulatory approval or do not require regulatory approval, they may not become commercially viable products.
Even if our therapeutic
candidates are approved for commercialization, they may not become commercially viable products. For example, if we or any licensee receive
regulatory approval to market a product, approval may be subject to limitations on the indicated uses or subject to labelling or marketing
restrictions, which could materially and adversely affect the marketability and profitability of the product. In addition, a new product
may appear promising at an early stage of development or after clinical trials but never reach the market, or it may reach the market
but not result in sufficient product sales, if any. A therapeutic candidate may not result in commercial success for various reasons,
including:
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difficulty in large-scale manufacturing; |
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low market acceptance by physicians, healthcare payors, patients and the medical community as a result of lower demonstrated clinical
safety or efficacy compared to other products, prevalence and severity of adverse side effects, or other potential disadvantages relative
to alternative treatment methods; |
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insufficient or unfavorable levels of reimbursement from government or third-party payors; |
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infringement on proprietary rights of others for which we or our licensees have not received licenses; |
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incompatibility with other therapeutic products; |
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other potential advantages of alternative treatment methods; |
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ineffective marketing and distribution support; |
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significant changes in pricing due to pressure from public opinion, non-governmental organizations or governmental authorities;
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lack of cost-effectiveness; or |
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timing of market introduction of competitive products. |
If we are unable to develop
commercially viable products, either on our own or through licensees, our business, results of operations and financial condition will
be materially and adversely affected.
Healthcare reforms and
related reductions in pharmaceutical pricing, reimbursement and coverage by governmental authorities and third-party payors may adversely
affect our business.
The continuing increase
in expenditures for healthcare has been the subject of considerable government attention, particularly as public resources have been stretched
by financial and economic crises in the United States, Western Europe and elsewhere. Both private health insurance funds and government
health authorities continue to seek ways to reduce or contain healthcare costs, including by reducing or eliminating coverage for certain
products and lowering reimbursement levels. In many countries and regions, including the United States, Western Europe, Israel, Russia,
certain countries in Central and Eastern Europe and several countries in Latin America, pharmaceutical prices are subject to new government
policies designed to reduce healthcare costs. These changes frequently adversely affect pricing and profitability and may cause delays
in market entry. We cannot predict which additional measures may be adopted or the impact of current and additional measures on the marketing,
pricing and demand for our approved products, if any of our therapeutic products are approved.
Significant developments
that may adversely affect pricing in the United States include (i) the enactment of federal healthcare reform laws and regulations, including
the Medicare Prescription Drug Improvement and Modernization Act of 2003 and the Patient Protection and Affordable Care Act of 2010, or
PPACA, and (ii) trends in the practices of managed care groups and institutional and governmental purchasers, including the impact of
consolidation of our customers. In 2022, the Inflation Reduction Act of 2022, or IRA, establishes the Medicare Drug Price Negotiation
Program which permits the government to negotiate “maximum fair” drug prices for certain high expenditure, single source drugs
and biologics. It is estimated that over the next seven years, 60 drugs covered under Medicare B and D will have negotiated a “maximum
fair price.”
Changes to the healthcare
system enacted as part of healthcare reform in the United States, as well as the increased purchasing power of entities that negotiate
on behalf of Medicare, Medicaid, and private sector beneficiaries, may result in increased pricing pressure by influencing, for instance,
the reimbursement policies of third-party payors. Healthcare reform legislation has increased the number of patients who would have insurance
coverage for our approved products, if any of our therapeutic products are approved, but provisions such as the assessment of a branded
pharmaceutical manufacturer fee and an increase in the amount of the rebates that manufacturers pay for coverage of their drugs by Medicaid
programs may have an adverse effect on us. It is uncertain how current and future reforms in these areas will influence the future of
our business operations and financial condition, as federal, state and foreign governmental authorities are likely to continue efforts
to control the price of drugs and reduce overall healthcare costs. These efforts could have an adverse impact on our ability to market
products and generate revenues in the United States and foreign countries.
If
third-party payors do not adequately reimburse customers for any of our therapeutic candidates that are approved for marketing, they might
not be purchased or used, and our revenues and profits will not develop or increase.
Our revenues and profits
will depend heavily upon the availability of adequate reimbursement for the use of our approved candidates, if any, from governmental
or other third-party payors, both in the United States and in foreign markets. Reimbursement by a third-party payor may depend upon a
number of factors, including the third-party payor’s determination that the use of an approved product is:
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a covered benefit under its health plan; |
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safe, effective and medically necessary; |
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appropriate for the specific patient; |
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neither experimental nor investigational. |
Obtaining reimbursement
approval for a product from each government or other third-party payor is a time-consuming and costly process that could require us or
our licensees to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to each payor. Even when
a payor determines that a product is eligible for reimbursement, the payor may impose coverage limitations that preclude payment for some
uses that are approved by the FDA or comparable foreign regulatory authorities. Reimbursement rates may vary according to the use of the
product and the clinical setting in which it used, may be based on payments allowed for lower-cost products that are already reimbursed,
may be incorporated into existing payments for other products or services, and may reflect budgetary constraints and/or imperfections
in Medicare, Medicaid or other data used to calculate these rates.
Regardless of the impact
of the PPACA on us, the U.S. government, other governments and commercial payors have shown significant interest in pursuing healthcare
reform and reducing healthcare costs. Any government-adopted reform measures, such as the IRA, could cause significant pressure on the
pricing of healthcare products and services, including those biopharmaceuticals currently being developed by us or our licensees, in the
United States and internationally, as well as the amount of reimbursement available from governmental agencies or other third-party payors.
The continuing efforts of the U.S. and foreign governments, insurance companies, managed care organizations and other payors to contain
or reduce healthcare costs may compromise our ability to set prices at commercially attractive levels for our products that we may develop,
which in turn could adversely impact how much or under what circumstances healthcare providers will prescribe or administer our products,
if approved. Changes in healthcare policy, such as the creation of broad limits for diagnostic products, could substantially diminish
the sale of or inhibit the utilization of diagnostic tests, increase costs, divert management’s attention and adversely affect our
ability to generate revenues and achieve consistent profitability. This could materially and adversely impact our business by reducing
our ability to generate revenue, raise capital, obtain additional collaborators and market our products, if approved.
Further, the Centers
for Medicare and Medicaid Services, or CMS, frequently change product descriptors, coverage policies, product and service codes, payment
methodologies and reimbursement values. The IRA will modify 60 drugs and biologics through negotiation of a fair maximum pricing for CMS.
Third-party payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and both CMS
and other third-party payors may have sufficient market power to demand significant price reductions.
Our business has a substantial
risk of clinical trial and product liability claims. If we are unable to obtain and maintain appropriate levels of insurance, a claim
could adversely affect our business.
Our business exposes
us to significant potential clinical trial and product liability risks that are inherent in the development, manufacturing and sales and
marketing of human therapeutic products. Claims could be made against us based on the use of our therapeutic candidates in clinical trials
and in marketed products. We currently carry life science liability insurance covering general liability with an annual coverage amount
of $30.0 million per occurrence and product liability and clinical trials coverage with an annual coverage amount of $30.0 million each
claim and in the aggregate. The annual aggregate as well as the maximum indemnity for a single occurrence, claim or circumstances under
this insurance is $30.0 million. However, our insurance may not provide adequate coverage against potential liabilities. Furthermore,
clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to maintain current amounts
of insurance coverage or to obtain additional or sufficient insurance at a reasonable cost to protect against losses that could have a
material adverse effect on us. If a claim is brought against us, we might be required to pay legal and other expenses to defend the claim,
as well as damages awards beyond the coverage of our insurance policies resulting from a claim brought successfully against us. Furthermore,
whether or not we are ultimately successful in defending any claims, we might be required to direct significant financial and managerial
resources to such defense, and adverse publicity is likely to result.
Significant disruptions
of our information technology systems or breaches of our data security could adversely affect our business.
A significant invasion,
interruption, destruction or breakdown of our information technology systems and/or infrastructure by persons with authorized or unauthorized
access could negatively impact our business and operations. We could experience business interruption, information theft and/or reputational
damage from cyber-attacks or cyber-intrusions over the Internet, computer viruses, malware, natural disasters, terrorism, war, telecommunication
and electrical failures, and attachments to emails. Any of the foregoing may compromise our systems and lead to data leakage either internally
or at our third-party providers. The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including
by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of
attempted attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations,
it could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed
or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to
recover or reproduce the data. Our systems have been, and are expected to continue to be, the target of malware and other cyber-attacks.
Although we have invested in measures to reduce these risks, we cannot assure you that these measures will be successful in preventing
compromise and/or disruption of our information technology systems and related data.
We deal with hazardous
materials and must comply with environmental, health and safety laws and regulations, which can be expensive and restrict how we do business.
Our activities and those
of our third-party manufacturers on our behalf involve the controlled storage, use and disposal of hazardous materials, including microbial
agents, corrosive, explosive and flammable chemicals, as well as cytotoxic, biologic, radio-labeled and other hazardous compounds. We
and our manufacturers are subject to U.S. federal, state, local, Israeli and other foreign laws and regulations governing the use, manufacture,
storage, handling and disposal of these hazardous materials. Although we believe that our safety procedures for handling and disposing
of these materials comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental contamination
or injury from these materials. In addition, if we develop a manufacturing capacity, we may incur substantial costs to comply with environmental
regulations and would be subject to the risk of accidental contamination or injury from the use of hazardous materials in our manufacturing
process.
In the event of an accident,
government authorities may curtail our use of these materials and interrupt our business operations. In addition, we could be liable for
any civil damages that result, which may exceed our financial resources and may seriously harm our business. Although our Israeli insurance
program covers certain unforeseen sudden pollutions, we do not maintain a separate insurance policy for any of the foregoing types of
risks. In addition, although the general liability section of our life sciences policy covers certain unforeseen, sudden environmental
issues, pollution in the United States and Canada is excluded from the policy. In the event of environmental discharge or contamination
or an accident, we may be held liable for any resulting damages, and any liability could exceed our resources. In addition, we may be
subject to liability and may be required to comply with new or existing environmental laws regulating pharmaceuticals or other medical
products in the environment.
We
are currently part to, and may in the future, become subject to litigation or claims arising in or outside the ordinary course of business
that could negatively affect our business operations and financial condition.
We are currently party
to, and may in the future, become subject to litigation or claims arising in or outside the ordinary course of business (other than intellectual
property infringement actions) that could negatively affect our business operations and financial condition, including securities class
actions which are typically expensive to defend. Such claims and litigation proceedings may be brought by third parties, including our
competitors, advisors, service providers, partners or collaborators, employees, and governmental or regulatory bodies. For information
on legal proceedings, please see “Item 8. Financial Information – A. Financial Statements and Other Financial Information
– Legal Proceedings.” Any claims and lawsuits, and the disposition of such claims and lawsuits, could be time-consuming and
expensive to resolve, divert management attention and resources, and lead to attempts on the part of other parties to pursue similar claims.
We may not be able to determine the amount of any potential losses and other costs we may incur due to the inherent uncertainties of litigation
and settlement negotiations. In the event we are required or decide to pay amounts in connection with any claims or lawsuits, such amounts
could be significant and could have a material adverse impact on our liquidity, business, financial condition and results of operations.
In addition, depending on the nature and timing of any such dispute, a resolution of a legal matter could materially affect our future
operating results, our cash flows or both. Additionally, we may be unable to maintain our existing directors’ and officers’
liability insurance in the future at satisfactory rates or adequate coverage amounts and may incur significant increases in insurance
costs.
Risks Related to Intellectual
Property
Our access to most of
the intellectual property associated with our therapeutic candidates results from in-license agreements with biotechnology companies and
a university, the termination of which would prevent us from commercializing the associated therapeutic candidates.
We do not conduct our
own initial research with respect to the identification of our therapeutic candidates. Instead, we rely upon research and development
work conducted by third parties as the primary source of our therapeutic candidates. As such, we have obtained our rights to our therapeutic
candidates through in-license agreements entered into with biotechnology companies and a university that invent and own the intellectual
property underlying our candidates. There is no assurance that such in-licenses or rights will not be terminated or expire due to a material
breach of the agreements, such as a failure on our part to achieve certain progress milestones set forth in the terms of the in-licenses
or due to the loss of the rights to the underlying intellectual property by any of our licensors. There is no assurance that we will be
able to renew or renegotiate an in-licensing agreement on acceptable terms if and when the agreement terminates. We cannot guarantee that
any in-license is enforceable or will not be terminated or converted into a non-exclusive license in the future. The termination of any
in-license or our inability to enforce our rights under any in-license would materially and adversely affect our ability to commercialize
certain of our therapeutic candidates.
We currently have in-licensing
agreements relating to our therapeutic candidates that are in development or being commercialized. In 2012, we in-licensed the rights
to motixafortide under a license agreement from Biokine. Under the license agreement for motixafortide, we are obligated to make commercially
reasonable, good faith efforts to sublicense or commercialize motixafortide for fair consideration. Agalimmune in-licensed rights to AGI-134
under a license from the University of Massachusetts in 2013 and under a license from Kode Biotech in 2015. Under each of those license
agreements, Agalimmune is obligated to use diligent efforts or cause its affiliates and sublicensees to use diligent efforts to develop
the respective licensed technology and introduce licensed products into the commercial market. In 2007, we in-licensed the rights to BL-5010
under a license agreement with IPC. Under the BL-5010 license agreement, we are obligated to use commercially reasonable efforts to develop
the licensed technology in accordance with a specified development plan, including meeting certain specified diligence goals.
Each of the foregoing
in-licensing agreements, or the obligation to pay royalties thereunder, will generally remain in effect until the expiration, under the
applicable agreement, of all the licensing, royalty and sublicense revenue obligations to the applicable licensors, determined on a product-by-product
and country-by-country basis. We may terminate the motixafortide in-licensing agreement upon 90 days’ prior written notice to Biokine.
Agalimmune may terminate each of the in-licensing agreements with University of Massachusetts and Kode Biotech relating to AGI-134, on
90 days’ notice. We may terminate the BL-5010 in-licensing agreement upon 30 days’ prior written notice to IPC.
Any party to any of the
foregoing in-licensing agreements may terminate the respective agreement for material breach by the other party if the breaching party
is unable to cure the breach within an agreed-upon period, generally 30 days to 90 days, after receiving written notice of the breach
from the non-breaching party.
Patent protection for
our products is important and uncertain.
Our success depends,
in part, on our ability, and the ability of our licensees and licensors to obtain patent protection for our therapeutic candidates, maintain
the confidentiality of our trade secrets and know-how, operate without infringing on the proprietary rights of others and prevent others
from infringing our proprietary rights.
We try to protect our
proprietary position by, among other things, filing U.S., European, Israeli and other patent applications related to our proprietary products,
technologies, inventions and improvements that may be important to the continuing development of our therapeutic candidates. As of March
21, 2023, we owned or exclusively licensed for uses within our field of business 33 patent families that collectively contain 129 issued
patents, 10 allowed patent applications and over 80 pending patent applications relating to our therapeutic candidates.
Because the patent position
of biopharmaceutical companies involves complex legal and factual questions, we cannot predict the validity and enforceability of patents
with certainty. Our issued patents and the issued patents of our licensees or licensors may not provide us with any competitive advantages
or may be held invalid or unenforceable as a result of legal challenges by third parties. Thus, any patents that we own or license from
others may not provide any protection against competitors. Our pending patent applications, those we may file in the future or those we
may license from third parties may not result in patents being issued. If these patents are issued, they may not provide us with proprietary
protection or competitive advantages against competitors with similar technology. The degree of future protection to be afforded by our
proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit
us to gain or keep our competitive advantage.
Patent rights are territorial;
thus, the patent protection we do have will only extend to those countries in which we have issued patents. Even so, the laws of certain
countries do not protect our intellectual property rights to the same extent as do the laws of the United States. For example, the patent
laws of China and India are relatively new and are not as developed as are older, more established patent laws of other countries. Competitors
may successfully challenge our patents, produce similar drugs or products that do not infringe our patents, or produce drugs in countries
where we have not applied for patent protection or that do not respect our patents. Furthermore, it is not possible to know the scope
of claims that will be allowed in published applications and it is also not possible to know which claims of granted patents, if any,
will be deemed enforceable in a court of law.
Our technology may infringe
the rights of third parties. The nature of claims contained in unpublished patent filings around the world is unknown to us and it is
not possible to know which countries patent holders may choose for the extension of their filings under the Patent Cooperation Treaty,
or other mechanisms. Any infringement by us of the proprietary rights of third parties may have a material adverse effect on our business,
financial condition and results of operations.
If we are unable to protect
the confidentiality of our trade secrets or know-how, such proprietary information may be used by others to compete against us.
We rely on a combination
of patents, trade secrets, know-how, technology, trademarks and regulatory exclusivity to maintain our competitive position. We generally
try to protect trade secrets, know-how and technology by entering into confidentiality or non-disclosure agreements with parties that
have access to it, such as our licensees, employees, contractors and consultants. We also enter into agreements that purport to require
the disclosure and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees, advisors, research
collaborators, contractors and consultants while we employ or engage them. However, these agreements can be difficult and costly to enforce
or may not provide adequate remedies. Any of these parties may breach the confidentiality agreements and willfully or unintentionally
disclose our confidential information, or our competitors might learn of the information in some other way. The disclosure to, or independent
development by, a competitor of any trade secret, know-how or other technology not protected by a patent could materially adversely affect
any competitive advantage we may have over any such competitor.
To the extent that any
of our employees, advisors, research collaborators, contractors or consultants independently develop, or use independently developed,
intellectual property in connection with any of our projects, disputes may arise as to the proprietary rights to this type of information.
If a dispute arises with respect to any proprietary right, enforcement of our rights can be costly and unpredictable, and a court may
determine that the right belongs to a third party.
Legal proceedings or third-party
claims of intellectual property infringement may require us to spend substantial time and money and could prevent us from developing or
commercializing products.
The development, manufacture,
use, offer for sale, sale or importation of our therapeutic candidates may infringe on the claims of third-party patents. A party might
file an infringement action against us. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could
be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively because of
their substantially greater financial resources. Uncertainties resulting from the initiation and continuation or defense of a patent litigation
or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings
may also absorb significant management time. Consequently, we are unable to guarantee that we will be able to manufacture, use, offer
for sale, sell or import our therapeutic candidates in the event of an infringement action. At present, we are not aware of pending or
threatened patent infringement actions against us.
In the event of patent
infringement claims, or to avoid potential claims, we may choose or be required to seek a license from a third party and would most likely
be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we were
able to obtain a license, the rights may be non-exclusive, which could potentially limit our competitive advantage. Ultimately, we could
be prevented from commercializing a therapeutic candidate or be forced to cease some aspect of our business operations if, as a result
of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms. This inability to enter
into licenses could harm our business significantly. At present, we have not received any written demands from third parties that we take
a license under their patents nor have we received any notice form a third party accusing us of patent infringement.
Our license agreements
with our licensees contain, and any contract that we enter into with licensees in the future will likely contain, indemnity provisions
that obligate us to indemnify the licensee against any losses arising from infringement of third-party intellectual property rights. In
addition, our in-license agreements contain provisions that obligate us to indemnify the licensors against any damages arising from the
development, manufacture and use of products developed on the basis of the in-licensed intellectual property.
We may be subject to other
patent-related litigation or proceedings that could be costly to defend and uncertain in their outcome.
In addition to infringement
claims against us, we may in the future become a party to other patent litigation or proceedings, including interference or re-examination
proceedings filed with the U.S. Patent and Trademark Office or opposition proceedings in other foreign patent offices regarding intellectual
property rights with respect to our products and technology, as well as other disputes regarding intellectual property rights with licensees,
licensors or others with whom we have contractual or other business relationships. Post-issuance oppositions are not uncommon and we,
our licensee or our licensor will be required to defend these opposition procedures as a matter of course. Opposition procedures may be
costly, and there is a risk that we may not prevail.
We may be subject to damages
resulting from claims that we or our employees or contractors have wrongfully used or disclosed alleged trade secrets of their former
employers.
Many of our employees
and contractors were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors
or potential competitors. Although no claims against us are currently pending, we may be subject to claims that we or any employee or
contractor has inadvertently or otherwise used or disclosed trade secrets or other proprietary information of his or her former employers.
Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages,
we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper or
prevent our ability to commercialize certain therapeutic candidates, which could severely harm our business, financial condition and results
of operations. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction
to management.
Risks Related to our
Ordinary Shares and ADSs
We
may be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our taxable year ending December 31, 2023
or in any subsequent year. There may be negative tax consequences for U.S. taxpayers that are holders of our ordinary shares or our ADSs
if we are a PFIC.
We will be treated as
a PFIC for U.S. federal income tax purposes in any taxable year in which either (i) at least 75% of our gross income is “passive
income” or (ii) on average at least 50% of our assets by value produce passive income or are held for the production of passive
income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains
from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income
also includes amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining
whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly
or indirectly, at least a 25% interest (by value) is taken into account. We believe that we were a PFIC during certain prior taxable years,
although we believe that we were not a PFIC for the year ended December 31, 2022. Although we have not determined whether we will be a
PFIC for our taxable year ending December 31, 2023, or in any subsequent year, our operating results for any such years may cause us to
be a PFIC. Because PFIC status is determined annually and is based on our income, assets and activities for the entire taxable year, it
is not possible to determine with certainty whether we will be characterized as a PFIC for the 2023 taxable year until after the close
of the year, and there can be no assurance that we will not be classified as a PFIC in any future year. If we are a PFIC for our taxable
year ending December 31, 2023, or any subsequent year, and a U.S. Investor (as defined below) does not make an election to treat us as
a “qualified electing fund,” or QEF, or make a “mark-to-market” election, then “excess distributions”
to a U.S. Investor, and any gain realized on the sale or other disposition of our ordinary shares or ADSs will be subject to special rules.
Under these rules: (i) the excess distribution or gain would be allocated ratably over the U.S. Investor’s holding period for the
ordinary shares (or ADSs, as the case may be); (ii) the amount allocated to the current taxable year and any period prior to the first
day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (iii) the amount allocated to each of the
other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and
an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other
taxable year. In addition, if the U.S. Internal Revenue Service, or the IRS, determines that we are a PFIC for a year with respect to
which we have determined that we were not a PFIC, it may be too late for a U.S. Investor to make a timely QEF or mark-to-market election.
U.S. Investors who hold our ordinary shares or ADSs during a period when we are a PFIC will be subject to the foregoing rules, even if
we cease to be a PFIC in subsequent years, subject to exceptions for U.S. Investors who made a timely QEF or mark-to-market election.
A U.S. Investor can make a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions
thereto. A QEF election generally may not be revoked without the consent of the IRS. Upon request, we intend to annually furnish U.S.
Investors with information needed in order to complete IRS Form 8621 (which form would be required to be filed with the IRS on an annual
basis by the U.S. Investor) and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC.
See also “Item 10. Additional Information—E. Taxation—U.S. Federal Income Tax Considerations.”
If
a United States person is treated as owning at least 10% of our shares, such holder may be subject to adverse U.S. federal income tax
consequences.
If a United States person
is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our shares, such person may
be treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our group
(if any). A United States shareholder of a controlled foreign corporation may be required to annually report and include in its
U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income” and investments
in U.S. property by controlled foreign corporations, whether or not we make any distributions, and may be subject to tax reporting obligations.
An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain
tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. A failure
to comply with these reporting obligations may subject you to significant monetary penalties and may prevent the statute of limitations
with respect to your U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances
that we will assist any shareholder in determining whether such shareholder is treated as a United States shareholder with respect to
any “controlled foreign corporation” in our group (if any) or furnish to any United States shareholders information that may
be necessary to comply with the aforementioned reporting and tax paying obligations. A United States investor should consult its
tax advisors regarding the potential application of these rules to its investment in the shares.
Our
business, operating results and growth rates may be adversely affected by current or future unfavorable economic and market conditions
and adverse developments with respect to financial institutions and associated liquidity risk.
Our
business depends on the economic health of the global economies. If the conditions in the global economies remain uncertain or continue
to be volatile, or if they deteriorate, including as a result of the impact of military conflict, such as the war between Russia and Ukraine,
terrorism or other geopolitical events, our business, operating results and financial condition may be materially adversely affected.
Economic weakness, inflation and increases in interest rates, limited availability of credit, liquidity shortages and constrained capital
spending have at times in the past resulted, and may in the future result, in challenging and delayed sales cycles, slower adoption of
new technologies and increased price competition, and could negatively affect our ability to forecast future periods, which could result
in an inability to satisfy demand for our products and a loss of market share.
In
addition, increases in inflation raise our costs for commodities, labor, materials and services and other costs required to grow and operate
our business, and failure to secure these on reasonable terms may adversely impact our financial condition. Additionally, increases in
inflation, along with the uncertainties surrounding COVID-19, geopolitical developments and global supply chain disruptions, have caused,
and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment, which may make it more difficult,
costly or dilutive for us to secure additional financing. A failure to adequately respond to these risks could have a material adverse
impact on our financial condition, results of operations or cash flows.
More
recently, the closures of SVB and Signature Bank and their placement into receivership with the FDIC created bank-specific and broader
financial institution liquidity risk and concerns. Although the Department of the Treasury, the Federal Reserve and the FDIC jointly released
a statement that depositors at SVB and Signature Bank would have access to their funds, even those in excess of the standard FDIC insurance
limits, under a systemic risk exception, future adverse developments with respect to specific financial institutions or the broader financial
services industry may lead to market-wide liquidity shortages, impair the ability of companies to access near-term working capital needs,
and create additional market and economic uncertainty. There can be no assurance that future credit and financial market instability and
a deterioration in confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such
economic downturn, liquidity shortages, volatile business environment or continued unpredictable and unstable market conditions. If the
current equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions, it may cause short-term
liquidity risk and also make any necessary debt or equity financing more difficult, more costly, more onerous with respect to financial
and operating covenants and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have
a material adverse effect on our growth strategy, financial performance and stock price and could require us to alter our operating plans.
In addition, there is a risk that one or more of our service providers, financial institutions, manufacturers, suppliers and other partners
may be adversely affected by the foregoing risks, which could directly affect our ability to attain our operating goals on schedule and
on budget.
The market prices of our
ordinary shares and ADSs are subject to fluctuation, which could result in substantial losses by our investors.
The stock market in general
and the market prices of our ordinary shares on the TASE and ADSs on Nasdaq, in particular, are subject to fluctuation, and changes in
these prices may be unrelated to our operating performance. We expect that the market prices of our ordinary shares and ADSs will continue
to be subject to wide fluctuations. The market price of our ordinary shares and ADSs are and will be subject to a number of factors, including:
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announcements of technological innovations or new products by us or others; |
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announcements by us of significant acquisitions, strategic partnerships, in-licensing, out-licensing, joint ventures or capital commitments;
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expiration or terminations of licenses, research contracts or other collaboration agreements; |
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public concern as to the safety of drugs we, our licensees or others develop; |
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general market conditions; |
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the volatility of market prices for shares of biotechnology companies generally; |
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success of research and development projects; |
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departure of key personnel; |
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developments concerning intellectual property rights or regulatory approvals; |
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variations in our and our competitors’ results of operations; |
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changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or ADSs are covered by analysts;
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statements about the Company made in the financial media or by bloggers on the Internet; |
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statements made about drug pricing and other industry-related issues by government officials; |
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changes in government regulations or patent decisions; |
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developments by our licensees; and |
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general market conditions and other factors, including factors unrelated to our operating performance. |
These factors and any
corresponding price fluctuations may materially and adversely affect the market price of our ordinary shares and ADSs, and result in substantial
losses by our investors. See also Risk Factors—Risks Related to our Ordinary Shares and ADSs—“ Our
business, operating results and growth rates may be adversely affected by current or future unfavorable economic and market conditions
and adverse developments with respect to financial institutions and associated liquidity risk.”
Additionally, market
prices for securities of biotechnology and pharmaceutical companies historically have been very volatile. The market for these securities
has from time to time experienced significant price and volume fluctuations for reasons unrelated to the operating performance of any
one company. A significant outbreak of contagious diseases could result in a widespread health crisis that could adversely affect the
economies and financial markets of many countries, resulting in an economic downturn. Following periods of market volatility, shareholders
have often instituted securities class action litigation and we are currently party to two purported securities class action litigation.
See “Item 8.A—Financial Information—Legal Proceedings” for additional information. Such securities litigation
or any additional securities litigation could have a substantial cost and divert resources and attention of management from our business,
even if we are successful.
Our ordinary shares are
traded on the TASE and our ADSs are listed on Nasdaq. Trading in our securities on these markets takes place in different currencies (dollars
on Nasdaq and NIS on the TASE), and at different times (resulting from different time zones, different trading days and different public
holidays in the United States and Israel). The trading prices of our securities on these two markets may differ due to these factors,
the factors listed above, or other factors. Any decrease in the price of our securities on one of these markets could cause a decrease
in the trading price of our securities on the other market.
Future sales of our ordinary
shares or ADSs could reduce the market price of our ordinary shares and ADSs.
Substantial sales of
our ordinary shares or ADSs, either on the TASE or on Nasdaq, may cause the market price of our ordinary shares or ADSs to decline. Sales
by us or our securityholders of substantial amounts of our ordinary shares or ADSs, or the perception that these sales may occur in the
future, could cause a reduction in the market price of our ordinary shares or ADSs.
As of March 21, 2023,
as a result of previous financings, we had warrants outstanding (i) for the purchase of 63,837 ADSs at an exercise price of $14.10 per
ADS, (ii) for the purchase of 1,866,667 ADSs at an exercise price of $11.25 per ADS, (iii) for the purchase of 718,750 ADSs at an exercise
price of $3.00 per ADS, (iv) for the purchase for the purchase of 13,636,365 ADSs at an exercise price of $1.15 per ADS and (vi) for the
purchase of 681,818 ADSs at an exercise price of $1.375 per ADS.
On September 25, 2020,
we entered into an offering agreement, or the Original HCW Offering Agreement, with HCW. Pursuant to Original HCW Offering Agreement,
we were able to offer and sell, from time to time, at our option, up to $25.0 million of our ADSs through an “at-the-market”
equity offering program under which HCW agreed to act as sales agent. From the effective date of the Original HCW Offering Agreement through
September 3, 2021, we had sold an aggregate of 7,381,101 ADSs for an aggregate offering price of $24.5 million. On September 3, 2021,
the Original HCW Offering Agreement was terminated.
On September 3, 2021,
we entered into a new offering agreement, or the New HCW Offering Agreement, with HCW, pursuant to which we may offer and sell, at our
option, up to $25.0 million of our ADSs through an “at-the-market” equity program under which HCW agreed to act as sales agent.
As of March 21, 2023, we have sold 608,651 of our ADSs for total gross proceeds of approximately $1.4 million under the New HCW Offering
Agreement.
As of March 21,
2023, in the framework of our Share Incentive Plan, there are outstanding stock options, restricted stock units and performance stock
units (granted to directors, employees and consultants) for the purchase of 92.1 million ordinary shares with a weighted average exercise
price of $0.13 per ordinary share.
The issuance of any additional
ordinary shares, any additional ADSs, or any securities that are exercisable for or convertible into our ordinary shares or ADSs, may
have an adverse effect on the market price of our ordinary shares and ADSs and will have a dilutive effect on our shareholders.
Raising additional capital
by issuing securities may cause dilution to existing shareholders.
We may need to raise
substantial future capital to continue to complete clinical development and commercialize our products and therapeutic candidates and
to conduct the research and development and clinical and regulatory activities necessary to bring our therapeutic candidates to market.
Our future capital requirements will depend on many factors, including:
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the failure to obtain regulatory approval, in a timely manner or at all, or achieve commercial success of our therapeutic candidates;
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our success in effecting out-licensing arrangements with third parties; |
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our success in establishing other out-licensing or co-development arrangements; |
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the success of our licensees in selling products that utilize our technologies; |
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the results of our preclinical studies and clinical trials for our earlier stage therapeutic candidates, and any decisions to initiate
clinical trials if supported by the preclinical results; |
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the costs, timing and outcome of regulatory review of our therapeutic candidates that progress to clinical trials; |
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the costs of establishing or acquiring specialty sales, marketing and distribution capabilities, if any of our therapeutic candidates
are approved, and we decide to commercialize them ourselves; |
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the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our issued patents and defending intellectual
property-related claims; |
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the extent to which we acquire or invest in businesses, products or technologies and other strategic relationships; and |
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the costs of financing unanticipated working capital requirements and responding to competitive pressures. |
If we raise additional
funds through licensing arrangements with third parties, we may have to relinquish valuable rights to our therapeutic candidates or grant
licenses on terms that are not favorable to us. If we raise additional funds by issuing equity or convertible debt securities, we will
reduce the percentage ownership of our then-existing shareholders, and these securities may have rights, preferences or privileges senior
to those of our existing shareholders. See also “— Future sales of our ordinary shares or ADSs could reduce the market price
of our ordinary shares and ADSs.”
As
a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of applicable SEC and
Nasdaq requirements, which may result in less protection than is accorded to investors under rules applicable to domestic issuers.
As a foreign private
issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise required under the Listing
Rules of the Nasdaq Stock Market, or the Nasdaq Rules, for U.S. domestic issuers. For instance, we may follow home country practice in
Israel with regard to, among other things, composition of the board of directors, director nomination procedure, composition of the compensation
committee, approval of compensation of officers, and quorum at shareholders’ meetings. In addition, we will follow our home country
law, instead of the Nasdaq Rules, which require that we obtain shareholder approval for certain dilutive events, such as for the establishment
or amendment of certain equity-based compensation plans, an issuance that will result in a change of control of the company, certain transactions
other than a public offering involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets
of another company. Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S.
company listed on Nasdaq may provide less protection than is accorded to investors under the Nasdaq Rules applicable to U.S. domestic
issuers. See “Item 16G — Corporate Governance — Nasdaq Listing Rules and Home Country Practices.”
In addition, as a foreign
private issuer, we are exempt from the rules and regulations under the U.S. Securities Exchange Act of 1934, as amended, or the Exchange
Act, related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from
the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required
under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly
as domestic companies whose securities are registered under the Exchange Act.
If we fail to comply with
the continued listing requirements of the Nasdaq Capital Market, our ADSs may be delisted and the price of our ADSs stock and our ability
to access the capital markets could be negatively impacted.
Nasdaq has established certain standards for
the continued listing of a security on the Nasdaq Capital Market. The standards for continued listing include, among other things, that
the minimum bid price for the listed securities not fall below $1.00 per share for a period of 30 consecutive trading days.
On November 2, 2022, we were notified in a
letter, or the Notification Letter, by the Nasdaq Listing Qualifications that we are not in compliance with the minimum bid price requirements
set forth in Nasdaq Listing Rule 5550(a)(2), or the Rule, for continued listing on The Nasdaq Capital Market.
The Notification Letter provides that the
Company has 180 calendar days, or until May 1, 2023, to regain compliance with the Rule. To regain compliance, the bid price of our ADSs
must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. In the event we do not regain
compliance by May 1, 2023, we may then be eligible for additional 180 days if we meet the continued listing requirement for market value
of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement,
and will need to provide written notice of our intention to cure the deficiency during the second compliance period. If we do not qualify
for the second compliance period or fail to regain compliance during the second compliance period, then Nasdaq will notify us of its determination
to delist our ADSs, at which point we will have an opportunity to appeal the delisting determination to a Hearings Panel
No
assurance can be given that we will be able to regain compliance with the Rule. Failure to meet applicable Nasdaq continued listing standards
could result in a delisting of our ADSs. A delisting of our ADSs from Nasdaq could materially reduce the liquidity of our ADSs and result
in a corresponding material reduction in the price of our ADSs. In addition, delisting could harm our ability to raise capital through
alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees
and fewer business development opportunities.
Risks Related to our
Operations in Israel
We conduct our operations
in Israel and therefore our results may be adversely affected by political, economic and military instability in Israel and its region.
Our headquarters, our
operations and some of our suppliers and third-party contractors are located in central Israel and our key employees, officers and most
of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region
may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place
between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of trade within Israel or between
Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us
to raise capital. From time to time and most recently in May and June of 2021, Israel has been engaged in armed conflicts with Hamas,
a militia group and political party operating in the Gaza Strip; These conflicts involved missile strikes against civilian targets in
various parts of Israel, as well as civil insurrection of Palestinians in the West Bank, on the border with the Gaza Strip and in Israeli
cities, and negatively affected business conditions in Israel. In addition, Israel faces threats from more distant neighbors, in particular
Iran. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah (a Lebanese
Islamist Shiite militia group and political party), and various rebel militia groups in Syria, as well as having a limited military presence
in Syria. Additionally, Iran has threatened to attack Israel and may be developing nuclear weapons. These threats may escalate in the
future to more violent events that may affect Israel and us. Among other things, this instability may affect the global economy and marketplace
through changes in oil and gas prices. Any armed conflicts, terrorist activities or political instability in the region could adversely
affect business conditions and could harm our results of operations. For example, any major escalation in hostilities in the region could
result in a portion of our employees being called up to perform military duty for an extended period of time. Parties with whom we do
business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements
when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving
performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure
provisions in the agreements.
Our commercial insurance
does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Although the Israeli
government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure
you that this government coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our
business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm
our results of operations.
Further, in the past,
the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with the
State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial
condition or the expansion of our business. If the BDS Movement, the movement for boycotting, divesting and sanctioning Israel and Israeli
institutions (including universities) and products become increasingly influential in the United States and Europe, this may also adversely
affect our financial condition.
Israel’s most recent
general elections were held on April 9, 2019, September 17, 2019, March 2, 2020, March 23, 2021 and November 1, 2022. In addition, proposed
judicial reform has sparked widespread protests across Israel. Uncertainty surrounding future elections and the outcome of the judicial
reform in Israel may continue and the political situation in Israel may further deteriorate. Actual or perceived political instability
in Israel or any negative changes in the political environment, may individually or in the aggregate adversely affect the Israeli economy
and, in turn, our business, financial condition, results of operations and growth prospects.
Due to a significant portion
of our expenses and revenues being denominated in non-dollar currencies, our results of operations may be harmed by currency fluctuations.
Our reporting and functional
currency is the dollar. However, we pay a significant portion of our expenses in NIS and in euro, and we expect this to continue. If the
dollar weakens against the NIS or the euro in the future, there may be a negative impact on our results of operations. Although we expect
our revenues from future licensing arrangements to be denominated primarily in dollars, we are exposed to the currency fluctuation risks
relating to the recording of our revenues in currencies other than dollars. For example, if the euro strengthens against the dollar, our
reported revenues in dollars may be lower than anticipated. From time to time, we engage in currency hedging transactions to decrease
the risk of financial exposure from fluctuations in the exchange rates of the currencies mentioned above in relation to the dollar. These
measures, however, may not adequately protect us from material adverse effects.
We have received Israeli
government grants for certain research and development expenditures. The terms of these grants may require us to satisfy specified conditions
in order to manufacture products and transfer technologies outside of Israel. We may be required to pay penalties in addition to repayment
of the grants.
Our research and development
efforts were previously financed, in part, through grants that we received from the Israel Innovation Authority, or the IIA (formerly
the Office of the Chief Scientist of Israel’s Ministry of Economy and Industry, or the OCS). In addition, before we in-licensed
motixafortide, Biokine had received funding for the project from the IIA, and as a condition to IIA consent to our in-licensing of motixafortide,
we were required to agree to abide by any obligations resulting from such funding. We therefore must comply with the requirements of the
Israeli Law for the Encouragement of Industrial Research, Development and Technological Innovation, 1984, and related regulations, as
amended, or the Research Law, with respect to these projects. Through December 31, 2022, we received approximately $22.0 million in funding
from the IIA and paid the IIA approximately $7.0 million in royalties under our approved programs. As of December 31, 2022, we have no
contingent obligation to the IIA other than for motixafortide as agreed when we in-licensed the project. The contingent liability to the
IIA assumed by us relating to this transaction (which liability has no relation to the funding actually received by us) amounts to $3.7
million as of December 31, 2022. We have a full right of offset for amounts payable to the IIA from payments that we may owe to Biokine
in the future.
The transfer or licensing
to third parties of know-how or technologies developed under the programs submitted to the IIA and derivatives thereof and as to which
we or our licensors received grants, or manufacturing or rights to manufacture based on and/or incorporating such know-how to third parties,
might require the consent of the IIA, and may require certain payments to the IIA. There is no assurance that we will be able to obtain
such consent on terms acceptable to us, or at all. Although such restrictions do not apply to the export from Israel of our products developed
with such know-how, without receipt of the aforementioned consent, such restrictions may prevent or limit us from engaging in transactions
with our affiliates, customers or other third parties outside Israel, involving transfer or licensing of manufacturing rights or other
know-how or assets that might otherwise be beneficial to us.
Provisions of Israeli
law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,
even when the terms of such a transaction are favorable to us and our shareholders.
Israeli corporate law
regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions
involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions.
For example, a merger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each
merging company with the Israel Registrar of Companies and at least 30 days from the date that the shareholders of both merging companies
approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a full
tender offer can only be completed if the acquirer receives the approval of at least 95% of the issued share capital (provided that a
majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, except that if
the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the
aggregate, approval by a majority of the offerees that do not have a personal interest in such tender offer is not required to complete
the tender offer), and the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six
months following the completion of the tender offer, claim that the consideration for the acquisition of the shares did not reflect their
fair market value and petition the court to alter the consideration for the acquisition accordingly (unless the acquirer stipulated in
the tender offer that a shareholder that accepts the offer may not seek appraisal rights, and the acquirer or the company published all
required information with respect to the tender offer prior to the date indicated for response to the tender offer).
Furthermore, Israeli
tax considerations may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a
tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges
to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes
the deferral contingent on the fulfilment of numerous conditions, including a holding period of two years from the date of the transaction
during which sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap
transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable, even if no actual disposition
of the shares has occurred.
These and other similar
provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition or merger
would be beneficial to us or to our shareholders.
We have received Israeli
government grants for certain research and development expenditures. The terms of these grants may require us to satisfy specified conditions
in order to manufacture products and transfer technologies outside of Israel. We may be required to pay penalties in addition to repayment
of the grants. Such grants may be terminated or reduced in the future, which would increase our costs. See “Business — Government
Regulation and Funding — Israeli Government Programs.”
It may be difficult to
enforce a U.S. judgment against us and our officers and directors in Israel or the United States, or to serve process on our officers
and directors.
We are incorporated in
Israel. All of our executive officers and the majority of our directors reside outside of the United States, and all of our assets and
most of the assets of our executive officers and directors are located outside of the United States. Therefore, a judgment obtained against
us or any of our executive officers and directors in the United States, including one based on the civil liability provisions of the U.S.
federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It also may be difficult
for you to effect service of process on these persons in the United States or to assert U.S. securities law claims in original actions
instituted in Israel.
Your rights and responsibilities
as a shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders
of U.S. companies.
We are incorporated under
Israeli law. The rights and responsibilities of the holders of our ordinary shares are governed by our Articles of Association and Israeli
law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S.-based
corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith toward the company and other shareholders
and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders
on matters such as amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers
and acquisitions and interested party transactions requiring shareholder approval. In addition, a shareholder who knows that it possesses
the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in
the company has a duty of fairness toward the company. There is limited case law available to assist us in understanding the implications
of these provisions that govern shareholders’ actions. These provisions may be interpreted to impose additional obligations and
liabilities on holders of our ordinary shares that are not typically imposed on shareholders of U.S. corporations.
ITEM 4.
INFORMATION ON THE COMPANY
A. History and Development
of the Company
Our legal and commercial
name is BioLineRx Ltd. We are a company limited by shares organized under the laws of the State of Israel. Our principal executive offices
are located at 2 HaMa’ayan Street, Modi’in 7177871, Israel, and our telephone number is +972 (8) 642-9100. Our wholly owned
subsidiary, BioLineRx USA, Inc., was incorporated in Delaware on January 4, 2008, and is located at 77 Fourth Ave, Waltham, Massachusetts
02451, and its telephone number is (617) 859-6409.
We were founded in 2003
by leading institutions in the Israeli life sciences industry. We completed our initial public offering in Israel in February 2007 and
our ordinary shares are traded on the TASE under the symbol “BLRX.” In July 2011, we listed our ADSs on Nasdaq and they are
traded under the symbol “BLRX.”
In March 2017, we acquired
Agalimmune Ltd., a private U.K.-based company, and its U.S. subsidiary, Agalimmune Inc. Agalimmune Inc. was dissolved on December 31,
2017.
Our capital expenditures
for the years ended December 31, 2020, 2021 were immaterial and 0.3 million for the year ended December 31, 2022. Our current capital
expenditures involve acquisitions of laboratory equipment, computers and communications equipment.
The SEC maintains an
Internet site that contains reports, proxy and information statements, and other information regarding issuers like BioLineRx that file
electronically with the SEC. The address of that site is www.sec.gov.
We maintain a corporate website at www.biolinerx.com.
Information contained on or accessible through our website is not a part of this Annual Report on Form 20-F, and the inclusion
of our website address herein is an inactive textual reference only.
We use our website (http://www.biolinerx.com)
as a channel of distribution of Company information. The information we post through this channel may be deemed material. Accordingly,
investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.
The contents of our website are not, however, a part of this Annual Report on Form 20-F.
We have not had any material
commitments for capital expenditures, including any anticipated material acquisition of plant and equipment or interests in other companies.
B. Business Overview
We are a pre-commercial-stage
biopharmaceutical company focused 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 stem-cell mobilization and solid tumors, 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. In this regard, we are currently executing on an independent commercialization
plan for motixafortide in stem cell mobilization for autologous bone marrow transplantation in multiple myeloma patients.
Our Product Development
Approach
We seek to develop a
pipeline of promising therapeutic candidates that exhibit distinct advantages over currently available therapies or address unmet medical
needs. Our resources are focused on advancing our therapeutic candidates through development and toward commercialization. Our current
drug development pipeline consists of two clinical-stage therapeutic candidates.
We have established close
relationships with various universities, academic and research institutions and biotechnology companies that permit us to identify and
select compounds at various stages of clinical and pre-clinical development. Our approach is consistent with our objective of proceeding
only with therapeutic candidates that we believe exhibit a relatively high probability of therapeutic and commercial success.
Our Product Pipeline
The table below summarizes
our current pipeline of therapeutic candidates, including the target indications and status of each candidate and our development partners:
Motixafortide
Motixafortide, is a novel,
short peptide that functions as a high-affinity antagonist for CXCR4, which we are developing for the treatment of stem cell mobilization
and solid tumors. CXCR4 is expressed by normal hematopoietic cells and overexpressed in various human cancers where its expression correlates
with disease severity. CXCR4 is a chemokine receptor that mediates the homing and retention of hematopoietic stem cells, or HSCs, in the
bone marrow, and also mediates tumor progression, angiogenesis (growth of new blood vessels in the tumor), metastasis (spread of tumor
to other organs) and survival. Before “motixafortide” was approved by the World Health Organization, or WHO, in 2019 as an
International Nonproprietary Name, this therapeutic candidate was known as “BL-8040”. In October 2021, we received WHO approval
of the United States Adopted Name, or USAN, “motixafortide”.
Inhibition of CXCR4 by
motixafortide leads to the mobilization of HSCs from the bone marrow to the peripheral blood, enabling their collection for subsequent
autologous or allogeneic transplantation in cancer patients. Clinical data has demonstrated the ability of motixafortide to mobilize higher
numbers of long-term engrafting HSCs (CD34+CD38-CD45RA-CD90+CD49f+) as compared to G-CSF.
Motixafortide also mobilizes
cancer cells from the bone marrow, detaching them from their survival signals and sensitizing them to chemotherapy. In addition, motixafortide
has demonstrated a direct anti-cancer effect by inducing apoptosis (cell death) and inhibiting proliferation in various cancer cell models
(multiple myeloma, non-Hodgkin’s lymphoma, leukemia, non-small-cell lung carcinoma, neuroblastoma and melanoma).
In the field of immuno-oncology,
motixafortide mediates infiltration of T-cells while reducing immune regulatory cells in the tumor microenvironment, or TME. In clinical
studies, the combination of motixafortide with immune checkpoint inhibitors, such as anti PD-1, has shown T-cell activation and a reduction
in tumor cell numbers.
The following is a summary
of the clinical trials being carried out with motixafortide.
Stem cell mobilization
In March 2015, we reported
successful top-line results from a Phase 1 safety and efficacy trial for the use of motixafortide as a novel stem cell mobilization treatment
for allogeneic bone marrow transplantation at Hadassah Medical Center in Jerusalem.
In March 2016, we initiated
a Phase 2 trial for motixafortide in allogeneic stem cell transplantation, conducted in collaboration with the Washington University School
of Medicine, Division of Oncology and Hematology. In May 2018, we announced positive top-line results of this study showing, among other
things, that a single injection of motixafortide mobilized sufficient amounts of CD34+ cells required for transplantation at a level of
efficacy similar to that achieved by using 4-6 injections of G-CSF, the current standard of care.
In December 2017, we
commenced a randomized, placebo-controlled Phase 3 registrational trial for motixafortide, known as the GENESIS trial, for the mobilization
of HSCs, for autologous transplantation in patients with multiple myeloma. The trial began with a lead-in period for dose confirmation,
which was to include 10-30 patients and then progress to the placebo-controlled main part, which was designed to include 177 patients
in more than 25 centers. Following review of the positive results from treatment of the first 11 patients, the Data Monitoring Committee,
or DMC, recommended that the lead-in part of the study be stopped and that we should move immediately to the second part. Additional positive
results from the lead-in period were reported at the annual meeting of the European Society for Blood and Marrow Transplantation held
in March 2019, where it was announced that HSCs mobilized by motixafortide in combination with G-CSF were successfully engrafted in all
11 patients.
In August 2020, we announced
a decision to perform an interim analysis on approximately 65% of the original study sample size, primarily based on a significantly lower-than-anticipated
patient-dropout rate in the study. In October 2020, we announced positive results from the interim analysis. Based on the statistically
significant evidence favoring treatment with motixafortide, the study’s independent DMC issued a recommendation to us that patient
enrollment may be ceased immediately, without the need to recruit all 177 patients originally planned for the study. In accordance with
the DMC’s recommendation, study enrollment was complete at 122 patients. In May 2021, we announced positive top-line results
from the Phase 3 trial. Based on an analysis of data on all 122 enrolled patients (the intent to treat population) we found highly statistically
significant evidence across all primary and secondary endpoints favoring motixafortide in addition to G-CSF, as compared to placebo plus
G-CSF (p<0.0001). The addition of motixafortide to G-CSF also allowed 88.3% of patients to undergo transplantation after only one apheresis
session, compared to 10.8% in the G-CSF arm – an 8.2-fold increase. The combination was also found to be safe and well tolerated.
We continue to follow-up
on the GENESIS study patients for relapse-free and overall survival. In addition, we continue to perform detailed analyses of the data
according to the statistical analysis plan agreed-upon with the FDA, as well as certain post hoc analyses. In December 2021, we held a
pre-NDA meeting with the FDA. The purpose of the meeting was to obtain agreement from the FDA on the content of the proposed NDA, and,
in particular, to confirm that our single Phase 3 pivotal study, GENESIS, is sufficient to support an NDA submission. During the pre-NDA
meeting, the FDA agreed that the proposed data package is sufficient to support an NDA submission. In September 2022, we submitted
an NDA to the FDA for motixafortide in stem cell mobilization for autologous bone marrow transplantation for multiple myeloma patients
and in November 2022, the FDA accepted for review the NDA and assigned the NDA a PDUFA target action date of September 9, 2023.
In October 2021, we announced
positive results from a pharmacoeconomic study evaluating the cost-effectiveness of using investigational drug motixafortide as a primary
stem cell mobilization agent on top of granulocyte colony stimulating factor (G-CSF), versus G-CSF alone, in multiple myeloma patients
undergoing autologous stem-cell transplantation (ASCT). The study was performed by the Global Health Economics and Outcomes Research (HEOR)
team of IQVIA, and was a pre-planned study conducted in parallel with the GENESIS Phase 3 trial. The study concluded that the addition
of motixafortide to G-CSF (the current standard of care) is associated with a statistically significant decrease in health resource utilization
(HRU) during the ASCT process, compared to G-CSF alone. Based on the significantly higher number of mobilized cells and the lower number
of apheresis sessions, lifetime estimates show quality-adjusted-life-year benefits and net cost savings of ~$19,000 (not including the
cost of motixafortide), versus G-CSF alone.
In March 2022, we announced
results from a follow-on pharmacoeconomic study performed by the HEOR team of IQVIA. This study indirectly evaluated the cost-effectiveness
of using motixafortide as a primary stem cell mobilization agent in combination with G-CSF, against plerixafor in combination with G-CSF,
in multiple myeloma patients undergoing ASCT. The additional study results show that motixafortide in combination with G-CSF, versus plerixafor
in combination with G-CSF, demonstrates a statistically significant decrease in HRU during the ASCT process. Based on the significantly
higher number of mobilized cells and the lower number of apheresis sessions, lifetime estimates show QALY benefits and net cost savings
of ~$30,000 (not including the cost of motixafortide), versus plerixafor plus G-CSF. The study findings strengthen the assessment that
the use of motixafortide in combination with G-CSF, as the potential new standard of care in mobilization for ASCT, would be a cost-effective
option in the US, based on accepted willingness-to-pay (WTP) values for healthcare payers.
We believe these results, together with the highly significant and clinically meaningful data from the GENESIS trial, strongly support
the potential use of motixafortide, on top of G-CSF, as the standard of care in stem cell mobilization for autologous stem cell transplantation.
In this regard, in June 2022, we appointed biopharmaceutical veteran executive, Holly W. May as our Chief Commercial Officer and in September
2022 we announced our U.S. commercialization plan for APHEXDA®
(motixafortide) in stem cell mobilization for autologous bone marrow transplantation for multiple myeloma patients and appointed Ms. May
as President of our U.S. subsidiary, who is responsible for the commercial planning, positioning, and launch oversight for motixafortide
in the stem cell mobilization indication across the U.S. market, assuming FDA approval. If
approved, we intend to commercialize APHEXDA in the U.S. independently in order to accelerate its availability to patients and to maximize
the value of this innovative therapeutic candidate.
In March 2023, we entered
into a clinical collaboration with Washington University School of Medicine in St. Louis to advance a Phase 1 clinical trial in which
motixafortide will be tested as monotherapy and in combination with natalizumab (VLA-4 inhibitor) as novel regimens to mobilize CD34+
hematopoietic stem cells for gene therapies in Sickle Cell Disease (SCD). The study will enroll five
adults with a diagnosis of SCD who are receiving automated red blood cell exchanges via apheresis. The trial’s primary objective
is to assess the safety and tolerability of motixafortide alone and the combination of motixafortide + natalizumab in SCD patients, defined
by dose-limiting toxicities. Secondary objectives include determining the number of CD34+ hematopoietic stem and progenitor cells (HSPCs)
mobilized via leukapheresis; and determining the kinetics of CD34+ HSPCs mobilization to peripheral blood in response to motixafortide
alone and motixafortide + natalizumab in SCD patients. The study is anticipated to begin enrollment
in 2023 (although timelines are ultimately controlled by the independent investigator and are therefore subject to change).
Solid tumors
In January 2016, we entered
into a clinical collaboration with MSD (a tradename of Merck & Co., Inc., Kenilworth, New Jersey) in the field of cancer immunotherapy.
Based on this collaboration, in September 2016 we initiated a Phase 2a study, known as the COMBAT/KEYNOTE-202 study, focusing on evaluating
the safety and efficacy of motixafortide in combination with KEYTRUDA® (pembrolizumab),
MSD’s anti-PD-1 therapy, in 37 patients with metastatic pancreatic adenocarcinoma, or PDAC. The study was an open-label, multicenter,
single-arm trial designed to evaluate the clinical response, safety and tolerability of the combination of these therapies as well as
multiple pharmacodynamic parameters, including the ability to improve infiltration of T-cells into the tumor and their reactivity. Top-line
results showed that the dual combination demonstrated encouraging disease control and overall survival in patients with metastatic pancreatic
cancer. In addition, assessment of patient biopsies supported motixafortide’s ability to induce infiltration of tumor-reactive T-cells
into the tumor, while reducing the number of immune regulatory cells.
In July 2018, we announced
the expansion of the COMBAT/KEYNOTE-202 study under the collaboration to include a triple combination arm investigating the safety, tolerability
and efficacy of motixafortide, KEYTRUDA ® and chemotherapy. We initiated this arm of the trial in December 2018. In December 2019,
we announced that preliminary data from the study indicated that the triple combination therapy showed a high level of disease control,
including seven partial responders and 10 patients with stable disease out of 22 evaluable patients. In February 2020, we completed recruiting
a total of 43 patients for the study and in December 2020, we announced the final results of the study. The results of the study showed
substantial improvement as compared to comparable historical results of other pancreatic cancer studies across all study endpoints. Of
the 38 evaluable patients, median overall survival was 6.5 months, median progression free survival was 4.0 months, confirmed overall
response rate was 13.2%, overall response rate was 21.2% and disease control rate was 63.2%. The combination was generally well tolerated,
with a safety profile consistent with the individual safety profile of each component alone; adverse event and severe adverse event profiles
were as expected with chemotherapy-based treatment regimens.
In August 2016, in the
framework of an agreement with MD Anderson Cancer Center, or MD Anderson, we entered into an additional collaboration for the investigation
of motixafortide in combination with KEYTRUDA in pancreatic cancer. The focus of this study, in addition to assessing clinical response,
was the mechanism of action by which both drugs might synergize, as well as multiple assessments to evaluate the biological anti-tumor
effects induced by the combination. We supplied motixafortide for this Phase 2b study, which commenced in January 2017. Final results
from this study (based on a cut-off in July 2019 from 20 enrolled patients out of which 15 were evaluable) showed that the dual combination
demonstrated clinical activity and encouraging overall survival in patients with metastatic pancreatic cancer. In addition, assessment
of patient biopsies supported motixafortide’s ability to induce infiltration of tumor-reactive T-cells into the tumor.
In October 2020, we announced
that motixafortide will be tested in combination with the anti-PD-1 cemiplimab (LIBTAYO®) and standard-of-care chemotherapy (gemcitabine
and nab-paclitaxel) in first-line PDAC. This investigator-initiated Phase 2 study, led by Columbia University, will initially enroll 10-12
PDAC patients, and will be expanded to a total of 40 patients following an evaluation of the initial 10-12 patients based on pre-defined
criteria. The primary endpoint of the study is the overall response rate. Secondary endpoints include safety and tolerability, progression
free survival, duration of clinical benefit and overall survival. Data from the study is anticipated in 2023 (although timelines are ultimately
controlled by the independent investigator and are therefore subject to change).
In June 2022, we entered
into a collaboration agreement with GenFleet Therapeutics, or GenFleet, an immuno-oncology focused biopharmaceutical company based in
China, to advance motixafortide through a randomized Phase 2b clinical trial in PDAC. Under the terms of the agreement, GenFleet will
fully fund, design and execute a randomized Phase 2b clinical trial that will enroll approximately 200 first-line metastatic PDAC patients
in China. This randomized controlled study will aim to evaluate the superiority of motixafortide in combination with an anti-PD-1 and
chemotherapy compared to chemotherapy alone, the current standard of care and is expected to commence in 2023 (although timelines are
ultimately controlled by the independent investigator and are therefore subject to change). As part of the collaboration, we will supply
motixafortide, while GenFleet will supply the other study drugs for the trial. Trial oversight will be administered by a Joint Development
Committee. GenFleet will be eligible to receive low-to-mid-single digit tiered percentage royalties on future motixafortide sales, if
approved.
ARDS secondary to COVID-19
and other viral infections
During the first half
of 2020, we initiated the evaluation of motixafortide as a potential therapy for acute respiratory distress syndrome, or ARDS, resulting
from COVID-19 and other viral infections In this regard, substantial data is emerging regarding the involvement of neutrophils, neutrophil
extracellular traps (NETs), monocytes and macrophages in the development of ARDS secondary to COVID-19 and other viral infections; as
well as the key involvement of CXCR4 as a mediator of those cells in the inflamed pulmonary tissue. Based on the scientific data indicating
the importance of blocking the CXCR4/CXCL12 axis during ARDS, we believe that motixafortide may be of potential benefit for patients with
ARDS. Following our initial evaluation, in November 2020, we announced initiation of a Phase 1b study in patients with ARDS secondary
to COVID-19 and other respiratory viral infections. The study is an investigator-initiated study, led by Wolfson Medical Center, in Israel,
to evaluate motixafortide in patients hospitalized with ARDS. The primary endpoint of the study is to assess the safety of motixafortide
in these patients; respiratory parameters and inflammatory biomarkers will be assessed as exploratory endpoints. Up to 25 patients will
be enrolled in the study, with a preliminary analysis planned after ten patients have completed the initial treatment period. Results
of the preliminary analysis are expected in 2023 (although timelines are ultimately controlled by the independent investigator and are
therefore subject to change).
Other matters
In addition to the above,
we are currently conducting, or planning to conduct, a number of investigator-initiated, open-label studies in a variety of indications
to support the interest of the scientific and medical communities in exploring additional uses for motixafortide. These studies serve
to further elucidate the mechanism of action for motixafortide. The results of studies such as these are presented from time to time at
relevant professional conferences.
Motixafortide has been
granted three Orphan Drug Designations by the FDA: for use to mobilize HSCs from the bone marrow to peripheral blood for collection in
autologous or allogeneic transplantation (granted in July 2012); for the treatment of AML (granted in September 2013); and for the treatment
of pancreatic cancer (granted in February 2019). In January 2020, the European Medicines Agency, or EMA, granted Orphan Drug Designation
to motixafortide for the treatment of pancreatic cancer.
In September 2022, the
FDA approved APHEXDA as motixafortide’s trade name.
AGI-134
AGI-134, a clinical therapeutic
candidate in-licensed by our subsidiary, Agalimmune Ltd., is a synthetic alpha-Gal glycolipid immunotherapy in development for solid tumors.
AGI-134 harnesses the body’s pre-existing, highly abundant, anti-alpha-Gal antibodies to induce a hyper-acute, systemic, specific
anti-tumor response to the patient’s own tumor neo-antigens. This response not only kills the tumor cells at the site of injection,
but also brings about a durable, follow-on, anti-metastatic immune response. In August 2018, we initiated a Phase 1/2a clinical study
for AGI-134 that is primarily designed to evaluate the safety and tolerability of AGI-134 in unresectable metastatic solid tumors and
to validate AGI-134’s mechanism of action using a wide array of biomarkers. The multi-center, open-label study was carried out in
the United Kingdom, Spain and Israel. Initial safety results from the first part of the study were announced at the beginning of September
2019; at the end of the same month, the second part of the study was commenced. Due to clinical operating issues associated with the COVID-19
pandemic, in April 2020, enrollment to the clinical trial was temporarily suspended. In August 2020, we renewed study enrollment, and
in January 2022, we completed enrollment. In December 2022, we announced results from the study. The study met its primary endpoint of
AGI-134’s safety and tolerability. Generation of an immune response and markers of clinical efficacy were assessed as secondary
endpoints. Most patients analyzed showed an increase in Alpha-Gal antibodies, indicating increased overall immune activity. Additionally,
increases in antigen presenting cells (APCs) were observed in most tissue samples analyzed, and T cell and macrophage tumor infiltration
was seen in approximately one-third of evaluable patients’ injected tumors, and in approximately half of evaluable patients’
un-injected lesions. Radiological assessments found that 29 percent of patients in the trial achieved best overall response of stable
disease. We plan to seek publication of our data at a medical congress in 2023, and in consultation with our scientific advisory board,
we will determine the next steps for the program in the first half of 2023.
Establishment
of Scientific Advisory Board
In December 2021, we
established a Scientific Advisory Board (SAB) to provide insight and guidance on our activities in the field of immuno-oncology. The SAB
is comprised of recognized leaders in cancer immunology, intra-tumoral injections and clinical development.
Listed in alphabetical
order, the founding SAB members are: Ronald Levy, MD, the Robert K. and Helen K. Summy Professor and Director of the Lymphoma Program
at Stanford University School of Medicine, Palo Alto, CA; Aurélien Marabelle, MD, PhD, Clinical Director, Cancer Immunotherapy Program,
Gustave Roussy, Paris, France and Director, Translational Research Laboratory in Immunotherapy, INSERM, Paris, France; Ignacio Melero
MD, PhD, Professor of Immunology at the Academic Hospital of Navarra, Spain and at the Center for Applied Medical Research (CIMA) of the
University of Navarra, Spain; Jon Wigginton, MD, Chair of the SAB and Senior Advisor at Cullinan Oncology, former Chief Medical Officer
of MacroGenics, and former Therapeutic Area Head, Immuno-Oncology, Early Clinical Research at Bristol-Myers Squibb; and Leisha Emens,
MD, PhD, Professor of Medicine, Director of Translational Immunotherapy for the Women's Cancer Research Center 15213 Co-Leader,
Hillman Cancer Immunology/Immunotherapy Program at the UPMC Hillman Cancer Center, Pittsburgh, PA.
BL-5010
Our commercialized, legacy
therapeutic product, BL-5010, is a customized, proprietary pen-like applicator containing a novel, acidic, aqueous solution for the non-surgical
removal of skin lesions. In December 2014, we entered into an exclusive out-licensing arrangement with Perrigo Company plc, or Perrigo,
for the rights to BL-5010 for over-the-counter, or OTC, indications in Europe, Australia and additional selected countries. In March 2016,
Perrigo received CE Mark approval for BL-5010 as a novel OTC treatment for the non-surgical removal of warts. The commercial launch of
products for treatment of this first OTC indication (warts/verrucas) commenced in Europe in the second quarter of 2016. Since then, Perrigo
has invested in improving the product and during 2019 launched an improved version of the product in several European countries. In March
2020, we agreed that Perrigo could relinquish its license rights for certain countries that had been included in its territory according
to the original license agreement and was also no longer obligated to develop, obtain regulatory approval for and commercialize products
for a second OTC indication. In turn, in March 2020, we agreed with our licensor of the rights to BL-5010, Innovative Pharmaceutical Concepts
(IPC) Inc., or IPC, to return to IPC those license rights no longer out-licensed to Perrigo as a result of the agreement described in
the preceding sentence, in consideration of the payment to us of royalties or fees on sublicense receipts.
Our Strategy
Our objective is to become
a leader in the development of novel therapeutics for the treatment of cancer. We have successfully advanced a number of therapeutic candidates
into clinical development. We intend to commercialize our two clinical candidates, motixafortide and AGI-134, and any future candidates
either on our own or through out-licensing or co-development arrangements with third parties that may perform any or all of the following
tasks: completing development, securing regulatory approvals, securing reimbursement codes from insurance companies and health maintenance
organizations, manufacturing and/or marketing. If appropriate, we may also enter into co-development and similar arrangements with respect
to any therapeutic candidate with third parties or commercialize a therapeutic candidate ourselves.
Therapeutic Candidates
Motixafortide
The following paragraphs
are a high-level summary of the therapeutic areas we are currently investigating for motixafortide:
Stem
cell mobilization. High-dose chemotherapy followed by stem
cell transplantation has become an established treatment modality for a variety of hematologic malignancies, including multiple myeloma
(MM), as well as various forms of lymphoma and leukemia. Stem cells are mobilized from the bone marrow of the patient (i.e., autologous
transplant) or donor (i.e., allogeneic transplant) using granulocyte-colony stimulating factor (G-CSF), harvested from the peripheral
blood by apheresis, and infused to the patient after intensive myeloablation (chemo/radiotherapy). In 2019, approximately 45,000 autologous
transplants were conducted in the US and EU. The goal of collection is approximately 5-6M cells/kg for MM patients. Plerixafor (in combination
with G-CSF) can be used upfront, or as a rescue therapy for those patients that did not achieve the target collection. Today, it is estimated
that approximately 55-60% of patients undergoing autologous transplantation in the US receive plerixafor on top of G-CSF. A recent market
assessment which we commissioned through a third-party vendor estimates the value of the U.S. stem cell mobilization market at ~$360M
in 2021.
Solid
tumors. Novel, emerging therapeutic approaches for targeting
solid tumors are being developed and tested. Combinational therapies of immune checkpoint inhibitors with immuno-oncology supporting agents,
with or without chemotherapy, are among the most promising experimental treatments for solid malignancies.
Pancreatic cancer has
a low rate of early diagnosis, a high mortality rate and a poor five-year survival prognosis. Symptoms are usually non-specific and as
a result, pancreatic cancer is often not diagnosed until it reaches an advanced stage. Once the disease has metastasized, or spread to
other organs, it becomes especially hard to treat. Each year, about 185,000 individuals globally are diagnosed with this condition; and
in 2022, the Surveillance, Epidemiology and End Results program, or SEER, of the National Cancer Institute estimated that in the United
States there would be approximately 62,000 individuals diagnosed with pancreatic cancer. The overall five-year survival rate among pancreatic
cancer patients is 11-12%, which constitutes the highest mortality rate among solid tumor malignancies; among those diagnosed with metastatic
disease, the overall five-year survival rate is only 3%. Recent developments that have improved the survival in many cancer types have
not been effective for pancreatic cancer patients, highlighting the need for the development of new therapeutic options.
Furthermore, second-line
patients that were diagnosed already with metastatic disease have very few therapeutic options. The only approved regimen for second-line
patients is Onivyde® in combination with 5FU and LV. For these Stage IV at diagnosis patients reaching second-line therapy, median
overall survival is only 4.7 months (Macarulla et al, Pancreas 2020).
Regulatory Approvals.
United States
In September 2013, the
FDA granted an Orphan Drug Designation to motixafortide as a therapeutic for the treatment of AML. In January 2014, the FDA granted an
Orphan Drug Designation to motixafortide for use, in combination with G-CSF, in mobilizing human stem cells from the bone marrow to the
peripheral blood for collection for autologous or allogeneic (donor-based) transplantation. In January 2015, the FDA modified this Orphan
Drug Designation for motixafortide for use either as a single agent or in combination with G-CSF. In February 2019, the FDA granted
Orphan Drug Designation to motixafortide for use in the treatment of pancreatic cancer. Orphan Drug Designation is granted to therapeutics
intended to treat rare diseases that affect not more than 200,000 people in the United States. Orphan Drug Designation entitles the sponsor
to a seven-year marketing exclusivity period and clinical protocol assistance with the FDA, as well as federal grants and tax credits
and an exemption from the Prescription Drug User Fee so long as the revenue is below $50,000,000.
European Union
In January 2020, the
EMA granted an 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.
Preclinical Results.
In vitro and in vivo
studies have shown that motixafortide binds CXCR4 with high affinity (7.9 pM) and occupies it for prolonged periods of time (>48h).
Animal cancer models have shown that motixafortide mobilizes cancer cells from the bone marrow and may therefore detach these cells from
survival signals in the bone marrow microenvironment as well as sensitize them to chemo- and bio-based anti-cancer therapies. In addition,
motixafortide directly induces apoptosis of cancer cells. Motixafortide was efficient, both alone and in combination with chemotherapy,
in reducing malignant bone marrow cells and stimulating their cell death.
In August 2013, we announced
that motixafortide has been shown in preclinical trials to be effective for the treatment of thrombocytopenia, or reduced platelet production.
In December 2013, we
presented preclinical data at the annual meeting of the American Society of Hematology (ASH), showing that motixafortide directly inhibits
AML, cell growth and induces cell death, both in cell cultures and in mice engrafted with human AML cells. In addition, motixafortide
showed the ability to induce mobilization of AML cells from the bone marrow into the blood circulation, thereby enhancing the chemotherapeutic
effect of ARA-C (one of the standard-of-care chemotherapies for AML). The data also showed that motixafortide’s effects were even
more robust in cells harboring the FLT3 mutation, and a synergistic effect was observed when motixafortide was combined with the FLT3
inhibitor AC220 (Quizartinib).
At the annual meeting
of ASH in December 2016, detailed preclinical data on the mechanism-of-action by which motixafortide directly induces apoptosis of AML
cells was presented by Prof. Amnon Peled of the Hadassah Medical Center and Biokine. The results of the preclinical studies showed that
motixafortide treatment in vivo triggered mobilization of AML blasts from their protective bone marrow microenvironment and induced their
terminal differentiation, further supporting the data we presented at the American Association for Cancer Research (AACR) annual conference
earlier in 2016. In addition, the studies illustrate how motixafortide increases the expression and activity of a special class of microRNA
precursors termed miR-15a/16-1. These microRNA molecules have been previously linked to cancer and shown to suppress the activity of several
tumor-related pro-survival proteins. Therefore, by increasing the expression of miR-15a/16-1 microRNA molecules, motixafortide decreases
the expression of tumor-survival proteins and promotes tumor cell death. Importantly, in both in vitro and in vivo experiments, motixafortide
was found to synergize with a selective Bcl-2 inhibitor (Venetoclax) and an FLT3 inhibitor (Quizartinib, also known as AC220) in inducing
AML cell death, pointing at potential drug combination treatments.
At the ASCO-SITC Clinical
Immuno-Oncology Symposium, or ASCO-SITC, in January 2018, we presented preclinical data showing that motixafortide augments the ability
of the immune system to fight cancer by increasing the infiltration of anti-tumor-specific T-cells into the TME, resulting in decreased
tumor growth and prolonged survival in a murine model of cancer. In the preclinical study, a murine model of cancer was used to assess
the effects of motixafortide in combination with a cancer vaccine that primes the immune system against the tumor. The results of the
study show that combining motixafortide with the cancer vaccine leads to a significantly enhanced anti-tumor immune response, which attenuates
tumor growth and prolongs mouse survival better than either agent administered alone. The results go on to demonstrate that motixafortide
significantly increases the abundance of tumor-specific T-cells in the TME, suggesting an explanation for the enhanced efficacy of the
combination over either agent when administered alone.
At the annual meeting
of SITC in November 2019, we presented positive preclinical results further elucidating the mechanism of action of motixafortide in combination
with an anti PD-1 and chemotherapy. The pre-clinical study assessed the effects of motixafortide, anti-PD-1 and chemotherapy (Irinotecan,
Fluorouracil and Leucovorin), both alone and in various combinations, on tumor growth and immune cell constitution in a mouse model for
pancreatic cancer. The key findings were that the triple combination of motixafortide+anti-PD-1+chemotherapy (a) had a significantly better
effect on tumor growth compared to chemotherapy alone or any dual combination with chemotherapy and (b) showed the best effect in modulation
of the TME, resulting in reduction in immunosuppressive cells, and accompanied by increase of activated T effector cells.
At the annual meeting
of ASH in December 2021, we presented findings from in vivo and in vitro pre-clinical studies demonstrating that motixafortide acts as
an immunomodulator by affecting the biology of regulatory T-cells (Tregs), and immunosuppressive T-cells, supporting biomarker findings
from our COMBAT Phase 2 study in pancreatic cancer patients.
Clinical Trials
Stem cell mobilization
Phase 1/2a and Phase
1 study
In a Phase 1/2a, open-label,
dose escalation, safety and efficacy clinical trial in 18 multiple myeloma patients, motixafortide demonstrated a good safety profile
at all doses tested and was highly effective in combination with G-CSF, in the mobilization of hematopoietic stem cells from the bone
marrow to the peripheral blood for autologous transplantation. All patients receiving transplants (n=17) exhibited rapid engraftment,
with median time to neutrophil and platelet recovery of 12 and 14 days, respectively, at the highest dose given (0.9 mg/kg).
In March 2015, we announced
successful top-line results from a Phase 1 trial for motixafortide as a novel treatment for the mobilization of stem cells from the bone
marrow to the peripheral blood circulation in healthy volunteers, where they can be potentially harvested for allogeneic transplant supporting
the treatment of hematological indications. The study was conducted at the Hadassah Medical Center in Jerusalem and consisted of two parts.
The first part of the study was a randomized, double-blind, placebo-controlled, dose-escalation study in three cohorts of eight participants
each, with each participant receiving two consecutive injections of motixafortide. Results show that motixafortide is safe and well tolerated
up to the maximal tested dose of one mg/kg, and that dramatic mobilization of CD34+ hematopoietic stem and progenitor cells, or HSPCs,
was observed across all doses tested. The robust mobilization supports the further use of a single injection of motixafortide for HSPC
collection.
In the second part of
the Phase 1 study, eight healthy participants received a single injection of motixafortide at the highest tested dose of 1 mg/kg, and
four hours later underwent a single, standard leukapheresis procedure. Robust and rapid stem cell mobilization was evident in all treated
participants, supporting a novel approach to stem cell collection. The median level of collected stem cells was higher than 11 x 106
cells per kg, which is more than two-fold higher than the target concentration, and five-fold higher than the minimum concentration, necessary
for transplantation. In addition, the level of HPSCs in the peripheral blood circulation 24 hours after injection of motixafortide enabled
an additional apheresis on Day 2, if needed. These data support the use of motixafortide as a single-agent, single-injection, one-day
regimen for the collection of stem cells.
Phase 2 study
In March 2016, we initiated
a Phase 2 trial for motixafortide as a novel approach for the mobilization and collection of bone marrow stem cells from the peripheral
blood circulation for allogeneic bone marrow transplantation. The open-label study was conducted in collaboration with the Washington
University School of Medicine, Division of Oncology and Hematology, and enrolled up to 24 donor/recipient pairs, aged 18-70. The trial
was designed to evaluate the ability of motixafortide, as a single agent, to promote stem cell mobilization for allogeneic transplantation.
On the donor side, the primary endpoint of the study was the ability of a single injection of motixafortide to mobilize 2x106
CD34 cells for transplantation following up to two apheresis collections. On the recipient side, the study aimed to evaluate the functionality
and engraftment following transplantation of the motixafortide collected graft. The study also evaluated the safety and tolerability of
motixafortide in healthy donors, as well as graft durability, the incidence of grade 2-4 acute graft versus host disease, or GVHD, chronic
GVHD, relapse and other recipient-related parameters in patients who have undergone transplantation of hematopoietic cells mobilized with
motixafortide.
In May 2018, we announced
positive results from the study. Single-agent treatment with motixafortide showed efficacy similar to standard of care (currently, a four-
to five-day treatment cycle with G-CSF and a one- to two-day apheresis procedure) in only one administration of motixafortide. In addition,
motixafortide showed results that were comparable to the standard of care in recipient engraftment, with all transplanted recipients successfully
engrafting with motixafortide-mobilized grafts.
Phase 3 study
In December 2017, we
initiated a Phase 3 registration study for motixafortide in autologous stem cell mobilization. The trial, known as the GENESIS study,
is a randomized, placebo-controlled, multicenter study, evaluating the safety, tolerability and efficacy of motixafortide and G-CSF, compared
to placebo and G-CSF, for the mobilization of HSCs for autologous transplantation in multiple myeloma patients. The study began with an
open-label, single-arm lead-in period, which was to include 10-30 patients in order to assess safety and efficacy following treatment
with motixafortide plus G-CSF. Results of the first 11 patients showed that motixafortide in combination with standard G-CSF treatment
is safe, tolerable and efficacious, demonstrating the potential of motixafortide treatment to reduce the number of administrations and
apheresis sessions, as well as hospitalization costs, related to the preparation of multiple myeloma patients for autologous HSC transplantation.
Following its review of the positive lead-in results, the DMC recommended that the lead-in part of the study be stopped and that
we move immediately to the placebo-controlled main part, which was designed to include 177 patients in more than 15 centers. Additional
positive results from the lead-in period were reported at the annual meeting of the European Society for Blood and Marrow Transplantation
held in March 2019, where it was announced that HSCs mobilized by motixafortide in combination with G-CSF were successfully engrafted
in all 11 patients. Treatment in the main part of the study included five to eight days of G-CSF, with a single dose of motixafortide
or placebo on Day 4 and an optional additional dose of motixafortide or placebo on Day 6. Apheresis for stem cell collection was performed
on day 5. Further apheresis sessions were conducted if needed in order to reach the benchmark of ≥ 6 million mobilized CD34+ cells.
The primary objective of the study was to demonstrate that motixafortide on top of G-CSF is superior to G-CSF alone in the ability of
mobilize ≥ 6 million CD34+ cells in up to two apheresis sessions. Secondary objectives included time to engraftment of neutrophils
and platelets and durability of engraftment, as well as other efficacy and safety parameters.
In August 2020, we announced
a decision to perform an interim analysis on approximately 65% of the original study sample size, primarily based on a significantly lower-than-anticipated
patient-dropout rate in the study. In October 2020, we announced positive results from the interim analysis. Based on the statistically
significant evidence favoring treatment with motixafortide, the study’s independent DMC issued a recommendation to us that patient
enrollment may be ceased immediately, without the need to recruit all 177 patients originally planned for the study. In accordance with
the DMC’s recommendation, study enrollment was complete at 122 patients.
In May 2021, we announced
positive top-line results from the Phase 3 trial. An analysis of data on all 122 enrolled patients (the intent to treat, or ITT, population)
found highly statistically significant evidence across all primary and secondary endpoints favoring motixafortide in addition to G-CSF,
as compared to placebo plus G-CSF. In addition, the combination was found to be safe and well tolerated. The primary endpoint of the study
demonstrated a 4.9-fold increase and treatment effect of 54.6% (95% CI 39.7-69.5%; p<0.0001) in the proportion of patients in the treatment
arm, as compared to the control arm, mobilizing ≥ 6 million CD34+ cells/kg in up to two apheresis sessions, and after only one administration
of motixafortide. This translated to an odds-ratio of 12.9. The study also achieved its main secondary endpoint, demonstrating a 14.1-fold
increase and treatment effect of 61.7% (95% CI 49.5-73.8%; p<0.0001) in the proportion of patients in the treatment arm, as compared
to the control arm, who mobilized ≥ 6 million CD34+ cells/kg in just one apheresis session. This translated to an odds-ratio of
56.0. Other important data from the study include median number of CD34+ cells collected on the first day of apheresis (~11 million in
the treatment arm vs ~2 million in the control arm) – a >5-fold increase. The addition of motixafortide to G-CSF also allowed
88.3% of patients to undergo transplantation after only one apheresis session, compared to 10.8% in the G-CSF arm – an 8.2-fold
increase. Engraftment endpoints, including the number of days needed for engraftment, success of engraftment and the durability of engraftment
100 days post-transplant, further support the study's success.
We continue to follow-up
on the GENESIS study patients for relapse-free and overall survival. In addition, we continue to perform detailed analyses of the data
according to the statistical analysis plan agreed-upon with the FDA, as well as certain post hoc analyses. In December 2021, we held a
pre-NDA meeting with the FDA. The purpose of the meeting was to obtain agreement from the FDA on the content of the proposed NDA, and,
in particular, to confirm that our single Phase 3 pivotal study, GENESIS, is sufficient to support an NDA submission. During the pre-NDA
meeting, the FDA agreed that the proposed data package is sufficient to support an NDA submission. In September 2022, we submitted
an NDA to the FDA for motixafortide in stem cell mobilization for autologous bone marrow transplantation for multiple myeloma patients
and in November 2022, the FDA accepted for review the NDA and assigned the NDA a PDUFA target action date of September 9, 2023.
Phase
I study (SCD)
In March 2023, we entered
into a clinical collaboration with Washington University School of Medicine in St. Louis to advance a Phase 1 clinical trial in which
motixafortide will be tested as monotherapy and in combination with natalizumab (VLA-4 inhibitor) as novel regimens to mobilize CD34+
hematopoietic stem cells for gene therapies in Sickle Cell Disease (SCD). The study will enroll five
adults with a diagnosis of SCD who are receiving automated red blood cell exchanges via apheresis. The trial’s primary objective
is to assess the safety and tolerability of motixafortide alone and the combination of motixafortide + natalizumab in SCD patients, defined
by dose-limiting toxicities. Secondary objectives include determining the number of CD34+ hematopoietic stem and progenitor cells (HSPCs)
mobilized via leukapheresis; and determining the kinetics of CD34+ HSPCs mobilization to peripheral blood in response to motixafortide
alone and motixafortide + natalizumab in SCD patients. The study is anticipated to begin enrollment
in 2023 (although timelines are ultimately controlled by the independent investigator and are therefore subject to change).
Solid tumors
COMBAT-KEYNOTE-202 Dual
Combination Study
In January 2016, we entered
into a clinical collaboration with MSD in the field of cancer immunotherapy. In the framework of this collaboration, in September 2016
we initiated a Phase 2a study, known as the COMBAT/KEYNOTE-202 study, focusing on evaluating the safety and efficacy of motixafortide
in combination with KEYTRUDA, MSD’s anti-PD-1 therapy, in patients with metastatic PDAC. Findings in the field of immuno-oncology
suggest that CXCR4 antagonists such as motixafortide may be effective in inducing the migration of anti-tumor T-cells into the TME. KEYTRUDA
is a humanized monoclonal antibody that works by blocking co-inhibitory T-cell activation signals, thereby increasing the ability of the
body’s immune system to help detect and fight tumor cells. KEYTRUDA blocks the interaction between PD-1 and its ligands, PD-L1 and
PD-L2, thereby activating T lymphocytes, which may affect both tumor cells and healthy cells. The study was an open-label, multicenter,
single-arm trial designed to evaluate the clinical response, safety and tolerability of the combination of motixafortide and KEYTRUDA
as well as multiple pharmacodynamic parameters, including the ability to improve infiltration of T-cells into the tumor and their reactivity.
According to the terms of our collaboration agreement with MSD, we sponsored and performed the COMBAT/KEYNOTE-202 study and MSD supplied
its compound for purposes of the study. Upon completion of the study, or at any earlier point, both parties will have the option to expand
the collaboration to include a pivotal registration study.
Partial results from
the motixafortide monotherapy portion of this trial were presented at ASCO-GI in January 2018. These results showed that motixafortide
was safe and well-tolerated, and that it induced an increase in the number of total immune cells in the peripheral blood, while the frequency
of peripheral blood Tregs, known to impede the anti-tumor immune response, was decreased. In addition, analysis of available biopsies
(N=7) showed infiltration of effector T-cells, known to attack cancer cells, into the tumor periphery and TME. In this regard, the results
show up to a 15-fold increase in CD3+ T-cells, and up to a two-fold increase in CD8+ T-cells, in the TME of 43% (3/7) of the patients,
after five days of motixafortide monotherapy.
In October 2018, we announced
encouraging top-line results from the dual combination arm of the COMBAT/KEYNOTE-202 study at the European Society for Medical Oncology
2018 Congress. The data showed that the treatment regimen was safe and well tolerated. The disease control rate (patients exhibiting a
response or stable disease) was 34.5% for the evaluable population (N=29), including one patient (3.4%) with a partial response showing
a 40% reduction in tumor burden, as well as nine patients (31%) with stable disease, with a median treatment time of 72 days (37-267).
Median overall survival (OS) in all patients (N=37) was 3.3 months with a six-month survival rate of 34.4%. A significant observation
was made in the subpopulation of patients receiving the study drugs as a second-line treatment (N=17), where the median overall survival
was 7.5 months, with a six-month survival rate of 51.5%. This compared favorably with historical median overall survival data of 6.1 months
for the only currently approved second-line PDAC treatment (a chemotherapy combination of Onivyde®,
5-FU and leucovorin). Additional data from in-depth analyses of biopsies taken at screening and following monotherapy or combination treatment
of motixafortide and KEYTRUDA demonstrate that in 75% of the available biopsies, motixafortide treatment promotes an increase in the number
of infiltrating CD4+, CD8+ and CD8+Granzyme B+ cytotoxic T-cells. The greatest improvement in T-cell infiltration was observed following
combination treatment of motixafortide and KEYTRUDA and was correlated with stable disease for eight cycles of treatment. Furthermore,
increased infiltration of activated CD4 and CD8 T-cells was accompanied by a pronounced decrease in the number of tumor cells, as well
as by a decrease in myeloid-derived suppressor cells, a cell type known to impede the antitumor immune response.
COMBAT-KEYNOTE-202 Triple
Combination Study
As a result of the encouraging
data, the collaboration with MSD was expanded to include an additional cohort that tested the effect of the triple combination of motixafortide,
KEYTRUDA and chemotherapy (Onivyde®/5-fluorouracil/leucovorin).
We initiated this additional arm of the trial in December 2018 to investigate the safety, tolerability and efficacy of this triple combination.
The triple combination arm focused on second-line pancreatic cancer patients and included approximately 40 patients with unresectable
metastatic PDAC who have progressed following first-line therapy prior to enrollment. Patients received motixafortide monotherapy priming
treatment for five days, followed by repeat cycles of the combination of chemotherapy, KEYTRUDA and motixafortide until progression. The
primary endpoint of the study was the objective response rate (ORR) assessed by RECIST v1.1 criteria. Secondary endpoints included overall
survival, progression free survival, and the disease control rate.
At the European Society
of Medical Oncology Immuno-Oncology Congress (ESMO IO) 2019 in December 2019, we presented partial results from the triple combination
arm of the study. Out of 36 enrolled patients, 30 patients were evaluable for safety and 22 were evaluable for efficacy. The best response
for the evaluable population of 22 patients showed 7 partial response (PR) and 10 stable disease (SD) patients, resulting in an overall
response rate (ORR) of 32% and a disease control rate (DCR) of 77%. These data compared favorably with the current chemotherapy standard-of-care
treatment (Onivyde®/5-fluorouracil/leucovorin) in
second-line patients with ORR of 17% and DCR of 52%. The combination showed continuity of effect, in that 5 patients with stable disease
became partial responders as treatment continued. Out of the 7 partial responders, 5 were still on treatment as of the presentation date,
with a current maximum treatment time of 330+ days; and 4 responders showed a reduction in tumor burden of >50%. The median duration
of clinical benefit until progression for the 17 patients with disease control (7 PR and 10 SD patients) was 7.8 months. The combination
was generally well tolerated, with a safety profile consistent with the individual safety profile of each component alone; adverse event
and severe adverse event profiles were as expected with chemotherapy-based treatment regimens.
In February 2020, we
completed recruiting a total of 43 patients for the triple combination study and in December 2020, we announced the final results of the
study. The results of the study showed substantial improvement as compared to comparable historical results of other pancreatic cancer
studies across all study endpoints. Of the 38 evaluable patients, median overall survival was 6.5 months (versus comparable historical
data of 4.7 months), median progression free survival was 4.0 months (versus comparable historical data of 2.7-3.1 months), confirmed
overall response rate was 13.2% (versus comparable historical data of 7.7%), overall response rate was 21.2% (versus comparable historical
data of 16%) and disease control rate was 63.2% (versus comparable historical data of 29-52%). The combination was generally well tolerated,
with a safety profile consistent with the individual safety profile of each component alone; adverse event and severe adverse event profiles
were as expected with chemotherapy-based treatment regimens.
MD Anderson Cancer Center
Study
In August 2016, we entered
into an agreement with MD Anderson in regard to an additional collaboration for the investigation of motixafortide in combination with
KEYTRUDA in pancreatic cancer. The study was conducted as an investigator-sponsored study, as part of a strategic clinical research collaboration
between Merck and MD Anderson aimed at evaluating KEYTRUDA in combination with various treatments and novel drugs, including motixafortide.
The open-label, single center, single-arm Phase 2b study focused on the mechanism of action by which both drugs might synergize. In addition
to assessing clinical response, the study included multiple assessments to evaluate the biological anti-tumor effects induced by the combination.
We supplied motixafortide for the study, which commenced in January 2017.
Final results of the
MD Anderson study were presented at the SITC annual meeting in November 2019. Of the 20 patients enrolled, 15 were evaluable for the primary
endpoint of radiologic response. Of these 15 evaluable patients, one patient showed a partial response, two patients had stable disease
and 12 patients experienced disease progression, resulting in a disease control rate of 20%. The overall median time to progression was
two months, while the median time to progression for patients showing disease control was seven months. Median overall survival was seven
months, while median survival for the patients showing disease control was 12 months. The combination was generally well tolerated with
injection site discomfort being the most commonly reported adverse event. Four patients experienced grade 3 toxicities and one patient
had a grade 4 dyspnea.
Investigator-Initiated
LIBTAYO Study
In October 2020, we announced
that motixafortide will be tested in combination with the anti-PD-1 cemiplimab (LIBTAYO®) and standard-of-care chemotherapy (gemcitabine
and nab-paclitaxel) in first-line PDAC. This investigator-initiated Phase 2 study, led by Columbia University, will initially enroll 10-12
PDAC patients, and will be expanded to a total of 40 patients following an evaluation of the initial 10-12 patients based on pre-defined
criteria. The primary endpoint of the study is the overall response rate. Secondary endpoints include safety and tolerability, progression
free survival, duration of clinical benefit and overall survival. Data from the study is anticipated in 2023 (although timelines are ultimately
controlled by the independent investigator and are therefore subject to change).
GenFleet Study
In June 2022, we entered
into a collaboration agreement with GenFleet Therapeutics, or GenFleet, an immuno-oncology focused biopharmaceutical company based in
China, to advance motixafortide through a randomized Phase 2b clinical trial in PDAC. Under the terms of the agreement, GenFleet will
fully fund, design and execute a randomized Phase 2b clinical trial that will enroll approximately 200 first-line metastatic PDAC patients
in China. This randomized controlled study will aim to evaluate the superiority of motixafortide in combination with an anti-PD-1 and
chemotherapy compared to chemotherapy alone, the current standard of care and is expected to commence in 2023. As part of the collaboration,
we will supply motixafortide, while GenFleet will supply the other study drugs for the trial. Trial oversight will be administered by
a Joint Development Committee. GenFleet will be eligible to receive low-to-mid-single digit tiered percentage royalties on future motixafortide
sales, if approved.
AML
Phase 2a Study
During 2016, we completed
and reported on the results of a Phase 2a clinical trial studying the use of motixafortide for the treatment of relapsed/refractory AML,
or r/r AML. The study was conducted at six sites in the United States, including MD Anderson in Houston, Memorial Sloan-Kettering Cancer
Center in New York, Mayo Clinic in Jacksonville, Johns Hopkins University in Baltimore, Northwestern Memorial Hospital in Chicago and
Washington University in St. Louis, as well as at five well-known sites in Israel. The study was an open-label study under an IND, designed
to evaluate the safety and efficacy profile of repeated escalating doses of motixafortide in combination with HiDAC in adult subjects
with r/r AML. The study was comprised of two parts – a dose escalation Phase and an expansion Phase at the highest tolerated dose
found during the escalation Phase. The primary endpoints of the study were the safety and tolerability of the drug. Secondary endpoints
included the pharmacokinetic profile of the drug and an efficacy evaluation, indicated by the extent of mobilization of cancer cells from
the bone marrow to the peripheral blood, the level of cancer cell death (apoptosis) and clinical responses.
Final results for the
Phase 2a trial were presented at the annual meetings of the Society of Hematologic Oncology and ASH in September and December 2016, respectively.
The reported data set includes 45 patients, including three compassionate-use patients treated at the study sites under the identical
treatment protocol. The majority of patients in the study were heavily pretreated, with 45% of patients being refractory to one or two
remission induction treatments, 19% of patients having relapsed after a short first remission of less than 12 months, and 17% of patients
having undergone two or more relapses. In addition, the treated patient population included patients that had relapsed post allogeneic
stem cell transplantation (17%), as well as secondary AML patients (24%), both conditions which represent difficult-to-treat populations
with poor prognoses.
The results showed that
treatment with motixafortide in combination with HiDAC, was safe and well tolerated at all doses tested up to and including the highest
dose level of 2.0 mg/kg. Response to treatment was associated with efficient CXCR4 inhibition, resulting in high mobilization of blasts.
The composite complete remission rate, including both CR and CRi, was 38% in subjects receiving up to two cycles of motixafortide
treatment at doses of 1 mg/kg and higher (n=39). In the 1.5 mg/kg dose selected for the expansion Phase of the study (n=23), the composite
complete remission rate was 39%. These response rates were superior to the historical response rate of approximately 19% reported for
high-risk AML patients treated with Ara-C alone in Phase 3 randomized trials. The ongoing follow-up of patients participating in the study’s
expansion Phase and responding to the combination treatment suggests long durability of the remissions achieved. Results further showed
that motixafortide monotherapy had a substantial therapeutic effect. Treatment with motixafortide as a single agent triggered robust mobilization
of AML blasts from the bone marrow to the peripheral blood stream, and the extent of mobilization was correlated with a positive response
to treatment. The preferential mobilization of AML blasts over normal cells (4.7-fold vs. 1.4-fold, respectively) was further confirmed
by analysis using the fluorescence in situ hybridization, or FISH, technique in a subset of patients. In addition, motixafortide monotherapy
resulted in a 40% increase in AML blast apoptosis.
In June 2018, at the
23rd Congress of the EHA in Stockholm, Sweden, we reported long-term survival data from the study that showed significantly enhanced overall
survival of r/r AML patients treated with a combination of motixafortide and HiDAC. The response rate for all dosing levels was 29% and
median overall survival was 9.1 months, compared with historical data on overall survival of 6.1 months for HiDAC alone. In addition,
a statistically significant correlation between patient response and the mobilization of AML blasts was reported. Responding patients
demonstrated a clear and significant increase in the number of AML blasts in the peripheral blood following motixafortide treatment, whereas
non-responding patients were largely unaffected. In patients receiving the 1.5 mg/kg dose selected for expansion (n=23), the response
rate was 39% and median overall survival was 10.7 months with one-year, two-year and three-year survival rates of 38.1%, 23.8% and 23.8%,
respectively. Furthermore, median overall survival for responding patients at the 1.5 mg/kg dose (n=9) was 21.8 months, with one-year,
two-year and three-year survival rates of 66.7%, 44.4% and 44.4%, respectively. Responding patients also demonstrated a statistically
significant mean 6.3-fold increase (p=0.003) in the number of AML blasts in the peripheral blood following motixafortide monotherapy treatment,
whereas in non-responding patients the mean-fold increase was minor and non-significant (1.66-fold; p=0.21).
BLAST Study
We also investigated
a second AML treatment line – consolidation therapy – in a large randomized, controlled Phase 2b trial in Germany, known as
the BLAST study. This study examined motixafortide as part of a second-stage treatment, termed consolidation therapy (cytarabine), to
improve outcomes for the approximately 70% of AML patients who achieved remission after the standard initial treatment regimen, known
as induction therapy. The consolidation therapy was aimed at eliminating the minimal residual disease left in the bone marrow after induction
therapy that can lead to relapse in 40-60% of the patients within 12-18 months after entering remission.
The Phase 2b trial, which
was conducted in collaboration with the University of Halle as sponsor and with the participation of two large leukemia study groups in
Germany, was a double-blind, placebo-controlled, randomized, multi-center study aimed at assessing the efficacy of motixafortide in addition
to standard consolidation therapy in AML patients. The primary endpoint of the study was to compare the RFS time in AML subjects in their
first remission during a minimum follow-up time of 18 months after randomization. In addition, pharmacodynamic measurements were conducted
in order to assess the minimal residual disease, and biomarker analyses was performed to identify predictors of motixafortide response.
The study, which was carried out at 29 sites in Germany. AML patients between 18 and 75 years of age with documented first remission were
randomized in a 1:1 ratio to receive HiDAC, either with motixafortide or with a matching placebo, as consolidation therapy.
During 2020, we finalized
plans with our collaboration partners to conduct an interim analysis on 2/3 (N=128) of the 194 patients originally planned in the study,
all of which had already completed treatment. In November 2020, we announced that based on the interim analysis, the investigational arm
of motixafortide combined with cytarabine did not demonstrate a statistically significant effect in the study’s primary endpoint,
and therefore, the DMC recommended not to continue the study. Based on the DMC’s recommendation, we terminated the study. We continue
to believe in the relevance of CXCR4 as a viable target in other AML treatment lines, such as rr/AML and induction treatment.
Other clinical results
At the annual meeting
of ASH in December 2017, clinical data supporting motixafortide as a robust mobilizer of HSCs associated with long-term engraftment was
presented by Prof. Amnon Peled. HSCs are cells found in the bone marrow, peripheral blood or umbilical cord blood that are responsible
for generation and replenishment of all blood cell progenitors and eventually mature cells. It is therefore believed to be beneficial
for a variety of therapeutic purposes, such as transplantation for people with hematological malignancies or for the therapy of blood
or immune system disorders. The success of long-term HSC engraftment depends largely on the amount and quality of HSCs (CD34+ CD38- CD45RA-
CD90+ CD49f+). The data presented demonstrate that human CD34+ cells from motixafortide-mobilized grafts contain high numbers of HSC (CD34+,
CD38-, CD45RA-, CD90+, CD49f+) associated with long-term engraftment, compared to cells mobilized by granulocyte colony stimulating factor
(G-CSF). An associated in vivo study further showed that motixafortide-mobilized HSCs can successfully engraft the bone marrow and spleen
of immunodeficient mice. In addition, a robust long-term engraftment of motixafortide-mobilized human CD34+ cells was seen in these mice
in primary and secondary transplants.
AGI-134
AGI-134 entered our pipeline
following our acquisition of Agalimmune in March 2017. The compound is a synthetic alpha-gal immunotherapy in development for solid tumors.
AGI-134 harnesses the body’s pre-existing, highly abundant, anti-alpha-gal, or anti-Gal, antibodies to induce a systemic, specific
anti-tumor response to the patient’s own tumor neo-antigens. This response not only kills the tumor cells at the site of injection,
but also brings about a durable, follow-on, anti-metastatic immune response. Alpha-gal is a cell-surface carbohydrate antigen that is
not expressed by humans, unlike virtually all other mammals and bacteria. Therefore, humans universally produce and maintain high levels
of anti-Gal antibodies, due to exposure to alpha-gal on bacteria in the digestive system.
AGI-134 is injected into
the tumor, where it coats the tumor cell membranes, resulting in alpha-gal being exposed on the tumor cell surface. Anti-Gal antibodies
bind to the alpha-gal part of AGI-134 to produce an initial immune response that activates complement-dependent and antibody-dependent
cellular cytotoxicity (cell death). This cytotoxicity generates immune-tagged cells and cellular debris that trigger an uptake of tumor-associated
antigens by antigen-presenting cells (APCs). These APCs induce a follow-on systemic immune response by the activation and clonal expansion
of T-cells to the patient’s own neo-antigens. This approach not only targets the primary injectable tumor but has also demonstrated
efficacy against existing distant secondary tumors. Furthermore, the mechanism of action suggests the potential of long-term protection
against future metastases.
AGI-134 has completed
numerous proof-of-concept studies, demonstrating regression of established primary tumors after injection with AGI-134 and robust protection
against the development of secondary tumors in a model of melanoma with a single dose only. Synergy has also been demonstrated in the
same model when combined with a PD-1 immune checkpoint inhibitor, offering the potential to broaden the utility of such immunotherapies
and improve the rate and duration of responses in multiple cancer types. A 28-day, repeated-administration GLP toxicology study in monkeys
with AGI-134 has also been successfully completed.
At ASCO-SITC in January
2018, we presented preclinical findings demonstrating successful results in the treatment of primary tumors. Intratumoral administration
of AGI-134 induced regression of established tumors in two murine melanoma models. Moreover, treatment with AGI-134 showed a beneficial
effect on survival, compared to the control group, with fewer mice dying or requiring euthanasia due to tumor burden. In addition, the
results show that injection of AGI-134 into the tumors induces activation of the complement system, an important component of the innate
immune system. Activation of the complement system within tumors by AGI-134 is predicted to destroy tumor cells and create a pro-inflammatory
TME that attracts and activates other immune cells, ultimately resulting in adaptive anti-tumor immunity.
In August 2018, we initiated
a Phase 1/2a clinical study for AGI-134 that is primarily designed to evaluate the safety and tolerability of AGI-134 given as monotherapy
in unresectable metastatic solid tumors. Additional objectives are to perform a wide array of biomarker studies, to demonstrate the mechanism
of AGI-134 and to assess its efficacy by clinical and pharmacodynamic parameters. The multicenter, open-label study is being carried out
in the United Kingdom, Spain and Israel.
The study is comprised
of two parts: (i) an accelerated dose-escalation part to assess the safety and tolerability of intratumorally injected AGI-134 as a monotherapy,
as well as to determine the maximum tolerated dose and the recommended dose for part 2 of the study and (ii) a dose expansion part at
the recommended dose, designed to assess the safety, tolerability and anti-tumor activity of AGI-134 as a monotherapy in a basket cohort
of multiple solid tumor types. The first part of the study was completed in September 2019, with AGI-134 being found to be safe and well
tolerated, with no serious drug-related adverse events or dose-limiting toxicities reported. The maximal tolerated dose was not reached
and the recommended dose for the second part of the study was determined. We commenced the second part of the study in September 2019.
Due to clinical operating issues associated with the COVID-19 pandemic, in April 2020, the clinical trial was temporarily suspended. In
August 2020, we renewed study enrollment, and in January 2022, we completed enrollment. In December 2022, we announced results from the
study. The study met its primary endpoint of AGI-134’s safety and tolerability. Generation of an immune response and markers of
clinical efficacy were assessed as secondary endpoints. Most patients analyzed showed an increase in Alpha-Gal antibodies, indicating
increased overall immune activity. Additionally, increases in antigen presenting cells (APCs) were observed in most tissue samples analyzed,
and T cell and macrophage tumor infiltration was seen in approximately one-third of evaluable patients’ injected tumors, and in
approximately half of evaluable patients’ un-injected lesions. Radiological assessments found that 29 percent of patients in the
trial achieved best overall response of stable disease. We plan to seek publication of our data at a medical congress in 2023, and in
consultation with our scientific advisory board, we will determine the next steps for the program in the first half of 2023.
In November 2018, the
FDA granted the Biological Product Designation for AGI-134. This designation provides us with eligibility to obtain 12 years of market
exclusivity upon approval of the product for commercial use by the FDA. This regulatory market exclusivity adds an incremental layer of
protection in addition to that afforded by existing patents granted in the United States and Europe, and pending in other countries, covering
the use of AGI-134 for the treatment of solid cancer tumors.
Commercialized Product
BL-5010
BL-5010 is a novel medical
device containing an acidic, aqueous solution and applicator for the non-surgical removal of benign skin lesions. It offers an alternative
to painful, invasive and expensive removal treatments including cryotherapy, laser treatment and surgery. Since the treatment is non-invasive,
it poses minimal infection risk and eliminates the need for anesthesia, antiseptic precautions and bandaging. The pre-filled device controls
and standardizes the volume of solution applied to a lesion, ensuring accurate administration directly on the lesion and preventing both
accidental exposure of the healthy surrounding tissue and unintentional dripping. It has an ergonomic design, making it easy to handle,
and has been designed with a childproof cap. BL-5010 is applied topically on a skin lesion in a treatment lasting a few minutes with the
pen-like applicator and causes the lesion to gradually dry out and fall off within one to four weeks. We received European confirmation
from British Standards Institute of the regulatory pathway classification of BL-5010 as a Class IIa medical device. We in-licensed the
exclusive, worldwide rights to develop, market and sell BL-5010 from IPC in November 2007.
Development
and Commercialization Arrangement. In December 2014, we
entered into an exclusive out-licensing arrangement with Perrigo for the rights to BL-5010 for OTC indications in Europe, Australia and
additional selected countries. We retain the OTC rights to BL-5010 in the United States and the rest of the world, as well as the non-OTC
rights on a global basis. Under the original terms of our out-licensing arrangement with Perrigo, Perrigo was obligated to use commercially
reasonable best efforts to obtain regulatory approval in the licensed territory for at least two OTC indications and to commercialize
BL-5010 for those two OTC indications. In addition, Perrigo agreed to sponsor and manufacture BL-5010 in the relevant regions. Compensation
by Perrigo for the exclusive license includes the payment to us of an agreed percentage of the gross revenue of sales of licensed products.
We agreed to pay a portion of all net consideration we receive from Perrigo, within our standard range of sublicense receipt consideration,
to IPC, the company from which we initially in-licensed the development rights to BL-5010. We have the right to prosecute and maintain
the patents for BL-5010 in the licensed territories, and Perrigo agreed to bear the cost of all renewal fees for patents and the other
costs of prosecution and maintenance up to an agreed limit. In addition, we were granted full access to all clinical and research and
development data generated during the performance of the development plan and may use these data in order to develop or license the product
in other territories and fields of use where we retain the rights. Our agreement with Perrigo will continue in effect until the cessation
of all commercialization in the licensed territory. After the fifth anniversary of the first commercial sale of a licensed product, either
party may terminate the agreement by giving at least 18 months’ prior written notice to the other party. Either party may terminate
the agreement (a) by providing 60 days’ written notice of a material breach of the agreement by the other party if the breaching
party does not cure the breach during that time or (b) with immediate effect on written notice to the other party if there is a change
of control of the other party. The parties have agreed that the announced acquisition of Perrigo by Perrigo Company Plc is a change of
control event that will not give rise to a right on our part to terminate the license agreement. In addition, we have the right to terminate
the agreement if Perrigo does not fulfill any of its obligations of diligence with respect to launching a licensed product or obtaining
regulatory approval for, and commercializing, licensed products as described above.
In March 2016, Perrigo
received CE Mark approval for BL-5010 as a novel OTC treatment for the non-surgical removal of warts. The commercial launch of products
for treatment of this first OTC indication (warts/verrucas) commenced in Europe in the second quarter of 2016. Since then, Perrigo has
invested in improving the product and during 2019 launched an improved version of the product in several European countries.
In March 2020, we agreed
that Perrigo could relinquish its license rights for certain countries that had been included in its territory according to the original
license agreement and was also no longer obligated to develop, obtain regulatory approval for and commercialize products for a second
OTC indication. In turn, in March 2020, we agreed with our licensor of the rights to BL-5010, IPC, to return to IPC those license rights
no longer out-licensed to Perrigo as a result of the agreement described in the preceding sentence, in consideration of the payment to
us of royalties or fees on sublicense receipts.
Collaboration and Out-Licensing
Agreements
Collaboration Agreement
with MSD
See “—Therapeutic
Candidates — Motixafortide — Clinical Trials — Solid tumors” for details regarding our collaboration with MSD.
Collaboration
Agreement with GenFleet
See “—Therapeutic
Candidates — Motixafortide — Clinical Trials — Solid tumors” for details regarding our collaboration with GenFleet.
Out-Licensing Agreement
with Perrigo
See “—Commercialized
Product— BL-5010— Development and Commercialization Arrangement” for details regarding our out-licensing agreement with
Perrigo.
In-Licensing Agreements
We have in-licensed and
intend to continue to in-license development, production and marketing rights from selected research and academic institutions in order
to capitalize on the capabilities and technology developed by these entities. We also seek to obtain technologies that complement and
expand our existing technology base by entering into license agreements with pharmaceutical and biotechnology companies. When entering
into in-license agreements, we generally seek to obtain unrestricted sublicense rights consistent with our primarily partner-driven strategy.
We are generally obligated under these agreements to diligently pursue product development, make development milestone payments, pay royalties
on any product sales and make payments upon the grant of sublicense rights. We generally insist on the right to terminate any in-license
for convenience upon prior written notice to the licensor.
The scope of payments
we are required to make under our in-licensing agreements is comprised of various components that are paid commensurate with the progressive
development and commercialization of our drug products.
Our in-licensing agreements
generally provide for the following types of payments:
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Revenue sharing payments. These are payments to be made to licensors with respect to revenue we receive from sub-licensing to third
parties for further development and commercialization of our drug products. These payments are generally fixed at a percentage of the
total revenues we earn from these sublicenses. |
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Milestone payments. These payments are generally linked to the successful achievement of milestones in the development and approval
of drugs, such Phases 1, 2 and 3 of clinical trials and approvals of NDAs. |
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Royalty payments. To the extent we elect to complete the development, licensing and marketing of a therapeutic candidate, we are
generally required to pay our licensors royalties on the sales of the end drug product. These royalty payments are generally based on
the net revenue from these sales. In certain instances, the rate of the royalty payments decreases upon the expiration of the drug’s
underlying patent and its transition into a generic drug. Certain of our agreements provide that if a licensed drug product is developed
and sold through a different corporate entity, the licensors may elect to receive shares in such company instead of a portion of the royalties.
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Additional payments. In addition to the above payments, certain of our in-license agreements provide for a one-time or periodic payment
that is not linked to milestones. Periodic payments may be paid until the commercialization of the product, either by direct sales or
sublicenses to third parties. Other agreements provide for the continuation of these payments even following the commercialization of
the licensed drug product. |
The royalty and revenue-sharing
rates we agree to pay in our in-licensing agreements vary from case to case but in most cases range from 20% to 29.5% of the consideration
we receive from sublicensing the applicable therapeutic candidate. We are required to pay a substantially lower percentage, generally
less than 5%, if we elect to commercialize the subject therapeutic candidate independently. Due to the relatively advanced stage of development
of the compound licensed from Biokine, our license agreement with Biokine provides for royalty payments of 10% of net sales, subject to
certain limitations, should we independently sell products. In addition, milestone payments are not generally payable if the revenue-sharing
from an out-licensing transaction is greater than any relevant payments due under our in-licensing agreements.
The following are descriptions
of our in-licensing agreements associated with our therapeutic candidates. In addition to the in-licensing agreements discussed herein,
we have entered into other in-licensing arrangements in connection with our therapeutic candidates in clinical, advanced preclinical and
feasibility stages.
Motixafortide
In September 2012, we
in-licensed the rights to motixafortide under a license agreement with Biokine. Pursuant to the agreement, Biokine granted us an exclusive,
worldwide, sublicensable license to develop, manufacture, market and sell certain technology relating to a short peptide that functions
as a high-affinity antagonist for CXCR4 and the uses thereof.
There were no upfront
payments due under the agreement. We are obligated to pay a monthly development fee of $27,500 for certain development services that Biokine
has committed to provide to us under the agreement. The payment of this monthly fee will continue until the completion of the last clinical
trial in which motixafortide is planned to be tested, or is being tested with, at least 20 subjects.
We are responsible for
paying all development costs incurred by the parties in carrying out the development plan.
Should we independently
develop manufacture and sell products (excluding sublicensing) containing the licensed technology, we are obligated to make royalty payments
of 10% of net sales, subject to certain limitations.
The agreement also grants
us the right to grant sublicenses for the licensed technology. Initially, we were required to pay Biokine a royalty payment of 40% of
the amounts we receive as consideration in connection with any sublicensing, development, manufacture, marketing, distribution or sale
of the licensed technology. In October 2018, Biokine agreed to reduce the royalty payment for sublicensing to 20% in return for the payment
by us of $10 million in cash plus $5 million in our restricted shares. Biokine is also eligible to receive up to a total of $5 million
in future milestone payments.
Before we in-licensed
motixafortide, Biokine had received funding for the project from the IIA, and as a condition to IIA giving its consent to our in-licensing
of motixafortide, we were required to agree to abide by any obligations resulting from such funding. However, if we become legally required
to make payments to the IIA in respect of grants made to Biokine, we have the right to offset the full amount of such grants from any
payments otherwise due to Biokine as sublicensing royalties as described above.
We are obligated under
the agreement with Biokine to make commercially reasonable, good faith efforts to sublicense or commercialize motixafortide for fair consideration.
If we do not fulfill this obligation within 24 months after completion of the development plan, all of the rights and responsibilities
with respect to commercialization of the licensed technology will revert to Biokine, and our obligation to pay royalties for sales of
any licensed products or sublicensing as described above will revert to Biokine.
We have the first right
to prepare, file, prosecute and maintain any patent applications and patents, in respect of the licensed technology and any part thereof,
at our expense, provided that we are required to consult with Biokine regarding patent prosecution and patent maintenance. In addition,
we have the right to take action in the prosecution, prevention, or termination of any patent infringement of the licensed technology.
We are responsible for all the expenses of any patent infringement suit that we bring, including any expenses incurred by Biokine in connection
with such suits, with such expenses reimbursable from any sums recovered in such suit or in the settlement thereof for. After such reimbursement,
if any funds remain, both we and Biokine are each entitled to a certain percentage of any remaining sums.
The agreement will remain
in effect until the expiration of all of our royalty and sublicense revenue obligations to Biokine, determined on a product-by-product
and country-by-country basis. We may terminate the agreement for any reason on 90 days’ prior written notice to Biokine. Either
party may terminate the agreement for a material breach by the other party if the breaching party is unable to cure the breach within
30 days after receiving written notice of the breach from the non-breaching party. With respect to any termination for a material breach,
if the breach is not susceptible to cure within the stated period and the breaching party uses diligent, good faith efforts to cure such
breach, the stated period will be extended by an additional 30 days. In addition, either party may terminate the agreement upon the occurrence
of certain bankruptcy events.
Termination of the agreement
will result in a loss of all of our rights to the drug and the licensed technology, which will revert to Biokine. In addition, any sublicense
of ours will terminate provided that, upon such termination and at the request of the sublicensee, Biokine will be required to enter into
a separate license agreement with the sublicensee on substantially the same terms as those contained in the applicable sublicense agreement.
AGI-134
Acquisition
Agreements with Agalimmune
In March 2017, we acquired
substantially all of the outstanding shares of Agalimmune and entered into the Agalimmune Development Agreement with the selling shareholders.
We control the Agalimmune board of directors, and subject to the protections in favor of the selling shareholders, we will direct and
be responsible for the planning, execution and day-to-day management of Agalimmune and its pipeline, including AGI-134.
The Agalimmune Development
Agreement provides the selling shareholders with a reversionary option, in the event of a breach of that agreement and certain other limited
triggering events, that permits the selling shareholders to re-acquire our equity interests in Agalimmune for nominal consideration. See
“Risk Factors — Risks Related to Our Business Regulatory Matters — If we do not meet the requirements under our agreement
with the Agalimmune selling shareholders, we could lose the rights to the therapeutic candidates in Agalimmune’s pipeline, including
but not limited to AGI-134.”
License
from the University of Massachusetts
In 2013, Agalimmune entered
into an exclusive license agreement with the University of Massachusetts, which was amended and restated in February 2017, for rights
to intellectual property related to AGI-134. Pursuant to the agreement, Agalimmune has an exclusive, worldwide, royalty-bearing, sublicensable
license to develop, manufacture, use, import and sell licensed products. Agalimmune is obligated to use diligent efforts to develop the
licensed products and to introduce them into the commercial market. The agreement sets forth specific development milestones that Agalimmune
is required to fulfill. In consideration of the grant of the license, Agalimmune is obligated to pay upfront license fees, annual maintenance
fees, milestone payments, and low, single digit royalty payments on the net sales of licensed products. In addition, the agreement provides
that following a change of control event, Agalimmune will allot to the University 6% of its shares on a fully diluted basis. The agreement
will remain in full effect until the later of expiration or abandonment of all valid claims in the licensed patents or 10 years from the
date of first sale of a licensed product. Agalimmune may terminate the agreement for any reason on 90 days’ prior written notice
to the University.
License
from Kode Biotech
In March 2015, Agalimmune
entered into an evaluation license and option agreement with Kode Biotech for the rights to intellectual property related to certain water
dispersible glycan-lipid conjugates (the “KODETM
Constructs”), including AGI-134. Pursuant to the agreement, Agalimmune had an exclusive license to pursue preclinical assessment
of the use of the KODETM Constructs in Agalimmune’s
method of promoting tumor anticancer therapy, and the exclusive right to require Kode Biotech to grant Agalimmune an exploitation license
to pursue clinical development and commercialization of the use of the KODETM
Constructs in its method.
In September 2017, Agalimmune
exercised its option to enter into the exploitation license agreement with Kode Biotech that grants Agalimmune a worldwide, exclusive,
royalty-bearing transferable license to develop, manufacture, use, import and sell licensed products, including AGI-134. Agalimmune is
obligated to use reasonable, diligent efforts to develop licensed products and to introduce licensed products into the commercial market.
In consideration of the grant of the license, Agalimmune paid a license issue fee and is obligated to pay annual maintenance fees, milestone
payments and low, single-digit royalty payments on the net sales of the licensed products. Agalimmune also has the right to grant sublicenses
for the licensed technology and is required to pay Kode Biotech a payment based on the revenues from sublicense net sales. The agreement
will remain in effect, unless terminated earlier in accordance with its terms, until the later of expiration or abandonment of all enforceable
patent claims within the licensed patents.
BL-5010
In November 2007, we
in-licensed the rights to develop and commercialize BL-5010 under a license agreement with IPC. Under the agreement, IPC granted us an
exclusive, worldwide, sublicensable license to develop, manufacture, market and sell certain technology relating to an acid-based formulation
for the non-surgical removal of skin lesions and the uses thereof. We are obligated to use commercially reasonable efforts to develop
the licensed technology in accordance with a specified development plan, including meeting certain specified diligence goals. We are required
to make low, single-digit royalty payments on the net sales of the licensed technology if we manufacture and sell it on our own, subject
to certain limitations. Our royalty payment obligations are payable on a product-by-product and country-by-country basis, until the last
to expire of any patent included within the licensed technology in such country. We also have the right to grant sublicenses for the licensed
technology and are required to pay IPC a payment, within our standard range of sublicense receipt consideration, based on the revenues
we receive as consideration in connection with any sublicensing, development, manufacture, marketing, distribution or sale of the licensed
technology.
The license agreement
remains in effect until the expiration of all of our license, royalty and sublicense revenue obligations to IPC, determined on a product-by-product
and country-by-country basis, unless we terminate the license agreement earlier. We may terminate the license agreement for any reason
on 30 days’ prior written notice. Either party may terminate the agreement for material breach if the breach is not cured within
30 days after written notice from the non-breaching party. If the breach is not susceptible to cure within the stated period and the breaching
party uses diligent, good faith efforts to cure such breach, the stated period will be extended by an additional 30 days. In addition,
either party may terminate the agreement upon the occurrence of certain bankruptcy events.
Termination of the agreement
will result in a loss of all of our rights to the licensed technology, which would revert to IPC. In addition, any sublicense of the licensed
technology will terminate provided that, upon termination, at the request of the sublicensee, IPC is required to enter into a license
agreement with the sublicensee on substantially the same terms as those contained in the sublicense agreement.
Intellectual Property
Our success depends in
part on our ability to obtain and maintain proprietary protection for our therapeutic candidates, technology and know-how, to operate
without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to seek
to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology,
inventions and improvements that are important to the development of our business. We also rely on trade secrets, know-how and continuing
technological innovation, as well as on regulatory exclusivity, such as Orphan Drug designation or new chemical entity, or NCE, protection
to develop and maintain our proprietary position.
Patents
As of March 21, 2023,
we owned or exclusively licensed for uses within our field of business 33 patent families that collectively contain 129 issued patents,
10 allowed patent applications and over 80 pending patent applications relating to the three candidates listed below. We are also pursuing
patent protection for other drug candidates in our pipeline. Patents related to our therapeutic candidates may provide future competitive
advantages by providing exclusivity related to the composition of matter, formulation, and method of administration of the applicable
compounds and could materially improve the value of our therapeutic candidates. The patent positions for our three therapeutic candidates
are described below and include both issued patents and pending patent applications we exclusively license. We vigorously defend our intellectual
property to preserve our rights and gain the benefit of our investment.
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The motixafortide drug product candidate is covered as a composition of matter by a pending international patent application. Corresponding
patents, if granted, will expire in December 2041, not including any applicable patent term extension, which may add an additional term
of up to five years on the patent. We also have an exclusive license to a patent family that covers the active ingredient molecule per
se. Patents of this family have been granted in the U.S., Europe, Japan and Canada. The patents will expire in August 2023, not including
any applicable patent term extension. We have an exclusive license to a patent family that covers motixafortide combined with a PD1 antagonist
for the treatment of cancer. Four patents of this family have been granted in the U.S., and member patent applications are pending in
the U.S., Europe, Japan, China, Canada, Australia, India, Korea, Mexico, Brazil and Israel. The granted U.S. patent and patents to issue
in the future based on pending patent applications in this family will expire in 2036, not including any applicable patent term extension.
In addition, we have an exclusive license to nineteen other patent families pending or granted worldwide directed to methods of synthesis
of motixafortide and methods of use of motixafortide either alone or in combination with other drugs for the treatment of certain types
of cancer and other indications. Furthermore, we have Orphan Drug status for AML, pancreatic cancer and stem cell mobilization, as well
as data exclusivity protection afforded to motixafortide as an NCE. |
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With respect to AGI-134, Agalimmune owns or has an exclusive license to three patent families that cover the AGI-134 compound and
its use for treating cancer. The use of AGI-134 for treating solid tumors is covered by patents granted in the U.S., Europe, China, Japan
and other countries. The patents will expire in 2035, not including any applicable patent term extensions. The compound AGI-134 is covered
by patents granted in the United States, Europe, Japan and other countries. The patents will expire in 2025, not including any applicable
patent term extensions. In addition, the future drug product is eligible for obtaining regulatory Biological Product exclusivity (12 years
of market exclusivity in the U.S.). |
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With respect to BL-5010, we have an exclusive license to a patent family directed to a novel applicator uniquely configured for applying
the BL-5010 composition to targeted skin tissue safely and effectively. Patents in this family have been granted in the U.S., Europe,
Israel, Japan and China. The patents will expire in 2034. |
The patent positions
of companies like ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain and solidify our
proprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted.
We do not know whether any of our patent applications or those patent applications that we license will result in the issuance of any
patents. Our issued patents and those that may issue in the future, or those licensed to us, may be challenged, narrowed, circumvented
or found to be invalid or unenforceable, which could limit our ability to stop competitors from marketing related products or the length
of term of patent protection that we may have for our products. Neither we nor our licensors can be certain that we were the first to
invent the inventions claimed in our owned or licensed patents or patent applications. In addition, our competitors may independently
develop similar technologies or duplicate any technology developed by us, and the rights granted under any issued patents may not provide
us with any meaningful competitive advantages against these competitors. Furthermore, because of the extensive time required for development,
testing and regulatory review of a potential product, it is possible that, before any of our products can be commercialized, any related
patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent.
Trade Secrets
We may rely, in some
circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to protect. We seek to protect our
proprietary technology and processes, in part, by confidentiality agreements and assignment of invention agreements with our employees,
consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets
by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we
have confidence in these individuals, organizations and systems, such agreements or security measures may be breached, and we may not
have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors.
We also rely on protection available under trademark laws. As of
March 21, 2023, we have registered trademarks for “APHEXDA” in Israel and also have the same pending trademarks in the EU
and Australia (both accepted and published) and in the UK, the US, Brazil, Canada, China, Japan and Republic of Korea jurisdictions. We
also claim common law protections for other marks we use in our business. Competitors and other companies could adopt similar marks or
try to prevent us from using our marks, consequently impeding our ability to build brand identity and possibly leading to customer confusion.
Manufacturing
Our laboratories are located in our headquarters in Modi’in, Israel, and are in part compliant with FDA regulations setting forth
current good laboratory practices, or GLP. While our bioanalytical laboratory complies with these regulations, the chemistry and formulation,
as well as the analytical laboratories, are limited in manufacturing scale and resources and are intended to support our projects for
research and development activities only. These laboratories are not compliant with cGMP. Hence, we cannot independently manufacture drug
substances or drug products for our current clinical trials or for commercial distribution. The cGMP contract manufacturing organization
of the drug substances and drug products used for our current clinical trials do have these necessary cGMP approvals.
There can be no assurance
that our therapeutic candidates, if approved, can be manufactured in sufficient commercial quantities, in compliance with regulatory requirements,
and at an acceptable cost. Our contract manufacturers, who we also plan to use as we execute our independent commercialization for montixafortide
to begin producing commercial scale product, are, and will be, subject to extensive governmental regulation in connection with the manufacture
of any pharmaceutical products or medical devices. Our contract manufacturers must ensure that all of the processes, methods and equipment
are compliant with cGMP on an ongoing basis, mandated by the FDA and other regulatory authorities, and conduct extensive audits of vendors,
contract laboratories and suppliers.
Contract Research Organizations
We outsource certain
preclinical and clinical development activities to CROs, which meet FDA or European Medicines Agency regulatory standards. We create and
implement the drug development plans and, during the preclinical and clinical Phases of development, manage the CROs according to the
specific requirements of the therapeutic candidate under development.
Competition
The pharmaceutical, medical
device and biotechnology industries are intensely competitive. Our therapeutic candidates, if commercialized, would compete with existing
drugs and therapies. In addition, there are many pharmaceutical companies, biotechnology companies, medical device companies, public and
private universities, government agencies and research organizations actively engaged in research and development of products targeting
the same markets as our therapeutic candidates. Many of these organizations have substantially greater financial, technical, manufacturing
and marketing resources than we do. In certain cases, our competitors may also be able to use alternative technologies that do not infringe
upon our patents to formulate the active materials in our therapeutic candidates. They may, therefore, bring to market products that are
able to compete with our candidates, or other products that we may develop in the future.
Motixafortide
There are a number of
potentially competitive compounds under development that act as CXCR4 inhibitors, including, among others, Mozobil®
(plerixafor), which is being marketed by Sanofi Genzyme as a stem cell mobilizer for autologous stem cell transplantation; burixafor developed
by GPCR Therapeutics; X4P-001 (mavorixafor) developed by X4 Pharmaceuticals Inc for WHIM syndrome; GMI-1359 developed by Glyco-Mimetics
Inc for Solid Tumors and AD-214 developed by AdAlta Ltd for idiopathic pulmonary fibrosis (IPF).
In the field of stem
cell mobilization, in addition to the above-referenced Mozobil, Magenta’s MGTA-145 is a compound under development that could potentially
be approved for stem cell mobilization in patients with genetic and autoimmune diseases, however, this development status is unclear as
Magenta recently announced the failure of lead asset and their intention to seek strategic alternatives.
During 2023, Mozobil’s
patent will expire. The following companies have developed and applied for FDA approval for Plerixafor generic drugs: Dr. Reddys Labs
LTD, TEVA Pharms USA, Zydus Pharms USA IND, MSN Laboratories Private Ltd, Auromedics Pharma LLC, Amneal EU Ltd and Kindos Pharma Co Ltd.
Immuno-oncology
is an area of great interest in the pharmaceutical market, specifically, immuno-oncology combination therapies. Currently there are thousands
of immuno-oncology combination treatments being tested in clinical trials that aim to transform scientific innovation into practice-changing
cancer drugs.
In the field of pancreatic
cancer, motixafortide, if approved, will compete with the few, currently approved treatments for PDAC. In the first line setting, Gemcitabine
in combination with Abraxane® or FOLFIRINOX regimen
are the current standard of care and there are a few targeted therapies including Tarceva and Lynparza. Oncologists have limited options
of existing therapies for second-line metastatic patients. The only FDA-approved second-line treatment is Onivyde®
in combination with 5FU and LV for gemcitabine-treated patients. In addition to chemotherapy, Merck’s KEYTRUDA®
was approved for MSI-H cancers (approximately 1% of all cases) and Lynparza®
was recently approved for maintenance of BRCA mutated pancreatic cancer (approximately 7% of all cases).
In the last years we
have seen a number of late-stage clinical failures of compounds for advanced PDAC, most notably Apexigen’s APX005, Erytech’s
Eryspase and Rafael Pharmaceuticals’s devimistat in the last year. Most of these failed trials have been based on a single promising
endpoint. There are very few compounds in advanced stages of development in PDAC, most notably TME Pharma’s (previously known as
Noxxon) NOX-A12, which has announced initiation of a Phase 2 trial as a triple combination study in PDAC.
The field of AML has
seen quite a few approvals in recent years, most of them being for specific subpopulations in specific lines of therapy. If approved,
motixafortide will compete with many currently approved treatments for AML that include chemotherapy (doxorubicin, cytarabine, vincristine);
radiation therapy; stem cell transplantation; hypomethylating agents Dacogen®
(decitabine, Eisai and Johnson & Johnson); Vidaza®
(azacitidine, Celgene); FLT3 Inhibitors Xospata®
(gilteritinib), Vanflyta® (quizartinib); Rydapt®
(midostaurin); IDH inhibitors Idhifa® (enasidenib)
and Tibsovo® (ivosidenib). Other approved drugs for
AML are Vyxeos® (liposomal cytarabine); Venclexta/Venclyxto®
(Venetoclax, AbbVie); Daunorubicin® (Jazz Pharmaceuticals);
Revlimid® (lenalidomide, Celgene); Daurismo®
(glasdegib, Pfizer); Mylotarg® (gemtuzumab, Pfizer);
and Rezlidhia® (olutasidenib, Rigel)
In addition there are
a number of potentially competitive compounds in development to treat AML including, among others, crenolanib (Arog Phramaceuticals),
oral azacytidine (Celgene/Bristol Myers Squibb); guadecitabine (Astex Pharmaceuticals / Otsuka); uprolesan (Glycomimetics); pracinostat
(MEI Pharma/Helsinn); devimistat (Rafael Pharmaceuticals); ibrutinib (AbbVie); enasidenib (Bristol Myers Squibb); alvocidib (Tolero Pharmaceuticals);
daratumumab (Johnson & Johnson); brentuximab (Seattle Genetics); selinexor (Karyopharm Therapeutics and Ono Pharmaceutical Co Ltd.);
Nexavar (sorafenib, Bayer) vosaroxim (Denovo Biopharma LLC).
AGI-134
The field of cancer immunotherapy
is rapidly growing, targeting CTLA-4, PD1 or PDL1 via antibody blockade. In recent years, approval has been granted for use of these agents
for various oncology- related indications such as melanoma, non-small cell lung cancer, renal cell carcinoma, head and neck, gastric and
colorectal cancer, liver cancer and bladder cancer. As noted above, there are currently hundreds of immuno-oncology combination treatments
being tested in clinical trials. Many of these combinations could be competitive with AGI-134.
In general, the competitive
landscape is comprised of compounds that target tumor specific neoantigens and create adaptive, anti-tumor immune response. Examples of
such therapeutic approaches include oncolytic viruses, dendritic cell vaccines, personalized neoantigen-based cancer vaccines, pathogen-associated
molecular patterns (PAMPs), damage-associated molecular pattern (DAMPs) and cancer vaccines.
If approved, AGI-134
will compete with approved treatments such as the oncolytic viruses Imlygic® (T-VEC; Amgen) and dendritic cell cancer vaccine Provenge®
(sipuleucel-T; Dendreon Corp). In addition, there are several potentially-competitive compounds that are currently under development,
including, among others, Pexa-Vec (pexastimogene devacirepvec, SillaJen and Transgene); Reolysin (pelareorep, Adlai Nortye Pharmaceutical
Co Ltd and Oncolytics Biotech Inc.); Cavatak (MSD/Viralytics); NeoVax (BioNTech/Neon Therapeutics); IVAC Mutanome (BioNTech); TLR9 agonists
such as lefitolimod (MGN-1703, Mologen Ag); tilsotolimod (IMO-2125, Idera Pharmaceuticals Inc.); SD-101 (TriSalus Life Sciences); CMP-001
(Checkmate Pharmaceuticals); ADU-S100 (Aduro BioTech Inc./Novartis); imprime PGG® (HiberCell) and MG1MA3 (Turnstone Biologics Inc/AbbVie).
Most of these competitors have ongoing combination trials with the approved checkpoint inhibitors.
BL-5010
BL-5010 competes with
a variety of approved destructive and non-destructive treatments for skin lesions. Both Endwarts®
(Meda Health) and Eskata® (Aclaris therapeutics)
are medical device-based treatments marketed for removal of warts.
Insurance
We maintain insurance
for our offices and laboratory in Israel. This insurance covers approximately NIS 15.8 million (approximately $4.5 million) of equipment,
consumables and lease improvements against risk of fire, lightning, natural perils and burglary (the latter coverage limited to NIS 790,500
(approximately $225,000)), and NIS 4.6 million (approximately $1.3 million) of consequential damages (covering fixed damages and extra
expenses). For our clinical activities, we carry life science liability insurance covering general liability with an annual coverage amount
of $30.0 million per occurrence and product liability and clinical trials coverage with an annual coverage amount of $30.0 million each
claim and in the aggregate. The annual aggregate as well as the maximum indemnity for a single occurrence, claim or circumstances under
this insurance is $30.0 million. In addition, we maintain the following insurance: employer’s liability with coverage of NIS 31.0
million (approximately $8.8 million) for each occurrence and in the aggregate; third-party liability with coverage of NIS 15.5 million
(approximately $4.4 million) for each occurrence and in the aggregate; all risk coverage of approximately NIS 8.0 million (approximately
$2.3 million) for electronic and mechanical equipment; directors’ and officers’ liability with coverage of $15.0 million for
each claim and in the aggregate; stock throughput insurance covering the API, clinical trials materials; and a global travel insurance
policy.
We procure stock throughput
insurance (cargo marine) coverage when we ship substances for our clinical studies. Such insurance is customized to the special requirements
of the applicable shipment, such as temperature and/or climate sensitivity. If required, we insure the substances to the extent they are
stored in central depots and at clinical sites.
We believe that the amounts
of our insurance policies are adequate and customary for a business of our kind. However, because of the nature of our business, we cannot
assure you that we will be able to maintain insurance on a commercially reasonable basis or at all, or that any future claims will not
exceed our insurance coverage.
Environmental Matters
We are subject to various
environmental, health and safety laws and regulations, including those governing air emissions, water and wastewater discharges, noise
emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated
sites. We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable
environmental and health and safety laws and regulations. Based on information currently available to us, we do not expect environmental
costs and contingencies to have a material adverse effect on us. The operation of our facilities, however, entails risks in these areas.
Significant expenditures could be required in the future if we are required to comply with new or more stringent environmental or health
and safety laws, regulations or requirements. See “Business — Government Regulation and Funding — Israel Ministry of
Environment — Toxin Permit.”
Government Regulation
and Funding
We operate in a highly
controlled regulatory environment. Stringent regulations establish requirements relating to analytical, toxicological and clinical standards
and protocols in respect of the testing of pharmaceuticals and medical devices. Regulations also cover research, development, manufacturing
and reporting procedures, both pre- and post-approval. In many markets, especially in Europe, marketing and pricing strategies are subject
to national legislation or administrative practices that include requirements to demonstrate not only the quality, safety and efficacy
of a new product, but also its cost-effectiveness relating to other treatment options. Failure to comply with regulations can result in
stringent sanctions, including product recalls, withdrawal of approvals, seizure of products and criminal prosecution.
Before obtaining regulatory
approvals for the commercial sale of our therapeutic candidates, we or our licensees must demonstrate through preclinical studies and
clinical trials that our therapeutic candidates are safe and effective. Historically, the results from nonclinical studies and early clinical
trials often have not accurately predicted results of later clinical trials. In addition, a number of pharmaceutical products have shown
promising results in early clinical trials but subsequently failed to establish sufficient safety and efficacy results to obtain necessary
regulatory approvals. We have incurred and will continue to incur substantial expense for, and devote a significant amount of time to,
preclinical studies and clinical trials. Many factors can delay the commencement and rate of completion of clinical trials, including
the inability to recruit patients at the expected rate, the inability to follow patients adequately after treatment, the failure to manufacture
sufficient quantities of materials used for clinical trials, and the emergence of unforeseen safety issues and governmental and regulatory
delays. If a therapeutic candidate fails to demonstrate safety and efficacy in clinical trials, this failure may delay development of
other therapeutic candidates and hinder our ability to conduct related preclinical studies and clinical trials. Additionally, as a result
of these failures, we may also be unable to find additional licensees or obtain additional financing.
Governmental authorities
in all major markets require that a new pharmaceutical product or medical device be approved or exempted from approval before it is marketed,
and have established high standards for technical appraisal, which can result in an expensive and lengthy approval process. The time to
obtain approval varies by country. In the past, it generally took from six months to four years from the application date, depending upon
the quality of the results produced, the degree of control exercised by the regulatory authority, the efficiency of the review procedure
and the nature of the product. Some products are never approved. In recent years, there has been a trend towards shorter regulatory review
times in the United States as well as certain European countries, despite increased regulation and higher quality, safety and efficacy
standards.
Historically, different
requirements by different countries’ regulatory authorities have influenced the submission of applications. However, a trend toward
harmonization of drug and medical device approval standards, starting in individual countries in Europe and then in the EU as a whole,
in Japan, the United Kingdom and in the United States under the aegis of what is now known as the International Council on Harmonisation,
or ICH (created as the International Conference on Harmonisation in 1990), is gradually narrowing these differences. In many cases, compliance
with ICH standards can help avoid duplication of non-clinical and clinical trials and enable companies to use the same basis for submissions
to each of the respective regulatory authorities. The adoption of the Common Technical Document format by the ICH has greatly facilitated
use of a single regulatory submission for seeking approval in the ICH regions and many other countries worldwide.
Summaries of the United
States, EU, United Kingdom and Israeli regulatory processes follow below.
United States
In the United States,
drugs are subject to rigorous regulation by the FDA. The U.S. Federal Food, Drug and Cosmetic Act, or FDCA, and other federal and state
statutes and regulations govern, among other things, the research, development, testing, manufacture, storage, record-keeping, packaging,
labeling, adverse event reporting, advertising, promotion, marketing, distribution and import and export of pharmaceutical products. Failure
to comply with the applicable U.S. requirements may subject us to stringent administrative or judicial sanctions, such as agency refusal
to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution,
injunctions or criminal prosecution.
Unless a drug is exempt
from the NDA process or the Biologics License Application, or BLA, process or subject to another regulatory procedure, the steps required
before a drug may be marketed in the United States include:
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preclinical laboratory tests, animal studies and formulation development; |
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submission to the FDA of an Investigational New Drug, or IND, application to conduct human clinical testing; |
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adequate and well controlled clinical trials to determine the safety and efficacy of the drug for each indication as well as to establish
the exposure levels; |
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submission to the FDA of an application for marketing approval; |
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satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is manufactured; and
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FDA review and approval of the drug and drug labeling for marketing. |
Preclinical studies include
laboratory evaluation of product chemistry, toxicity, formulation and stability, as well as animal studies. For preclinical studies conducted
in the United States, and certain studies carried out outside the United States, we submit the results of the nonclinical studies, together
with manufacturing information and analytical results, to the FDA as part of an IND, which must become effective before we may commence
human clinical trials.
Clinical Trials (INDs)
Clinical trials involve
the administration of the investigational drug to people under the supervision of qualified investigators in accordance with the principles
of good clinical practice, or GCP. We conduct clinical trials under protocols detailing the trial objectives, the parameters to be used
in monitoring safety, and the effectiveness criteria to be evaluated. We must submit each U.S. study protocol to the FDA as part of an
IND. An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions
about issues such as the conduct of the trials as outlined in the IND. In such a case, the IND sponsor and the FDA must resolve any outstanding
FDA concerns or questions before clinical trials can proceed. Submission of an IND does not always result in the FDA allowing clinical
trials to commence and the FDA may halt a clinical trial if unexpected safety issues surface or the study is not being conducted in compliance
with applicable requirements.
The FDA may refuse to
accept an IND for review if applicable regulatory requirements are not met. Moreover, the FDA may delay or prevent the start of clinical
trials if the manufacturing of the study drug fails to meet cGMP requirements or the clinical trials are not adequately designed. Such
government regulation may delay or prevent the study and marketing of potential products for a considerable time period and may impose
costly procedures upon a manufacturer’s activities. In addition, the FDA may, at any time, impose a clinical hold on ongoing clinical
trials. If the FDA imposes a clinical hold, clinical trials cannot continue without FDA authorization and then only under terms authorized
by the FDA.
Success in early-stage
clinical trials does not assure success in later-stage clinical trials. Results obtained from clinical activities are not always conclusive
and may be susceptible to varying interpretations that could delay, limit or prevent regulatory approval. Even if a therapeutic candidate
receives regulatory approval, later discovery of previously unknown problems with a product may result in restrictions on the product
or even withdrawal of marketing approval for the product.
Foreign clinical trials
may or may not be conducted under an IND. However, their safety assessments should be submitted annually.
We conduct clinical trials
typically in three sequential phases (1-3), but the phases may overlap or be combined. An institutional review board, or IRB, must review
and approve each trial before it can begin. Phase 1 includes the initial administration of a tested drug to a small number of humans.
These trials are closely monitored and may be conducted in patients but are usually conducted in healthy volunteer subjects. These trials
are designed to determine the metabolic and pharmacologic actions of the drug in humans and the side effects associated with increasing
doses as well as, if possible, to gain early evidence on effectiveness. Phase 2 usually involves trials in a limited patient population
to evaluate dosage tolerance and appropriate dosage, identify possible adverse effects and safety risks and preliminarily evaluate the
efficacy of the drug for specific indications. Phase 3 trials are large trials used to further evaluate clinical efficacy and test further
for safety by using the drug in its final form in an expanded patient population. There can be no assurance that we or our licensees will
successfully complete Phase 1, Phase 2 or Phase 3 testing with respect to any therapeutic candidate within any specified period of time,
if at all. Furthermore, clinical trials may be suspended at any time on various grounds, including a finding that the subjects or patients
are being exposed to an unacceptable health risk. We and our licensees perform some of our nonclinical and clinical testing outside of
the United States. The acceptability of the results of our preclinical and clinical testing by the FDA will be dependent upon adherence
to applicable U.S. and foreign standards and requirements, including GLP, GCP and the Declaration of Helsinki for protection of human
subjects.
Marketing Applications
(NDAs and BLAs)
After successful completion
of the required clinical testing, an NDA, or in the case of certain biological products a BLA, is prepared and submitted to the FDA. FDA
approval of the NDA or BLA is required before product marketing may begin in the United States. The NDA/BLA must include the preclinical
and clinical testing results and a compilation of detailed information relating to the product’s pharmacology, toxicology, chemistry,
manufacture and manufacturing controls. The cost of preparing and submitting an NDA may be substantial. Under U.S. federal law, the submission
of NDAs is generally subject to substantial application user fees, and the manufacturer and/or sponsor under an NDA approved by the FDA
is also subject to annual product and establishment user fees. These fees are typically increased annually.
The FDA has 60 days from
its receipt of an NDA/BLA to determine whether the application will be accepted for filing based on the FDA threshold determination that
the application is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth
review of the submitted application. Under U.S. federal law, the FDA has agreed to certain performance goals in the review of NDAs/BLAs.
Most such applications for non-priority drug products are to be reviewed within 10 months. The review process may be significantly extended
by FDA requests for additional information or clarification or if the applicant submits a major amendment during the review. The FDA may
also refer applications to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation
and a recommendation as to whether the application should be approved. This often, but not exclusively, occurs for novel drug products
or drug products that present difficult questions of safety or efficacy. The FDA is not bound by the recommendation of an advisory committee.
Before approving an application,
the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve the application
unless the FDA determines that the product is manufactured in substantial compliance with cGMP. If the FDA determines that the NDA or
BLA is supported by adequate data and information, the FDA may issue an approval letter. During review, the FDA may request additional
information via an information request, or IR letter, or state deficiencies via a deficiency letter, or DR letter. Upon compliance with
the conditions stated, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the drug
with specific prescribing information for specific indications. As a condition of approval, the FDA may require additional trials or post-approval
testing and surveillance to monitor the drug’s safety or efficacy, the adoption of risk evaluation and mitigation strategies, and
may impose other conditions, including labeling and marketing restrictions on the use of the drug, which can materially affect its potential
market and profitability. Once granted, product approvals may be withdrawn if compliance with regulatory standards for manufacturing and
quality control are not maintained or if additional safety problems are identified following initial marketing.
If the FDA’s evaluation
of the NDA or BLA submission or manufacturing processes and facilities is not favorable, the FDA may refuse to approve the NDA or BLA
and may issue a complete response letter. The complete response letter, or CRL, indicates that the review cycle for an application is
complete and that the application is not ready for approval. The complete response letter will describe specific deficiencies and, when
possible, will outline recommended actions the applicant might take in order to place the application in condition for approval. Following
receipt of a CRL, the company may submit additional information and start a new review cycle, withdraw the application or request a hearing.
Failure to take any of the above actions may result in the FDA considering the application withdrawn following one year from issuance
of the CRL. In such cases, the FDA will notify the company and the company will have 30 days to respond and request an extension of time
in which to resubmit the application. The FDA may grant reasonable requests for extension. If the company does not respond within 30 days
of the FDA’s notification, the application will be considered withdrawn. Even with submission of additional information for a new
review cycle, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
The Pediatric Research
Equity Act, or PREA, requires NDAs and BLAs (or supplements) for a new active ingredient, new indication, new dosage form, new dosing
regimen or new route of administration to contain results assessing the safety and efficacy for the claimed indication in all relevant
pediatric subpopulations. Data to support dosing and administration also must be provided for each pediatric subpopulation for which the
drug is safe and effective. The FDA may grant deferrals for the submission of results or full or partial waivers from the PREA requirements
(for example, if the product is ready for approval in adults before pediatric studies are complete, if additional safety data is needed,
among others). In addition, under the Best Pharmaceuticals for Children Act, or BPCA, the FDA may issue a written request to the company
to conduct clinical trials in the pediatric population that are related to the moiety and expand on the claimed indication. The studies
are voluntary but may award the company with 6 months of marketing exclusivity if conducted according to good scientific principles and
address the written request. Finally, a sponsor can request that a product that must be studied under PREA to be studied also under the
BPCA to allow the sponsor to be eligible for six-months of pediatric exclusivity. The pediatric studies requested under BPCA are usually
more extensive and would generally also fulfill the PREA requirement; however, even if the sponsor does not complete the studies outlined
in the BPCA written request, it is still required to complete any studies required under PREA.
Post-Marketing Requirements
Once an NDA or BLA is
approved, the drug sponsor will be subject to certain post-approval requirements, including requirements for adverse event reporting,
submission of periodic reports, manufacturing, labeling, packaging, advertising, promotion, distribution, record-keeping and other requirements.
For example, the approval may be subject to limitations on the uses for which the product may be marketed or conditions of approval, or
contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product or require the
adoption of risk evaluation and mitigation strategies. In addition, the FDA requires the reporting of any adverse effects observed after
the approval or marketing of a therapeutic candidate and such events could result in limitations on the use of such approved product or
its withdrawal from the marketplace. Also, some types of changes to the approved product, such as manufacturing changes and labeling claims,
are subject to further FDA review and approval. Additionally, the FDA strictly regulates the promotional claims that may be made about
prescription drug products. In particular, the FDA requires substantiation of any claims of superiority of one product over another including,
in many cases, requirements that such claims be proven by adequate and well controlled head-to-head clinical trials. To the extent that
market acceptance of our therapeutic candidates may depend on their superiority over existing products, any restriction on our ability
to advertise or otherwise promote claims of superiority, or any requirements to conduct additional expensive clinical trials to provide
proof of such claims, could negatively affect the sales of our therapeutic candidates and our costs.
Orphan Drug Designation
The Orphan Drug Act,
or ODA, provides for granting special status to a drug or biological product to treat a rare disease or condition (i.e., a disease or
condition that affects fewer than 200,000 individuals in the United States) upon request of a sponsor. This status is referred to as orphan
designation (or sometimes “orphan status”). For a therapeutic candidate to qualify for orphan designation, both the candidate
and the disease or condition must meet certain criteria specified in the ODA’s implementing regulations (set forth at 21 CFR Part
316). Orphan designation qualifies the sponsor of the candidate for various development incentives of the ODA, including tax credits for
qualified clinical testing, waiver of NDA/BLA user fees and eligibility for seven-year marketing exclusivity, referred to as orphan exclusivity
upon marketing approval. The granting of an orphan designation request does not alter the standard regulatory requirements and process
for obtaining marketing approval. Safety and effectiveness of a candidate must still be established through adequate and well-controlled
studies.
Expedited Programs for
Serious Conditions
The FDA has put in place
four programs intended to facilitate and expedite development and review of a new drug intended to address an unmet medical need in the
treatment of a serious or life-threatening condition: fast track designation, breakthrough therapy designation, accelerated approval and
priority review designation. Each program offers the sponsor a defined set of opportunities such as expedited development and review,
intensive FDA guidance during development, marketing approval based on an effect on a surrogate endpoint or an intermediate clinical endpoint
that is reasonably likely to predict the drug’s clinical benefit, and a shorter time for review of marketing application. Fast Track
and Breakthrough Therapy designations may be requested during development, while Accelerated Approval and Priority Review relate to the
marketing approval stage.
European Union/European
Economic Area
Clinical Trials
Within the European Union
(EU) and the European Economic Area (EEA), which is composed of the 27 member states of the EU plus Norway, Iceland and Liechtenstein,
the authorization of clinical trials occurs at member state level. The European Medicines Agency, or EMA, plays a key role in ensuring
that GCP standards are applied across the European Economic Area, or EEA in cooperation with the member states. It also manages a database
of clinical trials carried out in the EU.
Clinical trials in the
EU are now regulated under Regulation (EU) 536/2014, or the CTR. As opposed to the former law, Directive 2001/20/EC, or CTD, which as
an EU directive was not directly applicable in the member states, the CTR has immediate effect and does not have to be transposed into
national law. While national law transposing the CTD varied to a great extent, the CTR aims at significant further harmonization of the
law governing clinical trials in the EU. After significant delay, the CTR has now become applicable on January 31, 2022. The CTR further
harmonizes the assessment and supervision processes for clinical trials throughout the EU via a Clinical Trials Information System, or
CTIS, which includes a centralized EU portal and database for clinical trials. The exact timing of the Regulation’s application
depends on confirmation of full functionality of CTIS through an independent audit. The CTR will become applicable six months after the
European Commission publishes notice of this confirmation. The CTR provides inter alia:
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Consistent rules for conducting clinical trials throughout the EU; |
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Making information on the authorization, conduct and results of each clinical trial carried out in the EU publicly available;
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Harmonized electronic submission and assessment process for clinical trials conducted in multiple member states; |
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Improved collaboration, information sharing and decision-making between and within member states; |
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Increased transparency of information on clinical trials; and |
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Higher standards of safety for all participants in EU clinical trials. |
The authorization of
a clinical trial (Phase I-III) in an EU member state requires the submission of a clinical trial application (CTA) via the EU Portal.
The application will be reviewed by the competent authorities of the member states where the trial is supposed to take place. The application
and approval process is conducted by the member states under the cooperation system set forth in the CTR. Particularities under member
states’ national law still apply to some extent. In general, the CTA should include, among other documents, the study protocol,
results of the nonclinical studies and manufacturing information and analytical results. Also, the sponsor has to suggest one of the concerned
member states as reporting member state. The CTR aims at speeding up the validation and review of clinical trial applications and therefore
provides strict deadlines.
Marketing Authorization
Procedures
A medicinal product may
only be placed on the market in the EEA if it has obtained a marketing authorization according to the applicable EU and/or member state
law. A marketing authorization may either be granted in a national procedure, or in a coordinated procedure of several member states pursuant
to Directive 2001/83/EC, as amended, or under the centralized EU procedure in accordance with Regulation (EC) No. 726/2004, as amended,
or its predecessor, Regulation 2309/93. Depending on the nature of the medicinal product, several different legal frameworks of the EU
and the member states may be relevant for the market clearance.
Centralized Procedure
(CP)
The Centralized Procedure
according to Regulation 726/2004/EC allows a marketing authorization holder to market the medicine and make it available to patients and
healthcare professionals throughout the entire EEA on the basis of a single marketing authorization, granted by the European Commission,
acting in its capacity as the European Licensing Authority on the advice of the EMA. The EMA is the administrative body responsible for
coordinating the existing scientific resources available in the member states for evaluation, supervision and pharmacovigilance of medicinal
products. Certain medicinal products (e.g., products derived from biotechnology, orphan medicinal products and medicinal products for
human use, which contain an active substance authorized in the Union after 20 May 2004 and which are intended for the treatment of AIDS,
cancer, neurodegenerative disorders or diabetes) must be authorized centrally. For each application submitted to the EMA for scientific
assessment, the EMA is required to ensure that the opinion of the Committee for Medicinal Products for Human Use, or CHMP, is given within
210 days after receipt of a valid application or within 150 days by means of an accelerated procedure (excluding clock stops); the review
period can be extended. If the opinion is positive, the EMA is required to send the opinion to the European Commission, which is responsible
for preparing the decision granting a marketing authorization. If the initial opinion of the CHMP is negative, the applicant is afforded
an opportunity to seek a re-examination of the opinion. The CHMP is required to re-examine its opinion within 60 days following receipt
of the request by the applicant. A refusal of a centralized marketing authorization constitutes a prohibition on placing the given medicinal
product on the market in the EU.
The EMA’s Committee
for Advanced Therapies (CAT) is responsible for assessing the quality, safety and efficacy of advanced therapy medicinal products (ATMP).
ATMP include gene therapy medicinal products, somatic cell therapy medicinal products and tissue engineered products. The role of the
CAT is to prepare a draft opinion on an application for marketing authorization for an ATMP candidate that is submitted to the EMA. The
EMA then provides a final opinion regarding the application for marketing authorization. The European Commission grants or refuses marketing
authorization after the EMA has delivered its opinion. ATMP are further regulated under Regulation (EC) No 1394/2007 on advanced
therapy medicinal products.
National Authorization
Procedure
A National Authorization
Procedure is used when applying for a marketing authorization in one individual EEA state. The national procedure can only be used if
the medicinal product does not already have a marketing authorization in another EEA state.
Mutual Recognition Procedure
(MRP)
The mutual recognition
procedure (Art. 28 et seq. Directive 2001/83/EC) should be used if a medicinal product already has a marketing authorization in one EEA
member state, and the authorization holder would like to extend the authorization to other member states. An application for mutual recognition
may be addressed to one or more EEA countries. The country in which the national marketing authorization has been granted acts as the
Reference Member State, and the other countries concerned (Concerned Member States) can, upon successful completion of the procedure,
recognize the marketing authorization. The assessment time is 180 days plus 30 days.
Decentralized Procedure
(DCP)
The decentralized procedure
(introduced by Directive 2004/27/EU) is used in cases where the medicinal product has not received a marketing authorization in the EU
at the time of application. It allows the common assessment of an application submitted simultaneously to several member states. One of
the member states will take the lead in evaluating the application as Reference Member State. The Reference Member State should prepare
an assessment report that is then used to facilitate agreement with the Concerned Member States and the grant of a national marketing
authorization in all of these member states. The assessment time is 210 days + 30 days.
Manufacturing Requirements
Any medicinal product
placed on the market in the EEA must be manufactured in accordance with the principles of good manufacturing practice as set out in Directive
EC2017/1572 supplementing Directive 2001/83/EC of the European Parliament and of the Council as regards the principles and guidelines
of good manufacturing practice for medicinal products for human use for human use and Volume 4 of the “Rules Governing Medicinal
Products in the European Community”. Directive 2017/1572/EU has replaced Directive 2003/94/EC. Directive 2003/94/EC will still
be applicable to clinical trials conducted in accordance with the former regime under transitional provisions. Furthermore, distribution
of medicinal products in the EU is subject to Directive 2001/83/EC, 92/25/EEC and current guidance on good distribution practice, or GDP.
Moreover, EU law requires the clinical results in support of clinical safety and efficacy to be based upon clinical trials conducted in
the EU in compliance with the requirements of the CTR and Directive 2005/28/EC, which implement good clinical practice in the conduct
of clinical trials on medicinal products for human use. Clinical trials conducted outside the EU and used to support applications for
marketing within the EU must have been conducted in a way consistent with the principles set out in the CTR or if conducted prior to 31
January 2022, its predecessor Directive 2001/20/EC. The conduct of a clinical trial in the EU requires, pursuant to the CTR, authorization
by the relevant national competent authority where a trial takes place, and an ethics committee to have issued a favorable opinion in
relation to the arrangements for the trial. It also requires that the sponsor of the trial, or a person authorized to act on his behalf
in relation to the trial, be established in the EU.
Law Relating to Pediatric
Research
Regulation (EC) 1901/2006
(as amended by Regulation (EC) 1902/2006 and Regulation (EU) 2019/5), or the Pediatric Regulation, was adopted on December 12, 2006. This
Regulation governs the development of medicinal products for human use in order to meet the specific therapeutic needs of the pediatric
population (children aged 0 to 17 years). It requires any application for marketing authorization made after July 26, 2008 in respect
of a medicinal product not authorized in the EU on January 26, 2007, the time the Regulation entered into force, to include studies in
children conducted in accordance with a pediatric investigation plan agreed to by the relevant European authorities. This does not apply
if the product is subject to an agreed waiver or deferral or if the product is excluded from the scope of Regulation 1901/2006, which
is the case for inter alia generics, homeopathic and traditional (herbal) medicinal products.
Waivers can be granted in certain circumstances where pediatric studies are not required or desirable. Deferrals can be granted in certain
circumstances where the initiation or completion of pediatric studies should be deferred until appropriate studies in adults have been
performed. Moreover, this regulation imposes the same obligation from January 26, 2009 on an applicant seeking approval of a new indication,
pharmaceutical form or route of administration for a product already authorized and still protected by a supplementary protection certificate
granted under Regulation (EC) no. 469/2009 or its precursor Regulation (EEC) 1768/92 by a patent that qualifies for the granting of such
a supplementary protection certificate. The pediatric Regulation 1901/2006 also provides, subject to certain conditions, a reward for
performing such pediatric studies, regardless of whether the pediatric results provided resulted in the grant of a pediatric indication.
This reward comes in the form of an extension of six months to the supplementary protection certificate granted in respect of the product,
unless the product is subject to Orphan Drug designation, in which case the 10-year market exclusivity period for such orphan products
is extended to 12 years. If any of the non-centralized procedures for marketing authorization have been used, the six-month extension
of the supplementary protection certificate is only granted if the medicinal product is authorized in all member states. Where the product
is no longer covered by a patent or supplementary protection certificate, the applicant may make a separate application for a Pediatric
Use Marketing Authorization, or PUMA, which, on approval, will provide eight years’ protection for data and 10 years’ marketing
protection for the pediatric results.
Post-authorization Obligations
An authorization to market
a medicinal product in the EU carries with it an obligation to comply with many post-authorization regulations relating to the marketing
and other activities of authorization holders. These include requirements relating to provision of a risk management plan and provision
of annual periodic safety update reports, carrying out of post-authorization efficacy studies and/or post-authorization safety studies,
maintenance of a pharmacovigilance system master file, adverse event reporting, signal detection and management and other pharmacovigilance
activities conducted under an established quality system, advertising, packaging and labelling, patient package leaflets, and distribution.
The regulations frequently operate within a criminal law framework, and failure to comply with the requirements may not only affect the
authorization, but also can lead to financial and other sanctions levied on the company in question and responsible officers. EU pharmacovigilance
legislation has been significantly modified by the Pharmacovigilance Directive, Directive 2010/84/EU which amended the legal framework
of pharmacovigilance for medicines marketed within the EU provided in Regulation (EC) No 726/2004 with respect to EU authorized medicinal
products and in Directive 2001/83/EC with respect to nationally authorized medicinal products (including those authorized through the
mutual recognition and decentralized systems). Furthermore, EU good pharmacovigilance practice (GVP) rules apply. With the amended pharmacovigilance
requirements, the financial and organizational burden on market authorization holders increased significantly, such as the obligation
to maintain a pharmacovigilance system master file that applies to all holders of marketing authorizations granted in accordance with
Directive 2001/83/EC or Regulation (EC) No 726/2004. Marketing authorization holders must furthermore collect data on adverse events associated
with use of the authorized product outside the scope of the authorization. Pharmacovigilance for biological products and medicines with
a new active substance is strengthened by subjecting their authorization to additional monitoring activities.
Another relevant aspect
in the EU regulatory framework is the “sunset clause”: a provision leading to the cessation of the validity of any marketing
authorization if it is not followed by marketing within three years or, if marketing is interrupted for a period of three consecutive
years.
Data Privacy in the EU
The EU has a strict regime
on data privacy under the General Regulation on Data Protection, Regulation 2016/679 (GDPR) that has become applicable on May 25, 2018.
The GDPR as an EU regulation does not have to be implemented into member states’ national law but applies directly in all member
states. It applies to companies with an establishment in the European Economic Area (EEA) that includes the 27 member states of the EU
and Norway, Iceland and Liechtenstein. Furthermore, the GDPR applies to companies not located in the EEA but processing personal data
of individuals located in the EEA (e.g., through online business). The GDPR implements stringent operational requirements for controllers
of personal data, including, for example, obligations to justify the collection, use and other processing of personal data (e.g., based
on the individual’s consent), to notify the individuals concerned about data processing activities, to protect all processed personal
data through appropriate technical and organizational measures, and to implement a data protection compliance management. Furthermore,
the GDPR defines high data security and compliance standards for the transfer of personal data to third countries, including the U.S.
The operational requirements under the GDPR are even stricter in case of sensitive personal data, such as health or genetic data, that
typically have to be stored in a pseudonymized (i.e., key-coded) manner. The GDPR provides that EU member states may in certain areas
deviate from GDPR standards which results in varying laws and regulations at member states level. The applicable data protection laws
in the EEA may limit our ability to share and otherwise process personal data. If our business falls below the GDPR standards, we may
be subject to severe administrative fines (under the GDPR, in the amount of up to 4 % of the total worldwide annual turnover of our
preceding financial year) and suffer significant loss of reputation.
United Kingdom
Effect of Brexit and Changed
Legislation
The withdrawal of the
United Kingdom (UK) from the EU took effect on January 1, 2021 (Brexit), and there are 27 member states remaining in the EU. As of January
1, 2021, the UK is a “third country” with regard to the EU (subject to the terms of the EU UK Trade Agreement) and EU law
ceased to apply directly in the UK. However, the UK has retained the EU regulatory regime as standalone UK legislation with some amendments
to reflect procedural and other requirements with respect to marketing authorizations and other regulatory provisions. Therefore, the
UK regulatory regime with respect to medicines and medical devices is currently similar to EU regulations, but under new legislation,
the Medicines and Medical Devices Act 2021, the UK may adopt changed regulations that may diverge from the EU legislative regime for medicines
and their research, development and commercialization, medical devices and clinical trials. The separate UK regulatory system for these
areas, albeit with transitional recognition procedures in the UK, may lead to additional regulatory costs.
In order to market a
medicinal product in the United Kingdom, a license or marketing authorization must be obtained from the United Kingdom Medicines and Healthcare
Products Regulatory Agency, or MHRA. The United Kingdom legislation includes multiple assessment routes for applications for medicinal
products, including a 150-day national assessment or a rolling review application. Further, and for a transitional period until 31 December
2022, the MHRA may rely on a decision taken by the European Commission on the approval of a new marketing authorization in the centralized
procedure. In addition, the MHRA has the power to have regard to marketing authorizations approved in EU member states.
The MHRA reviews applications
for orphan designation at the time of a marketing authorization application or as part of a subsequent variation to that authorization.
To qualify for orphan designation, a medicine must meet certain criteria in the United Kingdom including that the medicine for the treatment,
prevention or diagnosis of a disease that is life-threatening or chronically debilitating, the prevalence of the condition must not be
more than 5 in 10,000 or it must be unlikely that the marketing would generate sufficient returns to justify investment and no satisfactory
method of diagnosis, prevention or treatment must exist in Great Britain or, if such a method exists the medicine must be of significant
benefit to those affected by the condition. On grant of a marketing authorization with orphan status, the medicinal product will benefit
from up to 10 years of market exclusivity from similar products in the approved orphan indication starting from the date of first approval
of the product in Great Britain.
The United Kingdom has
adopted new legislation, the Medicines and Medical Devices Act 2021 and may make changes to the licensing or authorization of medicines
in the future.
Clinical Trials
As a consequence of Brexit,
the United Kingdom has not adopted the new EU Regulation on Clinical Trials (Reg. EU No. 536/2014), or CTR, that became applicable on
31 January 2022. The rules with respect to clinical trials in the United Kingdom are therefore different from those in the EU and are
based on previous EU legislation. In January 2022, the United Kingdom issued a consultation with respect to changes to clinical trial
legislation.
Data Privacy in the EU
The UK’s data protection
regime is currently based on the GDPR which continues to form part of law in the United Kingdom with some amendments following Brexit
although there is a risk of divergence in the future which may increase our overall data protection compliance cost.
Israel
Israel Ministry of the
Environment — Toxin Permit
In accordance with the
Israeli Dangerous Substances Law - 1993, the Israeli Ministry of the Environment is required to grant a permit in order to use toxic materials.
Because we utilize toxic materials in the course of operation of our laboratories, we were required to apply for a permit to use these
materials. Our current toxin permit will remain in effect until February 2025.
Clinical Testing in Israel
In order to conduct clinical
testing on humans in Israel, special authorization must first be obtained from the ethics committee and the head of the medical center
in which the clinical studies are planned to be conducted, as required under the Guidelines for Clinical Trials in Human Subjects implemented
pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable
legislation. These regulations require authorization by the institutional ethics committee and the head of the medical center. Israeli
Ministry of Health, except for certain circumstances, is required to approve each trial as well. . The institutional ethics committee
must, among other things, evaluate the anticipated benefits that are likely to be derived from the project to determine if it justifies
the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for the
rights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since
we intend to perform a portion of the clinical studies on certain of our therapeutic candidates in Israel, we will be required to obtain
authorization from the ethics committee and head of medical center of each institution in which we intend to conduct our clinical trials,
and in most cases, from the Israeli Ministry of Health.
Other Countries
In addition to regulations
in the United States, the EU and Israel, we are subject to a variety of other regulations governing clinical trials and commercial sales
and distribution of drugs in other countries. Whether or not our products receive approval from the FDA, approval of such products must
be obtained by the comparable regulatory authorities of countries other than the United States before we can commence clinical trials
or marketing of the product in those countries. The approval process varies from country to country, and the time may be longer or shorter
than that required for FDA approval. The requirements governing the conduct of clinical trials and product licensing vary greatly from
country to country.
Related Matters
From time to time, legislation
is drafted, introduced and passed in governmental bodies that could significantly change the statutory provisions governing the approval,
manufacturing and marketing of products regulated by the FDA or EMA and other applicable regulatory bodies to which we are subject. In
addition, regulations and guidance are often revised or reinterpreted by the national agency in ways that may significantly affect our
business and our therapeutic candidates. It is impossible to predict whether such legislative changes will be enacted, whether FDA or
EMA regulations, guidance or interpretations will change, or what the impact of such changes, if any, may be. We may need to adapt our
business and therapeutic candidates and products to changes that occur in the future.
Israeli Government Programs
Israel Innovation Authority
Research
and Development Grants. A number of our therapeutic products
have been financed, in part, through funding from the IIA in accordance with Research Law. Through December 31, 2022 we have received
approximately $22.0 million in aggregate funding from the IIA and have paid the IIA approximately $7.0 million in royalties under our
approved programs. As of December 31, 2022, we have no contingent obligation to the IIA other than for motixafortide. In connection with
the in-licensing of motixafortide from Biokine, and as a condition to IIA consent to the transaction, we agreed to abide by any obligations
resulting from funds previously received by Biokine from the IIA. The contingent liability to the IIA assumed by us relating to this transaction
(which liability has no relation to the funding actually received by us) amounts to $3.7 million as of December 31, 2022. We have a full
right of offset for amounts payable to the IIA from payments that we may owe to Biokine in the future.
Under the Research Law
and the terms of the grants, royalties on the revenues derived from sales of products developed with the support of the IIA were payable
to the Israeli government, generally at the rate of 3% although these terms would be different if we were to receive IIA approval
to manufacture or to transfer the rights to manufacture our products developed with IIA grants outside of Israel. The obligation to make
these payments terminates upon repayment of the amount of the received grants as adjusted for fluctuation in the dollar/shekel exchange
rate, plus interest and any additional amounts as described below.
Pursuant to the Research
Law and the tracks published by the IIA, recipients of funding from the IIA are prohibited from manufacturing products developed using
IIA grants or derived from technology developed with IIA grants outside of Israel and from transferring rights to manufacture such products
outside of Israel. However, the IIA could, in special cases, approve the transfer of manufacture or of manufacturing rights of a product
developed in an approved program or which resulted therefrom, outside of Israel. If we were to receive approval to manufacture or to transfer
the rights to manufacture our products developed with IIA grants outside of Israel, we would be required to pay an increased total amount
of royalties (possibly up to 300% of the grant amounts plus interest), depending on the portion of total manufacturing that was performed
outside of Israel. In addition, the royalty rate applicable to us could possibly increase. Such increased royalties constituted the total
repayment amount required in connection with the transfer of manufacturing rights of IIA-funded products outside Israel. The tracks published
by the IIA do enable companies to seek prior approval for conducting manufacturing activities outside of Israel without being subject
to increased royalties (but resulting in a lower grant amount).
Under the Research Law
and the tracks published by the IIA, we are prohibited from transferring or licensing our IIA-financed technologies, technologies derived
therefrom and related intellectual property rights and know-how outside of Israel except under limited circumstances and only with the
approval of the IIA and generally upon making a payment to the IIA. The required approvals may not be received for any proposed transfer
and, if received, we could be required to pay the IIA an amount calculated in accordance with the applicable formula set out in the tracks
published by the IIA. The scope of the support received, the royalties that we already paid to the IIA, the amount of time that elapsed
between the date on which the technology was transferred and the date on which the applicable project performance period for the IIA grants
was completed, and the sale price and the form of transaction are to be taken into account in order to calculate the amount of the payment
to the IIA. The repayment amount is subject to a maximum limit calculated in accordance with a formula set forth in guidelines published
by the IIA. In addition, any decrease in the percentage of manufacture performed in Israel of any product or technology, as originally
declared in the application to the IIA with respect to the product or technology, could require us to notify, or to obtain the approval
of, the IIA, and could result in increased royalty payments to the IIA of up to 300% of the total grant amounts received in connection
with the product or technology, plus interest, depending on the portion of total manufacturing that was performed outside of Israel.
Approval of the transfer
or license of technology to residents of Israel is required and could be granted in specific circumstances, but only if the recipient
agrees to abide by the provisions of applicable laws, including the restrictions on the transfer of know-how and the obligation to pay
royalties. Additionally, a royalty payment is generally required to be made from the consideration paid for such transfer.
The State of Israel does
not own intellectual property rights in technology developed with IIA funding and there is no restriction on the export of products manufactured
using technology and know-how developed with IIA funding. The technology and know-how are, however, subject to transfer of technology
and manufacturing rights restrictions as described above.
Israel Ministry of Health
Israel’s Ministry
of Health, which regulates medical testing, has adopted protocols that correspond, generally, to those of the FDA and the EMA, making
it comparatively straightforward for studies conducted in Israel to satisfy FDA and the EMA requirements, thereby enabling medical technologies
subjected to clinical trials in Israel to reach U.S. and EU commercial markets in an expedited fashion. Many members of Israel’s
medical community have earned international prestige in their chosen fields of expertise and routinely collaborate, teach and lecture
at leading medical centers throughout the world. Israel also has free trade agreements with the United States and the EU.
C. Organizational Structure
Our corporate structure
consists of BioLineRx Ltd., one wholly owned subsidiary, BioLineRx USA, Inc., and a substantially wholly owned U.K. subsidiary, Agalimmune
Ltd.
D. Property, Plant and
Equipment
We are headquartered
in Modi’in, Israel. We entered into a lease agreement in August 2014, for an aggregate of 1,663 square meters (approximately 17,900
square feet) of space. Monthly rent is NIS 120,300 (approximately $34,000), including maintenance fees and parking. The initial term of
the lease expired in June 2020, and we exercised our option to extend the lease through June 30, 2025. We have the option to extend the
lease for two additional lease periods totaling up to an additional 5 years, each option at a 5% increase to the preceding lease payment
amount.
This facility houses
both our administrative and research operations and our central laboratory. The central laboratory consists of approximately 380 square
meters (approximately 4,200 square feet) and includes a bioanalytical laboratory, a formulation laboratory and a tissue culture laboratory.
Our bioanalytical laboratory has received GLP certification.
In addition, in October,
2022, we entered into a lease agreement for our office in Waltham, Massachusetts for an aggregate of 4,880 square feet of space. Monthly
rent is $23,600. The term of the lease expires in December 2024.
ITEM 4A.
UNRESOLVED STAFF COMMENTS
None.
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following
discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included
elsewhere in this Annual Report on Form 20-F. The following discussion contains forward-looking statements that reflect our plans, estimates
and beliefs. 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 discussed below and elsewhere in this Annual Report on Form 20-F, particularly those
in “Item 3. Key Information — Risk Factors.” Our discussion and analysis for the year ended December 31, 2021 can be
found in our Annual Report on Form 20-F for the fiscal year ended December 31, 2021, filed with the SEC on March 16, 2022, as amended
by Amendment No. 1 to our Annual Report on Form 20-F for the fiscal year ended December 31, 2021, filed with the SEC on September 9, 2022.
(File No. 001-35223).
We
are a pre-commercial-stage biopharmaceutical company focused 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 stem-cell mobilization
and solid tumors, 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. In this regard, we are currently executing
on an independent commercialization plan for motixafortide in stem cell mobilization for autologous bone marrow transplantation in multiple
myeloma patients.
A. Operating Results
History of Losses
Since our inception in
2003, we have generated significant losses in connection with our research and development. As of December 31, 2022, we had an accumulated
deficit of $330.0 million. We may continue to generate losses in connection with the research and development activities relating to our
pipeline of therapeutic candidates. Such research and development activities are budgeted to expand over time and will require further
resources if we are to be successful. As a result, we expect to continue to incur operating losses, which may be substantial over the
next several years, and we expect to need to obtain additional funds to further pursue our research and development programs.
We have funded our operations
primarily through the sale of equity securities (both in public and private offerings), funding received from the 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, the commercialization of our lead therapeutic candidate, motixafortide, if approved, 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, potential revenues that
we may receive from the direct commercialization of 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 December 31, 2022, we held $51.1 million of
cash, cash equivalents and short-term bank deposits.
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 the independent commercialization of motixafortide in stem cell mobilization, if approved
by the FDA, as well as payments from any future out- licensing agreement 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:
Project |
Status |
Expected Near Term Milestones |
motixafortide |
1. |
Phase 3 registration study in autologous stem cell mobilization (GENESIS) completed; top-line results announced
May 2021 showed highly statistically significant evidence across all primary and secondary endpoints favoring motixafortide in combination
with G-CSF (p<0.0001). In addition, the combination was found to be safe and well tolerated. Pharmaco-economic studies showed positive
results regarding the cost-effectiveness of using motixafortide versus both G-CSF alone and plerixafor in combination with G-CSF. NDA
submission made in September 2022, and in November 2022 the FDA accepted for review the NDA with a PDUFA target action date of September
9, 2023. |
1. |
FDA decision on NDA filing expected in third quarter of 2023 |
2. |
Phase 2 investigator-initiated study in first-line metastatic PDAC patients |
2. |
Data from the study is anticipated in 2023* |
3. |
Phase 1b study in patients with ARDS secondary to COVID-19 and other respiratory viral infections
|
3. |
Data from the study is anticipated in 2023* |
4. |
Phase 2b randomized clinical trial in first-line metastatic PDAC patients under collaboration with GenFleet
|
4. |
Initiation of the study is expected in 2023 |
5. |
Phase 1 study for gene therapies in SCD |
5. |
Initiation of the study is expected in 2023 |
AGI-134 |
Phase 1/2a study completed. Results announced December 2022. The study met its primary endpoint of safety
and tolerability. Generation of an immune response and markers of clinical efficacy were assessed as secondary endpoints. |
Determination of next steps for the program in the first half of 2023 |
*These studies are investigator-initiated
studies; therefore, the timelines are ultimately controlled by the independent investigators and are subject to change.
We expect that a large percentage of our research
and development expenses 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 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 as well as the U.S. commercialization of motixafortide, 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:
|
• |
the number of sites included in the clinical trials; |
|
• |
the length of time required to enroll suitable patients; |
|
• |
the number of patients that participate in the clinical trials; |
|
• |
the duration of patient follow-up; |
|
• |
whether the patients require hospitalization or can be treated on an out-patient basis; |
|
• |
the development stage of the therapeutic candidate; and |
|
• |
the efficacy and safety profile of the therapeutic candidate. |
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.
We expect our sales and marketing expenses
to become our most significant cost as we advance our U.S. commercialization plan for motixafortide in stem cell mobilization for autologous
bone marrow transplantation for multiple myeloma patients.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily
of commercialization activities and compensation for employees in commercialization, 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 February 2019, May-June
2020 and September 2022. These fair-value adjustments are highly influenced by our share price at each period end (revaluation date).
Non-operating expense and income also includes issuance expenses of the ATM sales agreements between us and H.C. Wainwright & Co.,
LLC, or HCW, entered into in September 2020 and September 2021, and the pro-rata share of issuance expenses from the placements related
to the warrants. 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 consist of interest
earned on our cash, cash equivalents and short-term bank deposits; interest expense related to our loans from Kreos Capital; 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.
Critical Accounting Policies
and Estimates
Our consolidated financial
statements are prepared in conformity with International Financial Reporting Standards, or IFRS, as issued by the International Accounting
Standards Board, or IASB. In preparing our consolidated financial statements, we make judgements, estimates and assumptions about the
application of our accounting policies which affect the reported amounts of assets, liabilities, revenue and expenses. Our critical accounting
judgements and sources of estimation uncertainty are described in Note 4 to our consolidated financial statements, which are included
elsewhere in this Annual Report.
Revenue Recognition
We recognize revenues
in accordance with International Financial Reporting Standards No. 15, or IFRS 15. IFRS 15, “Revenue from Contracts with Customers,”
which was issued in May 2014, amends revenue recognition requirements and establishes principles for reporting information about the nature,
amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The standard replaces International Auditing
Standard, or IAS, 18, “Revenue” and IAS 11, “Construction Contracts” and related interpretations. The standard
is effective for annual periods beginning on or after January 1, 2018, and we have adopted it as of that date.
IFRS 15 introduces a
five-step model for recognizing revenue from contracts with customers, as follows:
|
• |
identify the contract with a customer; |
|
• |
identify the performance obligations in the contract; |
|
• |
determine the transaction price; |
|
• |
allocate the transaction price to the performance obligations in the contract; and |
|
• |
recognize revenue when (or as) the entity satisfies a performance obligation. |
Accrued Expenses
We are required to estimate
accrued expenses as part of our process of preparing financial statements. This process involves estimating the level of service performed
on our behalf and the associated cost incurred in instances where we have not been invoiced or otherwise notified of actual costs. Examples
of areas in which subjective judgments may be required include costs associated with services provided by contract organizations for preclinical
development, clinical trials and manufacturing of clinical materials. We account for expenses associated with these external services
by determining the total cost of a given study based on the terms of the related contract. We accrue for costs incurred as the services
are being provided by monitoring the status of the trials and the invoices received from our external service providers. In the case of
clinical trials, the estimated cost normally relates to the projected costs of treating the patients in our trials, which we recognize
over the estimated term of the trial according to the number of patients enrolled in the trial on an ongoing basis, beginning with patient
enrollment. As actual costs become known to us, we adjust our accruals.
Investments in Financial
Assets
The primary objective
of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly
increasing risk and loss. Our investments are exposed to market risk due to fluctuations in interest rates, which may affect our interest
income and the fair market value of our investments. We manage this exposure by performing ongoing evaluations of our investments. Due
to the short-term maturities of our investments to date, their carrying value has always approximated their fair value.
A financial asset is
classified in this category if our management has designated it as a financial asset upon initial recognition, because it is managed,
and its performance is evaluated, on a fair-value basis in accordance with a documented risk management or investment strategy. Our investment
policy with regard to excess cash, as adopted by our Board of Directors, is composed of the following objectives: (i) preserving investment
principal; (ii) providing liquidity; and (iii) providing optimum yields pursuant to the policy guidelines and market conditions. The policy
provides detailed guidelines as to the securities and other financial instruments in which we are allowed to invest. In addition, in order
to maintain liquidity, investments are structured to provide flexibility to liquidate at least 50% of all investments within 15 business
days. Information about these assets, including details of the portfolio and income earned, is provided internally on a quarterly basis
to our key management personnel and on a semi-annual basis to the Investment Monitoring Committee of our Board of Directors. Any divergence
from this investment policy requires approval from our Board of Directors.
Stock-based Compensation
We account for stock-based
compensation arrangements in accordance with the provisions of IFRS 2. IFRS 2 requires companies to recognize stock compensation expense
for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions). The cost is recognized
as compensation expense over the life of the instruments, based upon the grant-date fair value of the equity or liability instruments
issued. The fair value of our stock-based compensation grants is computed as of the grant date based on the Black-Scholes model, using
the standard parameters established in that model including estimates relating to volatility of our stock, risk-free interest rates, estimated
life of the equity instruments issued and the market price of our stock. As our ordinary shares are publicly traded on the TASE, we do
not need to estimate their fair market value. Rather, we use the actual closing market price of our ordinary shares on the date of grant,
as reported by the TASE.
Warrants
In connection with a
loan transaction entered into with Kreos Capital in October 2018, we issued a warrant to purchase 63,837 ADSs at an exercise price of
$14.10 per ADS. The warrant is exercisable for a period of ten years from the date of issuance. Since the exercise price was not deemed
to be fixed, the warrant is not qualified for classification as an equity instrument and has therefore been classified as a non-current
financial liability.
In connection with a
public offering we completed in February 2019, we issued warrants to purchase 1,866,667 ADSs at an exercise price of $11.25 per ADS. The
warrants are exercisable for a period of five years from the date of issuance. Since the exercise price was not deemed to be fixed, the
warrant is not qualified for classification as an equity instrument and has therefore been classified as a non-current financial liability.
In connection with a
registered direct offering we completed in May 2020, we issued warrants to purchase 5,142,859 ADSs at an exercise price of $2.25 per ADS
and also issued warrants to purchase 257,143 ADSs at an exercise price of $2.1875 per ADS. The warrants are exercisable for a period of
two and one-half years from the date of issuance. Since the exercise price was not deemed to be fixed, the warrant is not qualified for
classification as an equity instrument and has therefore been classified as a non-current financial liability. The warrants expired in
November 2022.
In connection with a
registered direct offering we completed in June 2020, we issued warrants to purchase 2,510,286 ADSs at an exercise price of $2.25 per
ADS and also issued warrants to purchase 125,514 ADSs at an exercise price of $2.1875 per ADS. The warrants are exercisable for a period
of two and one-half years from the date of issuance. Since the exercise price was not deemed to be fixed, the warrant is not qualified
for classification as an equity instrument and has therefore been classified as a non-current financial liability. The warrants expired
in November 2022.
In connection with an
underwritten public offering we completed in January 2021, we issued warrants to purchase 718,750 ADSs at an exercise price of $3.00 per
ADS. The warrants are exercisable for a period of five years from the date of issuance. The warrants have been classified as shareholder’s
equity.
In connection with a
registered direct offering we completed in September 2022, we issued warrants to purchase 13,636,365 ADSs at an exercise price of $1.15
per ADS. The warrants are exercisable for a period of five years from the date of issuance. Since the exercise price of those warrants
were not deemed to be fixed, the warrants are not qualified for classification as an equity instrument and have therefore been classified
as a non-current financial liability. We also issued warrants to purchase 681,818 ADSs at an exercise price of $1.375 per ADS. The warrants
are exercisable for a period of five years from the date of issuance and have been classified as shareholder’s equity.
Results of Operations
-- Overview
Revenues
We did not record any
revenues for the years ended December 31, 2020, 2021 and 2022.
Cost of revenues
We did not record any
cost of revenues for the years ended December 31, 2020, 2021 and 2022.
Comparison of the Year
Ended December 31, 2022 to the Year Ended December 31, 2021
Research and development
expenses
Research and development expenses for the
year ended December 31, 2022 were $17.6 million, a decrease of $1.9 million, or 9.7% compared to $19.5 million for the year ended December
31, 2021. The decrease resulted primarily from lower expenses related to NDA supporting activities related to motixafortide, as well as
lower expenses associated with the completed motixafortide GENESIS clinical trial, offset by an increase in expenses associated with the
AGI-134 study and increase in payroll and related expenses.
Sales and marketing expenses
Sales and marketing expenses for the year
ended December 31, 2022 were $6.5 million, an increase of $5.5 million, or 550% compared to $1.0 million for the year ended December 31,
2021. The increase resulted primarily from initiation of pre-commercialization activities related to motixafortide, as well as an increase
in market research.
General and administrative
expenses
General
and administrative expenses for the year ended December 31, 2022 were $5.1 million, an increase of $0.8 million, or 18.6% compared to
$4.3 million for the year ended December 31, 2021. The increase resulted primarily from an increase in share-based compensation and small
increases in a number of G&A expenses.
Non-operating income (expense),
net
We recognized net non-operating income of
$5.7 million for the year ended December 31, 2022 compared to net non-operating expenses of $1.8 million for the year ended December 31,
2021. Non-operating income for the year ended December 31, 2022 primarily relates to fair-value adjustments of warrant liabilities on
our balance sheet, offset by warrant offering expenses. Non-operating expenses for the year ended December 31, 2021 primarily relate to
fair-value adjustments of warrant liabilities on our balance sheet and issuance expenses of the ATM.
Financial income (expense),
net
We recognized net financial expenses of $1.5
million for the year ended December 31, 2022 compared to net financial expenses of $0.4 million for the year ended December 31, 2021.
Net financial expenses for the year ended December 31, 2022 period primarily relate to interest paid on loan and losses recorded on foreign
currency (primarily NIS) cash balances due to the strengthening of the US dollar during the period, offset by investment income earned
on our bank deposits. Net financial expenses for the 2021 period primarily relate to interest paid on loans, offset by investment income
earned on our bank deposits.
B. Liquidity and Capital
Resources
Since our inception, we have funded our operations
primarily through public and private offerings of our equity securities, payments received under our strategic licensing and collaboration
arrangements, interest earned on investments and funding from the IIA. As of December 31, 2022, we held $51.1 million of cash, cash equivalents
and short-term bank deposits. We have invested substantially all of our available cash funds in short-term bank deposits.
In September 2021, we entered into an “at-the-market”
offering agreement, or ATM, with H.C. Wainwright, or HCW, pursuant to which we may offer and sell, at our option, up to $25.0 million
of our ADSs through an at-the-market equity program under which HCW agreed to act as sales agent. This agreement replaced a substantially
identical ATM program that we previously had with HCW. As of the issuance date of this report, we have sold 608,651 of our ADSs for total
gross proceeds of approximately $1.4 million under the ATM.
In September 2022, we entered into a loan
agreement with Kreos Capital. Under the Loan Agreement, Kreos Capital will provide the Company with access to term loans in an aggregate
principal amount of up to $40 million in three tranches as follows: (a) a loan in the aggregate principal amount of up to $10 million,
available for drawdown upon closing of the Loan Agreement and until April 1, 2023, (b) a loan in the aggregate principal amount of up
to $20 million, available for drawdown upon achievement of certain milestones and until April 1, 2024, and (c) a loan in the aggregate
principal amount of up to $10 million, available for drawdown upon achievement of certain milestones and until October 1, 2024. We drew
down the initial tranche of $10 million following execution of the agreement in September 2022.
In September 2022, we entered into definitive
agreements with certain institutional investors providing for the issuance and sale in a registered direct offering of 13,636,365 of our
ADSs and warrants to purchase up to an aggregate of 13,636,365 ADSs at a combined purchase price of $1.10 per ADS and associated investor
warrant, for aggregate gross proceeds of approximately $15 million. The transaction closed in September 2022.
Net
cash used in operating activities was $26.2 million for the year ended December 31, 2022, compared with net cash used in operating activities
of $23.6 million for the year ended December 31, 2021. The $2.6 million increase in net cash used in operating activities in 2022 was
primarily the result of an increase in sales and marketing expenses.
Net
cash provided by investing activities was $4.0 million for the year ended December 31, 2022, compared to net cash used in investing activities
of $38.2 million for the year ended December 31, 2021. 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 $20.4 million for the year ended December 31, 2022, compared to net cash provided by financing
activities of $57.7 million for the year ended December 31, 2021. The cash flows in 2022 primarily reflect the underwritten public offering
of our ADSs in September 2022 and the net proceeds of a loan from Kreos Capital, offset by repayments of a previous loan from Kreos Capital.
The cash flows in 2021 primarily reflect the underwritten public offering of our ADSs in January 2021, warrant exercises, and net proceeds
from the ATM Facility, offset by repayments of a loan from Kreos Capital.
We
have incurred accumulated losses in the amount of $330 million through December 31, 2022, and we expect to continue incurring losses and
negative cash flows from operations until our product or products reach commercial profitability. Management monitors rolling forecasts
of our liquidity reserves on the basis of anticipated cash flows and maintains liquidity balances at levels that are sufficient to meet
its needs. The execution of an independent commercialization plan for motixafortide in the United States implies an increased level of
expenses prior to and following launch of the product. However, as is common with FDA approvals of innovative pharmaceutical products,
there is significant uncertainty regarding the receipt of approval, as well as the timing and scope of any potential approval ultimately
received in order to launch commercialization of the product. Therefore, our cash flow projections are subject to various risks and uncertainties
concerning their fulfilment, and these factors and the risk inherent in our operations may cast significant doubt on our ability to continue
as a going concern. Our independent registered public accounting firm has included a “going concern” explanatory paragraph
in its report on our financial statements for the year ended December 31, 2022.
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 current projected
cash requirements into the first half of 2024, we will require additional financing in the future to fund our operations. Additional financing
may not be available on acceptable terms, if at all. We
expect to also continue to seek to finance our operations through other sources, including commercialization, if approved, in the United
States for motixafortide, our lead therapeutic candidate, out-licensing arrangements for the development and commercialization of our
therapeutic candidates or other partnerships or joint ventures, as well as grants from government agencies and foundations. Our
future capital requirements will depend on many factors, including:
|
• |
the progress and costs of our preclinical studies, clinical trials and other research and development activities; |
|
• |
the scope, prioritization and number of our clinical trials and other research and development programs; |
|
• |
the amount of revenues we receive under our collaboration or licensing arrangements; |
|
• |
the costs of the development and expansion of our operational infrastructure; |
|
• |
the costs and timing of obtaining regulatory approval of our therapeutic candidates; |
|
• |
the ability of our collaborators to achieve development milestones, marketing approval and other events or developments under our
collaboration agreements; |
|
• |
the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; |
|
• |
the costs and timing of securing manufacturing arrangements for clinical or commercial production; |
|
• |
the costs of establishing sales and marketing capabilities or contracting with third parties to provide these capabilities for us;
|
|
• |
the costs of acquiring or undertaking development and commercialization efforts for any future product candidates; |
|
• |
the magnitude of our general and administrative expenses; |
|
• |
interest and principal payments on the loan from Kreos Capital; |
|
• |
any cost that we may incur under current and future licensing arrangements relating to our therapeutic candidates; |
|
• |
payments to the IIA; and |
|
• |
the impact of the COVID-19 pandemic and the Russian invasion of Ukraine, which may exacerbate the magnitude of the factors discussed
above. |
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.
Contractual
Obligations
The following table summarizes
our significant contractual obligations at December 31, 2022:
|
|
Total |
|
|
Less than 1 year |
|
|
1-3 years |
|
|
4-5 years |
|
|
More than 5 years |
|
|
|
(in thousands of U.S. dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Car leasing obligations |
|
|
242 |
|
|
|
0 |
|
|
|
242 |
|
|
|
- |
|
|
|
- |
|
Premises leasing obligations |
|
|
2,860 |
|
|
|
569 |
|
|
|
884 |
|
|
|
617 |
|
|
|
790 |
|
Purchase commitments |
|
|
5,908 |
|
|
|
4,692 |
|
|
|
1,196 |
|
|
|
20 |
|
|
|
- |
|
Total |
|
|
9,010 |
|
|
|
5,261 |
|
|
|
2,322 |
|
|
|
637 |
|
|
|
790 |
|
The premises leasing
obligations in the foregoing table include our commitments under the lease agreement for our facility in Modi’in, Israel and our
facility in Waltham, Massachusetts. See “Item 4. Information on the Company — Property, Plant and Equipment.” As for
our facility in Israel, the initial term of the lease began on June 15, 2015 and expired June 2020. We have exercised an option to extend
the lease through June 30, 2025 and have the option to extend the lease for two additional lease periods totaling up to an additional
5 years, each option at a 5% increase to the preceding lease payment amount. The monthly lease fee is $25,500. In addition, we pay building
maintenance charges of $8,700 per month. As for our facility in the US, we entered into a lease agreement in October 2022. The monthly
leased fee is $23,600. The term of the lease expires in December 2024.
The foregoing table
does not include our in-licensing agreements. Under our in-licensing agreements, we are obligated to make certain payments to our licensors
upon the achievement of agreed-upon milestones. We are unable at this time to estimate the actual amount or timing of the costs we will
incur in the future under these agreements; however, we do not expect any material financial milestone obligations to be achieved within
the next 12 months. Some of the in-licensing agreements are accompanied by consulting, support and cooperation agreements, pursuant to
which we are required to pay the licensors a fixed monthly amount, over a period stipulated in the applicable agreement, for their assistance
in the continued research and development under the applicable license. All of our in-licensing agreements are terminable at-will by us
upon prior written notice of 30 to 90 days. We are unable at this time to estimate the actual amount or timing of the costs we will incur
in the future under these agreements. See “Item 4. Information on the Company — Business Overview — In-Licensing Agreements.”
C. Research and Development,
Patents and Licenses
For our research and
development policies, see “Item 4 — Information on the Company — Business Overview — Our Strategy.” For
information regarding patents, see Item 4 — Information on the Company — Intellectual Property.” For information regarding
licenses, see “Item 4 — Information on the Company — Collaboration and Out-Licensing Arrangements” and Item 4
— Information on the Company — In-Licensing Agreements.”
D. Trend Information
We are a pre-commercial
stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development or commercialization
efforts. As such, it is not possible for us to predict with any degree of accuracy any known trends, uncertainties, demands, commitments
or events that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability,
liquidity or capital resources, or that would cause reported financial information to not necessarily be indicative of future operating
results or financial conditions. However, to the extent possible, certain trends, uncertainties, demands, commitments and events are in
this “Operating and Financial Review and Prospects.”
E. Critical Accounting
Estimates
Our consolidated financial
statements are prepared in conformity with IFRS, as issued by the IASB. In preparing our consolidated financial statements, we make judgements,
estimates and assumptions about the application of our accounting policies which affect the reported amounts of assets, liabilities, revenue
and expenses. Our critical accounting judgements and sources of estimation uncertainty are described in Note 4 to our consolidated financial
statements, which are included elsewhere in this Annual Report.
ITEM
6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Executive Officers
and Directors
The following table sets
forth information for our executive officers and directors as of March 21, 2023. Unless otherwise stated, the address for our directors
and officers is c/o BioLineRx Ltd., 2 HaMa’ayan Street, Modi’in 7177871, Israel.
Name |
|
Age |
|
Position(s) |
|
|
|
|
|
Philip A. Serlin, CPA, MBA |
|
62 |
|
Chief Executive Officer |
Mali Zeevi, CPA |
|
47 |
|
Chief Financial Officer |
Ella Sorani, Ph.D. |
|
55 |
|
Chief Development Officer |
Tami Rachmilewitz, M.D. |
|
53 |
|
Chief Medical Officer |
Holly W. May |
|
61 |
|
US President |
Aharon Schwartz, Ph.D. (1) |
|
80 |
|
Chairman of the Board |
Michael J. Anghel, Ph.D. (1)(4) |
|
84 |
|
Director |
Rami Dar, MBA (1)(2)(3)(4) |
|
66 |
|
External Director |
B.J. Bormann, Ph.D. (1)(3) |
|
64 |
|
Director |
Raphael Hofstein, Ph.D. (1)(2)(3) |
|
73 |
|
Director |
Avraham Molcho, M.D. (1)(2)(3) |
|
65 |
|
External Director |
Sandra Panem, Ph.D. (1) |
|
76 |
|
Director |
(1) |
Independent director under applicable Nasdaq Capital Market and SEC rules, as affirmatively
determined by our Board. |
|
|
(2) |
A member of our audit committee. |
|
|
(3) |
A member of our compensation committee. |
|
|
(4) |
A member of our investment committee |
Philip
A. Serlin, CPA, MBA, has served as our Chief Executive
Officer since October 2016. From May 2009 to October 2016, Mr. Serlin served as our Chief Financial and Operating Officer. From January
2008 to August 2008, Mr. Serlin served as the Chief Financial Officer and Chief Operating Officer of Kayote Networks Inc. From January
2006 to December 2007, he served as the Chief Financial Officer of Tescom Software Systems Testing Ltd., an IT services company publicly
traded in both Tel Aviv and London. His background also includes senior positions at Chiaro Networks Ltd. and at Deloitte, where he was
head of the SEC and U.S. Accounting Department at the National Office in Tel Aviv, as well as seven years at the SEC at its Washington,
D.C., headquarters. Mr. Serlin is a CPA and holds a B.Sc. in accounting from Yeshiva University and a Master’s degree in economics
and public policy from The George Washington University.
Mali
Zeevi, CPA, has served as our Chief Financial Officer since
October 2016. Prior to becoming Chief Financial Officer, Ms. Zeevi served as our Senior Director of Finance and Reporting beginning in
2011 and as our Director of Finance and Reporting beginning in 2009. Before joining BioLineRx,
Ms. Zeevi was employed by Tescom Software Systems Testing Ltd., her last position there being Vice President Finance. Ms. Zeevi also served
as a CPA at Kesselman&Kesselman, a member firm of PricewaterhouseCoopers International Limited. She holds a B.A. in business and accountancy
from the College of Management Academic Studies in Israel.
Ella
Sorani, Ph.D., has served as our Chief Development Officer
since January 2021. From February 2017 to December 2020, Dr. Sorani served as our Vice President Research and Development. Before joining
BioLineRx, from 2000 through 2016, Dr. Sorani served in a number of management positions in the global R&D division at Teva Pharmaceutical
Industries Ltd. In her most recent position as Senior Director and Global Project Leader, Dr. Sorani led the development of one of
Teva’s leading innovative late stage compounds. Dr. Sorani holds a B.Sc. in chemistry and an M.Sc. and Ph.D. in pharmacology, all
from Tel Aviv University.
Tami
Rachmilewitz, M.D., has served as our Chief Medical Officer
since January 2023. Dr. Rachmilewitz brings over 15 years of clinical development industry experience to the Company, including overseeing
clinical development programs in oncology, immunology, and neurodegeneration. Previously, she was Senior Vice President of Clinical
Development at VBL Therapeutics, where she led all aspects of the company’s immuno-oncology clinical trial programs and oversaw
its clinical operations and medical affairs teams. Her prior experience also includes clinical development leadership positions
at NeuroDerm Ltd., Teva Pharmaceutical Industries Ltd., and Novartis. During her career, Dr. Rachmilewitz has led early to late
phase clinical development programs, including large multinational pivotal trials. Dr. Rachmilewitz received her Bachelor of Medical Sciences
degree from The Hebrew University of Jerusalem, and her Doctor of Medicine degree from the Hadassah Medical School at the Hebrew University
of Jerusalem, where she also performed her internship and residency in psychiatry. .
Holly
W. May, has served as our US president since September
2022. From June 2022 to August 2022, Ms. May served as our Chief Commercial Officer. Prior to joining BioLineRx, Ms. May served as Chief
Commercial Officer at AVROBIO since September 2019, where she was responsible for building the company’s global commercial organization
and over-arching commercial capabilities, inclusive of driving the development and execution of commercial strategy. Prior to that, she
served as Vice President and Head of Commercial at SOBI, Inc., where she led all aspects of commercial strategy, operations and performance.
Prior to joining SOBI, Ms. May held leadership roles of increasing strategic importance across marketing, operations, sales, and planning
at Sanofi and Genzyme, with her last roles encompassing Vice President in the Genzyme rare disease unit, and Head of Marketing, Operations
and Strategic Planning for Sanofi’s global oncology division. She holds a BA in Zoology from Miami University of Ohio, and an MBA
with a concentration in marketing from the University of Akron.
Aharon
Schwartz, Ph.D., has served as the Chairman of our Board
of Directors since 2004. He served in a number of positions in Teva from 1975 through 2011, the most recent being Vice President, Head
of Teva Innovative Ventures from 2008. Dr. Schwartz is currently a member of the board of directors of Protalix Ltd. (NYSE American:PLX)
and Barcode Ltd. He also works as an independent consultant. Dr. Schwartz received his Ph.D. in organic chemistry from the Weizmann Institute,
his M.Sc. in organic chemistry from the Technion and a B.Sc. in chemistry and physics from the Hebrew University of Jerusalem. In addition,
Dr. Schwartz holds a Ph.D. from the Hebrew University of Jerusalem in the history and philosophy of science.
Michael
J. Anghel, Ph.D., has served on our Board of Directors
since 2010 and on our Investment Monitoring Committee since 2010. From 1977 to 1999, he led the Discount Investment Corporation Ltd. (of
the IDB Group) activities in the fields of technology and communications. Dr. Anghel was instrumental in founding Tevel, one of the first
Israeli cable television operators and later in founding Cellcom Israel Ltd. (NYSE:CEL), the second Israeli cellular operator. In 1999,
he founded CAP Ventures, an advanced technology investment company. From 2004 to 2005, Dr. Anghel served as CEO of DCM, the investment
banking arm of the Israel Discount Bank (TASE:DSCT). Over the years, Dr. Anghel has been involved in founding and managing various technology
enterprises and has served on the Boards of Directors of various major Israeli corporations and financial institutions, many of them publicly
traded in the U.S. and Israel. During the past two years, he completed long term tenures as director on the boards of: Partner Communications
Company, Ltd. (Nasdaq:PTNR, TASE:PTNR), Strauss Group Ltd. (TASE:STRS), and Orbotech Ltd. (Nasdaq:ORBK), He currently serves as director
on the boards of InMode Ltd. (Nasdaq:INMD) and Ellomay Capital Ltd. (NYSE American: ELLO). Prior to launching his business career, Dr.
Anghel served as a full-time member of the faculty of the Recanati Graduate School of Business Administration of the Tel Aviv University,
where he taught finance and corporate strategy. He currently serves as Chairman of the Tel Aviv University’s Executive Program.
Dr. Anghel holds a B.A. (Economics) from the Hebrew University in Jerusalem and an MBA and Ph.D. (Finance) from Columbia University, New
York.
Rami
Dar, MBA, has served as an external director on our Board
of Directors since July 2022. Mr. Dar has served since March 2020 as a board member of Nordia Springs, and since January 2018 as chairman
of Novolog Ltd. (TLV: NVLG). From 2002 to 2019, Mr. Dar served as Chief Executive Officer of Hazera Seeds Ltd. (formerly Hazera Genetics),
a leading global seed company, and prior to that, from 1998 to 2002, served in various management positions in Teva Pharmaceuticals Ltd.,
including as Business Development Executive from 2001 to 2002, Chief Executive Officer of Teva Medical Ltd., from 1998 to 2001, and Chief
Executive Officer of Teva Pharmaceuticals Ltd. Israel from 1995 to 1998. Mr. Dar holds a B.A. in economics and philosophy and an
M.A. in economics, both from the Hebrew University of Jerusalem, Israel, and an Executive M.B.A. from Columbia University, New York, USA.
BJ
Bormann, Ph.D., has served on our Board of Directors
since August 2013 and on our Compensation Committee since 2022. Dr. Bormann currently serves as the Vice President of Translational Science
and Network Alliances at The Jackson Laboratory, a non-profit organization focused on the genetic basis of disease. Dr. Bormann was previously
the Chief Executive Officer of Supportive Therapeutics, LLC, a Boston based company that is developing two molecules for use in the supportive
care of oncology patients. In the past several years Dr. Bormann has held executive positions in several biotechnology companies including
NanoMedical Systems (Austin, Texas), Harbour Antibodies (Rotterdam, The Netherlands) and Pivot Pharmaceuticals (PVTF: OTC listed). Prior
to these engagements, Dr. Bormann was Senior Vice President responsible for world-wide alliances, licensing and business development at
Boehringer Ingelheim Pharmaceuticals, Inc. from 2007 to 2013. From 1996 to 2007, she served in a number of positions at Pfizer, Inc.,
the last one being Vice President of Pfizer Global Research and Development and world-wide Head of Strategic Alliances. Dr. Bormann serves
on the board of directors of various companies, including Xeris BioPharma, Inc (Nasdaq:XERS) and NanoMedical Systems (private). Dr. Bormann
received her Ph.D. in biomedical science from the University of Connecticut Health Center and her B.Sc. from Fairfield University in biology.
Dr. Bormann completed postdoctoral training at Yale Medical School in the department of pathology.
Raphael
Hofstein, Ph.D., has served on our Board of Directors since
2003, our Audit Committee since 2007 and our Compensation Committee since 2012. Dr. Hofstein has served as the President and Chief Executive
Officer of MaRS Innovation (a commercialization company for 15 of Toronto’s universities, institutions and research institutes plus
the MaRS Discovery District) from June 2009 to March 2020. From 2000 through June 2009, Dr. Hofstein was the President and Chief Executive
Officer of Hadasit Medical Research Services and Development Ltd., or Hadasit, the technology transfer company of Hadassah University
Hospitals. He has served as chairman of the board of directors of Hadasit since 2006. Prior to joining Hadasit, Dr. Hofstein was the President
of Mindsense Biosystems Ltd. and the Business Unit Director of Ecogen Inc. and has held a variety of other positions, including manager
of R&D and chief of immunochemistry at the International Genetic Science Partnership. Dr. Hofstein serves on the board of directors
of numerous companies. Dr. Hofstein received his Ph.D. and M.Sc. from the Weizmann Institute of Science, and his B.Sc. in chemistry and
physics from the Hebrew University in Jerusalem. Dr. Hofstein completed postdoctoral training at Harvard Medical School in both the departments
of biological chemistry and neurobiology.
Avraham
Molcho, M.D., has served as an external director on our
Board of Directors and on our Audit Committee since 2010. In addition, Dr. Molcho has served on our Compensation Committee since 2012.
Dr. Molcho is the co-founder of Biolojic Design Ltd., a technology platform that encourages human antibody discovery. In 2012, he
became the co-founder of Ayana Pharma Ltd. (formerly DoxoCure), a privately-held company engaged in the manufacturing of liposome-based
therapeutics. He served as Ayana’s Chief Executive Officer and director until 2019. From 2006 through 2008, Dr. Molcho served as
the Chief Executive Officer and Chairman of Neovasc Medical, a privately-held Israeli medical device company. From 2006 until 2019, Dr.
Molcho was a venture partner at Forbion Capital Partners, a Dutch life sciences venture capital firm. From 2001 through 2006, Dr. Molcho
was a managing director and the head of life sciences of Giza Venture Capital and, in that capacity, was involved in the founding of our
company. He was also the Deputy Director General of Abarbanel Mental Health Center, the largest acute psychiatric hospital in Israel,
from 1999 to 2001. Dr. Molcho holds an M.D. from Tel-Aviv University School of Medicine and an MBA from Tel-Aviv University Recanati Business
School.
Sandra
Panem, Ph.D., has served on our Board of Directors
since February 2014. She is currently a managing partner at Cross Atlantic Partners, which she joined in 2000. She is also co-founder
and President of NeuroNetworks Fund, a not-for-profit venture capital fund focusing on epilepsy, schizophrenia and autism. From 1994 to
1999, Dr. Panem was President of Vector Fund Management, the then asset management affiliate of Vector Securities International. Prior
thereto, Dr. Panem served as Vice President and Portfolio Manager for the Oppenheimer Global BioTech Fund, a mutual fund that invested
in public and private biotechnology companies. Previously, she was Vice President at Salomon Brothers Venture Capital, a fund focused
on early and later-stage life sciences and technology investments. Dr. Panem was also a Science and Public Policy Fellow in economic studies
at the Brookings Institution, and an Assistant Professor of Pathology at the University of Chicago. Dr. Panem currently serves on the
board of directors of Acorda Therapeutics, Inc. (Nasdaq:ACOR). Previously, Dr. Panem served on numerous boards of public and private companies,
including Martek Biosciences (Nasdaq:MATK), IBAH Pharmaceuticals (Nasdaq:IBAH), Confluent Surgical, Molecular Informatics and Labcyte,
Inc. She received a B.S. in biochemistry and a Ph.D. in microbiology from the University of Chicago.
B. Compensation
Employment Agreements
We have entered into
written employment agreements with each of our executive officers, the terms of which are consistent with the provisions of our Compensation
Policy for Executives and Directors, or Compensation Policy, which was approved by our shareholders in July 2022. All of these agreements
contain customary provisions regarding noncompetition, confidentiality of information and assignment of inventions. However, the enforceability
of the noncompetition provisions may be limited under applicable law.
In addition, we have
entered into agreements with each executive officer and director pursuant to which we have agreed to indemnify each of them to the fullest
extent permitted by law to the extent that these liabilities are not covered by directors’ and officers’ insurance. The terms
of these agreements and of our directors’ and officers’ insurance are consistent with the provisions of the Compensation Policy.
Compensation of Directors
and Senior Management
The following table presents
in the aggregate all compensation we paid to all of our directors and senior management as a group for the year ended December 31, 2022.
The table does not include any amounts we paid to reimburse any of such persons for costs incurred in providing us with services during
this period.
|
|
Salaries, fees,
commissions
and bonuses |
|
|
Pension,
retirement,
options and
other similar benefits
|
|
|
|
(in thousands of U.S. dollars) |
|
All directors and senior management as a group, consisting of 12 persons |
|
|
2,165 |
|
|
|
1,310 |
|
In accordance with
the Companies Law, the following table presents information regarding compensation actually received or accrued by our five executive
officers during the year ended December 31, 2022.
Name and Position |
|
Salary |
|
|
Social Benefits(1)
|
|
|
Bonuses |
|
|
Value of Options Granted(2)
|
|
|
All Other
Compensation(3)
|
|
|
Total |
|
|
|
(in thousands of U.S. dollars) |
|
Philip A. Serlin
Chief Executive Officer |
|
|
297 |
|
|
|
80 |
|
|
|
238 |
|
|
|
401 |
|
|
|
20 |
|
|
|
1,036 |
|
Mali Zeevi
Chief Financial Officer |
|
|
193 |
|
|
|
47 |
|
|
|
122 |
|
|
|
102 |
|
|
|
18 |
|
|
|
482 |
|
Abi Vainstein-Haras
Chief Medical Officer (4) |
|
|
211 |
|
|
|
43 |
|
|
|
105 |
|
|
|
102 |
|
|
|
19 |
|
|
|
480 |
|
Ella Sorani
Chief Development Officer |
|
|
218 |
|
|
|
52 |
|
|
|
167 |
|
|
|
102 |
|
|
|
20 |
|
|
|
559 |
|
Holly W. May
President BioLineRx USA, Inc. |
|
|
224 |
|
|
|
- |
|
|
|
104 |
|
|
|
83 |
|
|
|
- |
|
|
|
411 |
|
(1) |
“Social Benefits” include payments to the National Insurance Institute,
advanced education funds, managers’ insurance and pension funds, vacation pay and recuperation pay as mandated by Israeli law.
|
(2) |
Consists of amounts recognized as share-based compensation expense on the Company’s
statement of comprehensive loss for the year ended December 31, 2022. |
(3) |
“All Other Compensation” includes automobile-related expenses pursuant
to the Company’s automobile leasing program, telephone, basic health insurance and holiday presents. |
(4) |
Dr. Vainstein-Haras resigned as of December 31, 2022. |
For additional information
concerning our equity compensation plan, see “— Beneficial Ownership of Executive Officers and Directors — Equity Compensation
Plan.”
C. Board Practices
Board of Directors
According to the Companies
Law, the management of our business is vested in our Board of Directors. However, certain of our committees are required to have a majority
of independent directors. Our Board of Directors may exercise all powers and may take all actions that are not specifically granted to
our shareholders. Our executive officers are responsible for our day-to-day management and have individual responsibilities established
by our Board of Directors. Executive officers are appointed by and serve at the discretion of our Board of Directors, subject to any applicable
employment agreements we have entered into with the executive officers.
Under the Companies Law,
we are not required to have a majority of independent directors. We are required to appoint at least two external directors, unless we
qualify as an Eligible Company (as defined below) and opt to follow an exemption provided under
the Relief Regulations (as defined below). See “— External Directors.”
According to our Articles
of Association, our Board of Directors must consist of at least five and not more than 10 directors, including external directors. Currently,
our Board of Directors consists of seven directors, including two external directors as required by the Companies Law. Pursuant to our
Articles of Association, other than the external directors, for whom special election requirements apply under the Companies Law as detailed
below, our directors are elected at a general or extraordinary meeting of our shareholders and serve on the Board of Directors until they
are removed by the majority of our shareholders at a general or extraordinary meeting of our shareholders or upon the occurrence of certain
events, in accordance with the Companies Law and our Articles of Association. In addition, our Articles of Association allow our Board
of Directors to appoint directors, other than external directors, to fill vacancies on the Board of Directors to serve until the next
general meeting or extraordinary meeting, or earlier if required by our Articles of Association or applicable law. We have held elections
for each of our non-external directors at each annual meeting of our shareholders since our initial public offering in Israel. External
directors are elected for an initial term of three years and may be elected, under certain conditions, to two additional terms, although
the term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including Nasdaq, may be further
extended under certain conditions. External directors may be removed from office only pursuant to the terms of the Companies Law. Our
last annual meeting of shareholders was held in July 2022. For additional information concerning external directors, see “—
External Directors.”
The Companies Law provides
that an Israeli company may, under certain circumstances, exculpate an office holder from liability with respect to a breach of his duty
of care toward the company if appropriate provisions allowing such exculpation are included in its articles of association. See “—
Exculpation, insurance and indemnification of office holders.” Our Articles of Association contain such provisions, and we have
entered into agreements with each of our office holders undertaking to indemnify them to the fullest extent permitted by law, to the extent
that these liabilities are not covered by insurance.
In accordance with the
exemption available to foreign private issuers under applicable Nasdaq rules, we do not follow the requirements of the Nasdaq Rules with
regard to the process of nominating directors, and instead follow Israeli law and practice, in accordance with which our Board of Directors
is authorized to recommend to our shareholders director nominees for election, and, in some circumstances, our shareholders may nominate
candidates for election as directors by the shareholders’ general meeting.
In addition, under the
Companies Law, our Board of Directors must determine the minimum number of directors who are required to have financial and accounting
expertise. Under applicable regulations, a director with financial and accounting expertise is a director who, by reason of his or her
education, professional experience and skill, has a high level of proficiency in and understanding of business accounting matters and
financial statements. He or she must be able to thoroughly comprehend the financial statements of the listed company and initiate debate
regarding the manner in which financial information is presented. In determining the number of directors required to have such expertise,
a company’s board of directors must consider, among other things, the type and size of the company and the scope and complexity
of its operations. Our Board of Directors has determined that we require at least one director with the requisite financial and accounting
expertise. Mr. Rami Dar and Dr. Michael J. Anghel have such financial and accounting expertise.
The term office holder
is defined in the Companies Law as a general manager, chief business manager, deputy general manager, vice general manager, executive
vice president, vice president, or any other person assuming the responsibilities of any of the foregoing positions, without regard to
such person’s title, or a director or any other manager directly subordinate to the general manager. Each person listed above under
“Executive Officers and Directors” is an office holder under the Companies Law.
Chairman
of the Board. Under the Companies Law, a person cannot
hold the role of both chairman of the board of directors and chief executive officer of a company, without shareholder approval by special
majority and for periods of time not exceeding three years each. Furthermore, a person who is directly or indirectly subordinate to a
chief executive officer of a company may not serve as the chairman of the board of directors of that company and the chairman of the board
of directors may not otherwise serve in any other capacity in a company or in a subsidiary of that company other than as a director or
the chairman of the board of directors of such a subsidiary.
DIVERSITY OF THE BOARD OF DIRECTORS
Board
Diversity Matrix (As of March 21, 2023)
Country of Principal Executive Offices |
Israel |
Foreign Private Issuer |
Yes |
Disclosure Prohibited under Home Country Law |
No |
Total Number of Directors |
7 |
Part I: Gender Identity |
Female |
|
Male |
|
Non-Binary |
|
Did
Not Disclose
Gender
|
Directors |
2 |
|
5 |
|
0 |
|
0 |
Part II: Demographic Background |
|
Underrepresented Individual in Home Country Jurisdiction |
0 |
LGBTQ+ |
0 |
Did Not Disclose Demographic Background |
0 |
External Directors
Under Israeli law, the
boards of directors of companies whose shares are publicly traded are, subject to certain exceptions, required to include at least two
members who qualify as external directors. Our external directors are Dr. Avraham Molcho, who was re-elected as an external director by
our shareholders in July 2022 for an additional three-year term and Mr. Rami Dar, who was elected as an external director by our shareholders
in July 2022 for a three-year term.
External directors must
be elected by majority vote of the shares present and voting at a shareholders meeting, provided that either:
|
• |
the majority of the shares that are voted at the meeting, including at least a majority of the shares held by non-controlling shareholders
or shareholders who do not have a personal interest in the election of the external director (other than a personal interest not deriving
from a relationship with a controlling shareholder) who voted at the meeting, excluding abstentions, vote in favor of the election of
the external director; or |
|
• |
the total number of shares held by non-controlling, disinterested shareholders (as described in the preceding bullet point) that
are voted against the election of the external director does not exceed 2% of the aggregate voting rights in the company. |
After an initial term
of three years, external directors may be re-elected to serve in that capacity for up to two additional terms of three years provided
that either (a) the board of directors has recommended such re-election and such re-election is approved by a majority vote at a shareholders’
meeting, subject to the conditions described above for election of external directors, (b) (1) the re-election has been recommended by
one or more shareholders holding at least 1% of the company’s voting rights and is approved by a majority of non-controlling, disinterested
shareholders who hold among them at least 2% of the company’s voting rights; and (2) the external director who has been nominated
in such fashion by the shareholders is not a linked or competing shareholder, and does not have or has not had, on or within the two years
preceding the date of such person’s appointment to serve as another term as external director, any affiliation with a linked or
competing shareholder, or (c) the external director has proposed himself for reappointment and the reappointment was approved by the majority
described in (b)(1) above. The term “linked or competing shareholder” means the shareholder(s) who nominated the external
director for reappointment or a material shareholder of the company holding more than 5% of the shares in the company, provided that at
the time of the reappointment, such shareholder(s) of the company, the controlling shareholder of such shareholder(s) of the company,
or a company under such shareholder(s) of the company’s control, has a business relationship with the company or are competitors
of the company; the Israeli Minister of Justice, in consultation with the Israeli Securities Authority, or ISA, may determine that certain
matters will not constitute a business relationship or competition with the company. The term of office for external directors for Israeli
companies traded on certain foreign stock exchanges, including Nasdaq, may be extended beyond the initial three terms permitted under
the Companies Law indefinitely in increments of additional three-year terms, provided in each case that the following conditions are met:
(a) the audit committee and the board of directors confirm that, in light of the external director’s expertise and special contribution
to the work of the board of directors and its committees, the re-election for such additional period(s) is beneficial to the company;
(b) the re-election is approved by the shareholders by a special majority required for the re-election of external directors; and (c)
the term of office of the external director, and the considerations of the audit committee and the board of directors in deciding to recommend
re-election of the external director for such additional term of office, are presented to the shareholders prior to the vote on re-election.
External directors may be removed from office by the same percentage of shareholders required for their election or by a court, in each
case, only under limited circumstances, including ceasing to meet the statutory qualification for appointment or violating the duty of
loyalty to the company. If an external directorship becomes vacant and there are less than two external directors on the board of directors
at the time, then the board of directors is required under the Companies Law to call a shareholders’ meeting immediately to appoint
a replacement external director. Each committee of the board of directors that exercises the powers of the board of directors must include
at least one external director (unless the company is an Eligible Company and opted to follow the exemption provided under the Relief
Regulations regarding appointment of external directors and composition of the audit and compensation committees). Under the Companies
Law external directors of a company are prohibited from receiving, directly or indirectly, any compensation from the company other than
for their services as external directors pursuant to the provisions and limitations set forth in regulations promulgated under the Companies
Law.
A person may not serve
as an external director if (a) the person is a relative of a controlling shareholder of a company or (b) at the date of the person’s
appointment or within the prior two years, the person, the person’s relatives, entities under the person’s control, the person’s
partner, the person’s employer, or anyone to whom that person is subordinate, whether directly or indirectly, have or have had any
affiliation with (1) a company, (2) a company’s controlling shareholder at the time of such person’s appointment or (3) any
entity that is either controlled by the company or under common control with the company at the time of such appointment or during the
prior two years. If a company does not have a controlling shareholder or a shareholder who holds company shares entitling him to vote
at least 25% of the votes in a shareholders meeting, then a person may not serve as an external director if, such person or such person’s
relative, partner, employer or any entity under the person’s control, has or had, on or within the two years preceding the date
of the person’s appointment to serve as external director, any affiliation with the chairman of the company’s board, chief
executive officer, a substantial shareholder who holds at least 5% of the issued and outstanding shares of the company or voting rights
which entitle him to vote at least 5% of the votes in a shareholders meeting, or the chief financial officer of the company.
The term “affiliation”
includes:
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an employment relationship; |
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• |
a business or professional relationship even if not maintained on a regular basis (excluding insignificant relationships);
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• |
service as an office holder, excluding service as a director in a private company prior to the first offering of its shares to the
public if such director was appointed as a director of the private company in order to serve as an external director following the public
offering. |
The term “relative”
is defined as a spouse, sibling, parent, grandparent or descendant; a spouse’s sibling, parent or descendant; and the spouse of
each of such persons.
In addition, no person
may serve as an external director if that person’s professional activities create, or may create, a conflict of interest with that
person’s responsibilities as a director or otherwise interfere with that person’s ability to serve as an external director
or if the person is an employee of the ISA or of an Israeli stock exchange. Furthermore, a person may not continue to serve as an external
director if he or she received direct or indirect compensation from us for his or her role as a director. This prohibition does not apply
to compensation paid or given for service as an external director in accordance with regulations promulgated under the Companies Law or
amounts paid pursuant to indemnification and/or exculpation contracts or commitments and insurance coverage.
Following the termination
of an external director’s service on a board of directors, such former external director and his or her spouse and children may
not be provided a direct or indirect benefit by the company, its controlling shareholder or any entity under its controlling shareholder’s
control. This includes engagement to serve as an executive officer or director of the company or a company controlled by its controlling
shareholder or employment by, or providing services to, any such company for consideration, either directly or indirectly, including through
a corporation controlled by the former external director, for a period of two years (and for a period of one year with respect to relatives
of the former external director).
If at the time an external
director is appointed all members of the board of directors are of the same gender, the external director must be of the other gender.
A director of one company may not be appointed as an external director of another company if a director of the other company is acting
as an external director of the first company at such time.
The Companies Law provides
that an external director must meet certain professional qualifications or have financial and accounting expertise and that at least one
external director must have financial and accounting expertise. However, if at least one of our other directors (1) meets the independence
requirements of the Exchange Act, (2) meets the standards of the Nasdaq Rules for membership on the audit committee and (3) has financial
and accounting expertise as defined in the Companies Law and applicable regulations, then neither of our external directors is required
to possess financial and accounting expertise as long as both possess other requisite professional qualifications. Our Board of Directors
is required to determine whether a director possesses financial and accounting expertise by examining whether, due to the director’s
education, experience and qualifications, the director is highly proficient and knowledgeable with regard to business-accounting issues
and financial statements, to the extent that the director is able to engage in a discussion concerning the presentation of financial information
in the company’s financial statements, among others. Furthermore, our Board of Directors is also required to take into consideration
a director’s education, experience and knowledge in any of the following: (1) accounting issues and accounting control issues characteristic
to the segment in which the company operates and to companies of the size and complexity of the company, (2) the functions of the external
auditor and the obligations imposed on such auditor, and (3) preparation of financial reports and their approval in accordance with the
Companies Law and the Israeli Securities Law, 5728-1968, or the Israeli Securities Law. The regulations define a director with the requisite
professional qualifications as a director who satisfies one of the following requirements: (1) the director holds an academic degree in
either economics, business administration, accounting, law or public administration; (2) the director either holds an academic degree
in any other field or has completed another form of higher education in the company’s primary field of business or in an area which
is relevant to the office of an external director; or (3) the director has at least five years of experience serving in any one of the
following, or at least five years of cumulative experience serving in two or more of the following capacities: (1) a senior business management
position in a corporation with a substantial scope of business; (2) a senior position in the company’s primary field of business;
or (3) a senior position in public administration. Our Board of Directors has determined that Mr. Rami Dar possesses “accounting
and financial” expertise, and that both of our external directors possess the requisite professional qualifications.
In addition, the Companies
Regulations (Relief for Companies the Shares of which are Registered for Trading Outside of Israel) – 2000, or the Relief Regulations,
provide an exemption for companies the shares of which are listed for trading on specified exchanges outside of Israel, including Nasdaq,
provided that: (i) such company does not have a controlling shareholder; and (ii) the company complies with the requirements of the foreign
securities laws and stock exchange regulations applicable to companies which are incorporated under the laws of such foreign countries
with regard to appointing independent directors and composition of the audit and compensation committees, or collectively, Eligible Companies.
Any Eligible Company which opts to comply with the applicable foreign securities laws and stock exchange regulations shall be exempt from
the following rules under the Companies Law: (i) the requirement to have at least two external directors appointed to serve in a public
company; (ii) that at least one of the external directors is required to have financial and accounting expertise and the rest are required
to have professional expertise; and (iii) that all of the board committees which are empowered and authorized to exercise any of the board’s
authorities must consist of at least one external director. The exemption from these rules under the Relief Regulations requires that
the board be composed of both male and female directors.
Audit Committee
Under the Companies Law,
the board of directors of a public company must appoint an audit committee. The audit committee must be comprised of at least three directors,
including all of the external directors, and one of the external directors must serve as chairperson of the committee. Additionally, a
majority of the members of the committee must be independent directors. The audit committee of a company may not include:
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the chairman of the company’s board of directors; |
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• |
a controlling shareholder or a relative of a controlling shareholder of the company (as each such term is defined in the Companies
Law); or |
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• |
any director employed by the company, by a controlling shareholder of the company or by any other entity controlled by a controlling
shareholder of the company, or any director who provides services to the company, to a controlling shareholder of the company or to any
other entity controlled by a controlling shareholder of the company on a regular basis (other than as a member of the board of directors),
or any other director whose main source of income derives from a controlling shareholder of the company. |
The term “controlling
shareholder” is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, other than
by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of
the voting rights in a company or has the right to appoint the majority of the directors of the company or its general manager.
A majority of the total
number of then-serving members of an audit committee shall constitute a quorum for the transaction of business at the audit committee
meetings, provided, that the majority of the members present at such meeting are unaffiliated directors and at least one of such members
is an external director.
The audit committee of
a publicly traded company must consist of a majority of independent directors. An “independent director” is defined as either
an external director or as a director who meets the following criteria:
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he or she meets the qualifications for being appointed as an external director, except for (i) the requirement that the director
be an Israeli resident (which does not apply to companies such as ours whose securities have been offered outside of Israel or are listed
outside of Israel) and (ii) the requirement for accounting and financial expertise or professional qualifications; and |
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he or she has not served as a director of the company for a period exceeding nine consecutive years. For this purpose, a break of
less than two years in the service shall not be deemed to interrupt the continuation of the service. |
Any person who is not
eligible to serve on the audit committee is further restricted from participating in its meetings and votes, unless the chairman of the
audit committee determines that such person’s presence is necessary in order to present a certain matter, provided however, that
company employees who are not controlling shareholders or relatives of such shareholders may be present in the meetings but not for the
actual votes, and likewise, company counsel or company secretary who are not controlling shareholders or relatives of such shareholders
may be present in the meetings and for the decisions if such presence is requested by the audit committee.
Pursuant to Nasdaq Rules,
our Board of Directors may appoint one director to our Audit Committee who (1) is not an Independent Director as defined in Nasdaq Marketplace
Rule 5605(a)(2), (2) meets the criteria set forth in Section 10A(m)(3) under the Exchange Act, and (3) is not one of our current officers
or employees or “family member,” as defined in Nasdaq Marketplace Rule 5605(a)(2), of an officer or employee, if our Board
of Directors, under exceptional and limited circumstances, determines that the appointment is in our best interests and the best interest
of our shareholders, and our Board of Directors discloses, in our next annual report subsequent to the determination, the nature of the
relationship and the reasons for that determination.
The members of our Audit
Committee are Mr. Rami Dar (Chairperson), Dr. Avraham Molcho and Dr. Raphael Hofstein.
Our Board of Directors
has determined that Mr. Rami Dar (Chairperson) qualifies as an audit committee financial expert as defined by rules of the SEC.
In November 2012, our
Board of Directors adopted an audit committee charter that added to the responsibilities of our Audit Committee under the Companies Law,
setting forth the responsibilities of the audit committee consistent with the rules of the SEC and the Nasdaq Rules, including the following:
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oversight of the company’s independent registered public accounting firm and recommending the engagement, compensation or termination
of engagement of our independent registered public accounting firm to our Board of Directors in accordance with Israeli law; |
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recommending the engagement or termination of the office of our internal auditor; and |
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reviewing and pre-approving the terms of audit and non-audit services provided by our independent auditors. |
Our Audit Committee provides
assistance to our Board of Directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing,
financial reporting, internal control and legal compliance functions by pre-approving the services performed by our independent accountants
and reviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our Audit Committee
also oversees the audit efforts of our independent accountants and takes those actions it deems necessary to satisfy itself that the accountants
are independent of management. Pursuant to the Companies Law, the audit committee of a company shall be responsible for: (i) determining
whether there are delinquencies in the business management practices of a company, including in consultation with an internal auditor
or independent auditor, and making recommendations to the company’s board of directors to improve such practices; (ii) determining
whether to approve certain related party transactions (including compensation of office holders or transactions in which an office holder
has a personal interest and whether such transaction is material or otherwise an extraordinary transaction); (iii) where the company’s
board of directors approves the working plan of the internal auditor, examining such working plan before its submission to the board and
proposing amendments thereto; (iv) examining internal control and the internal auditor’s performance, including whether the internal
auditor has sufficient resources and tools to dispose of his responsibilities (taking into consideration the special needs and size of
a company); (v) examining the scope of the auditor’s work and compensation and submitting its recommendation with respect thereto
to the corporate body considering the appointment thereof (either the board or the general meeting of shareholders); and (vi) establishing
procedures for the handling of employees’ complaints as to the management of the business and the protection to be provided to such
employees. The responsibilities of the audit committee under the Companies Law also include the following matters: (i) the establishment
of procedures to be followed in respect of related party transactions with a controlling shareholder (where such are not extraordinary
transactions), which may include, where applicable, the establishment of a competitive process for such transaction, under the supervision
of the audit committee, or individual, or other committee or body selected by the audit committee, in accordance with criteria determined
by the audit committee; and (ii) to determine procedures for approving certain related party transactions with a controlling shareholder,
which having been determined by the audit committee not to be extraordinary transactions, were also determined by the audit committee
not to be negligible transactions. Under the Companies Law, the approval of the audit committee is required for specified actions and
transactions with office holders and controlling shareholders. See “— Approval of Related Party Transactions under Israeli
Law.”
Pursuant to the Relief
Regulations, companies the shares of which are listed for trading on specified exchanges outside of Israel, including Nasdaq, and which
qualify as Eligible Companies, are exempt from the following rules regarding the audit committee under the Companies Law: (i) the committee
shall be comprised of at least three members, who shall include all of the external directors, and the majority of the members shall be
independent; (ii) certain persons may not be members of the audit committee; (iii) the controlling shareholder or his relatives shall
not be members of the audit committee; (iv) the chairman of the audit committee shall be an external director; (v) a person who is
prohibited from being a member of the audit committee shall not be present at the committee’s meetings; (vi) if the committee also
serves as a financial reports committee, the rules applicable to the financial reports committee shall apply; and (vii) the legal quorum
shall be the majority of the committee members, provided that the majority of directors present are independent, at least one of whom
is an external director.
Compensation Committee
Pursuant to the Companies
Law, the board of directors of an Israeli publicly-traded company is required to appoint a compensation committee comprised of at least
three members, including all of the external directors of a company, and one of the external directors must serve as chairman of the committee.
A majority of the members of the Compensation Committee are required to be external directors and the rest of the members shall be members
whose terms of service are as required under the Companies Law. Such compensation committee may not include:
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the chairman of the company’s board of directors; |
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• |
a controlling shareholder or a relative of a controlling shareholder of the company (as each such term is defined in the Companies
Law); or |
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any director employed by the company, by a controlling shareholder of the company or by any other entity controlled by a controlling
shareholder of the company, or any director who provides services to the company on a permanent basis, to a controlling shareholder of
the company or to any other entity controlled by a controlling shareholder of the company on a regular basis (other than as a member of
the board of directors), or any other director whose main source of income derives from a controlling shareholder of the company.
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A majority of the total
number of then-serving members of a compensation committee shall constitute a quorum for the transaction of business at the compensation
committee meetings. The compensation committee of a publicly-traded company must consist of a majority of external directors.
Pursuant to the Relief
Regulations, companies the shares of which are listed for trading on specified exchanges outside of Israel, including Nasdaq and qualify
as Eligible Companies are exempt from the following rules regarding the compensation committee under the Companies Law: (i) the board
of a public company is required to appoint a compensation committee; and (ii) the compensation committee shall be comprised of at least
three members, all of the external directors shall be members and shall constitute the majority of its members and the rest of the members
shall be members whose terms of service are as required under the Companies Law.
Any person who is not
eligible to serve on the compensation committee is further restricted from participating in its meetings and votes, unless the chairman
of the compensation committee determines that such person’s presence is necessary in order to present a certain matter, provided
however, that company employees who are not controlling shareholders or relatives of such shareholders may be present in the meetings
but not for the actual votes, and likewise, company counsel and secretary who are not controlling shareholders or relatives of such shareholders
may be present in the meetings and for the decisions if such presence is requested by the compensation committee.
The responsibilities
of the compensation committee include the following:
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to make recommendations to the board of directors as to a compensation policy for officers, as well as to recommend once every three
years to extend the compensation policy, subject to receipt of the required corporate approvals; |
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to make recommendations to the board of directors as to any updates to the compensation policy which may be required; |
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to review the implementation of the compensation policy by the company; |
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to approve transactions relating to terms of office and employment of certain company office holders, that require the approval of
the compensation committee pursuant to the Companies Law; and |
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to exempt, under certain circumstances, a transaction relating to terms of office and employment from the requirement of approval
of the shareholders meeting. |
Our Compensation Committee
is comprised of Dr. Raphael Hofstein, Dr. B.J Bormann and our two external directors Mr. Rami Dar, who was elected by our shareholders
as an external director, in July 2022 and Dr. Avraham Molcho who serves as the Chairperson of our Compensation Committee.
Under the Companies Law,
a board of directors of an Israeli publicly-traded company, following the recommendation of the compensation committee, is required to
establish a compensation policy, to be approved by the shareholders of the company, and pursuant to which the terms of office and compensation
of the company’s officer holders will be decided.
A company’s compensation
policy shall be determined based on, and take into account, certain parameters set forth in Section 267B(a) and Parts A and B of Annex
1A of the Companies Law, which were legislated as part of Amendment 20.
Under the Companies Law,
the board of directors of a publicly traded company is obligated, after considering the recommendations of the compensation committee,
to adopt a compensation policy according to which the compensation of the company’s office holders will be determined. The final
adoption of the compensation policy is subject to the approval of the shareholders of the company, and such approval is subject to certain
special majority requirements, as set forth in the Companies Law, pursuant to which one of the following must be met:
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the majority of the votes includes at least a majority of all the votes of shareholders who are not controlling shareholders of the
company or who do not have a personal interest in the compensation policy and participating in the vote; abstentions shall not be included
in the total of the votes of the aforesaid shareholders; or |
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(ii) |
the total of opposing votes from among the shareholders described in subsection (i) above does not exceed 2% of all the voting rights
in the company. |
For this purpose, under
the Companies Law “personal interest” is defined as: (1) a shareholder’s personal interest in the approval of an act
or a transaction of the company, including (i) the personal interest of his or her relative (which includes for these purposes any members
of his/her (or his/her spouse’s) immediate family or the spouses of any such members of his or her (or his/her spouse’s) immediate
family); and (ii) a personal interest of a body corporate in which a shareholder or any of his/her aforementioned relatives serves as
a director or the chief executive officer, owns at least 5% of its issued share capital or its voting rights or has the right to appoint
a director or chief executive officer, but (2) excluding a personal interest arising solely from the fact of holding shares in the company
or in a body corporate.
Nonetheless, even if the shareholders of the
company do not approve the compensation policy, the board of directors of a company may approve the compensation policy, provided that
the compensation committee and, thereafter, the board of directors resolved, based on detailed, documented, reasons and after a second
review of the compensation policy, that the approval of the compensation policy is for the benefit of the company.
In December 2013, a general
meeting of our shareholders approved our first Executive Compensation Policy which had been recommended by our Compensation Committee
and approved by our Board of Directors. At the annual general meeting of our shareholders in 2022, our shareholders approved our
current Compensation Policy. Below is a summary discussion of the main provisions of the Compensation Policy:
The Compensation Policy
includes, among other issues prescribed by the Companies Law, a framework for establishing the terms of office and employment of our office
holders, a recoupment policy and guidelines with respect to the structure of the variable pay of our office holders.
Compensation is considered
performance-based to the extent that a direct link is maintained between compensation and performance and that rewards are consistent
with long-term stakeholder value creation. At the company level, we analyze the overall compensation trends of the market in order to
make informed decisions about our compensation approach.
According to the Compensation
Policy, the fixed components of our office holder compensation will be examined at least every two years and compared to the market. Our
Board of Directors may change the amount of the fixed components for one or more of our office holders after receiving a recommendation
for such from our Compensation Committee, provided such change is within the limits determined by the Compensation Policy. The change
may be made if our Board of Directors concludes that such a change would promote our goals, operating plans and objectives and after taking
into account the business and legal implications of the proposed change and its impact on our internal labor relations. Any such changes
are subject to formal approval by the relevant parties. Our Board of Directors will has the authority to approve a change in the incentive
structure of all executive officers, including but not limited to the chief executive officer, up to an immaterial amount in any one year
(immaterial being defined as a change of up to 5% of an officer’s total compensation). The fixed component of compensation remunerates
the specific role covered and scope of responsibilities. It also reflects the experience and skills required for each position, as well
as the level of excellence demonstrated and the overall quality of the office holder’s contribution to our business. The weighting
of fixed compensation within the overall package is designed to reduce the risk of excessively risk-oriented behavior, to discourage initiatives
focused on short-term results which might jeopardize our mid and long-term business sustainability and value creation, and to allow us
a flexible compensation approach. We offer our employees benefit plans based on common practice in the local labor market of the office
holder.
As for the variable components
of compensation, the types and amounts of such components will be determined with an aim at creating maximum matching between the Compensation
Policy and our operating plan and objectives. Variable components of compensation will be primarily based on measurable long-term criteria.
Nevertheless, we are allowed to base a non-material part of variable compensation on qualitative non-measurable criteria which focus on
the office holder’s contribution to the Company. Our variable compensation aims to remunerate for achievements by directly linking
pay to performance outcomes in the short and long term. To strengthen the alignment of shareholder interests and the interests of management
and employees, performance measurements reflect our actual results overall, as well as of the individual office holder. To support the
aforementioned principles, we provide two types of variable compensation: short-term - annual bonus; and long-term - stock option plans.
Annual bonuses will be
based on achievement of the business goals set out in our annual operating plan approved by the board of directors at the beginning of
each year. The operating plan encompasses all aspects of our activities and as such sets the business targets for each member of the management
team. Consequently, our Compensation Committee and Board of Directors should be able to judge the suitability of a bonus payment by deliberating
retrospectively at year end and comparing actual performance and target achievements against the forecasted operating plan. The annual
bonus mechanism will be directly tied to meeting objectives - both our business objectives and the office holder’s personal objectives.
The Board of Directors’ satisfaction with the officer’s performance will also affect the bonus amount. Annual bonus payments
are subject to the limitations set out in the Compensation Policy and also subject to the discretion of our Compensation Committee and
approval by the Board of Directors. In order to maintain some measure of flexibility, after calculating the compensation amount, the Board
of Directors may exercise discretion about the final amount of the bonus.
Equity-based compensation
may be granted in any form permitted under our share incentive plan in effect from time to time and shall be made in accordance with the
terms of such share incentive plan. Equity-based compensation to office holders shall be granted from time to time and be individually
determined and awarded according to the performance, educational background, prior business experience, qualifications, role and the personal
responsibilities of each officer. The vesting period will generally be four years, with the vesting schedule to be determined in accordance
with market compensation trends. Our policy is to grant equity-based compensation with exercise prices at market value. Furthermore, in
order to create a ceiling for the variable compensation: (1) the aggregate value of annual grants to any one office holder (based on the
Black Scholes calculation as of the date of grant) will be no more than the higher of 2% of our market capitalization at the end of the
measurement period or $1.5 million; and (2) it is our intention that the maximum outstanding equity awards under its share incentive plan
will not exceed 12% of our total fully-diluted share capital. Our Board of Directors may, following approval by our Compensation Committee,
make provisions with respect to the acceleration of the vesting period of any office holder’s awards, including, without limitation,
in connection with a corporate transaction involving a change of control.
We have also established
a defined ratio between the variable and the fixed components of compensation, as well as a maximum amount for all variable components
as of the date on which they are paid (or as of the grant date for non-cash variable equity components), and subject to the limitations
on variable compensation components which are set out in the Compensation Policy. In all events, the weight of all the variable components
(out of the total compensation amount which is to be granted for any year will not be greater than 80% for each office holder and may
vary from one office holder to the other).
In the event of an accounting
restatement, we shall be entitled to recover from office holders’ bonus compensation granted, earned or vested based on a pre-accounting
restatement of our financial results in the amount of the excess over what would have been paid under the accounting restatement, with
a three-year look-back period. However, the compensation recovery will not be triggered in the event of a financial restatement required
due to changes in applicable financial reporting standards.
All compensation arrangements
of office holders are to be approved in the manner prescribed by applicable law. Our Compensation Committee will review the Compensation
Policy on an annual basis, and monitor its implementation, and recommend to our Board of Directors and shareholders to amend the Compensation
Policy as it deems necessary from time to time. The term of the Compensation Policy is three years from the date of its adoption, or July
2, 2022. Following such three-year term, the Compensation Policy, including any revisions recommended by our Compensation Committee and
approved by our Board of Directors, as applicable, will be brought once again to the shareholders for approval.
Nominating Committee
Our Board of Directors
does not currently have a nominating committee, having availed BioLineRx of the exemption available to foreign private issuers under the
Nasdaq Rules. See “Item 16G. Corporate Governance.”
Investment Monitoring
Committee
Our Board of Directors
has established an Investment Monitoring Committee which consists of the following four members: Directors Dr. Michael Anghel (Chairperson)
and Mr. Rami Dar; Ms. Mali Zeevi, our Chief Financial Officer; and Mr. Raziel Fried, our Treasurer and Budgetary Control Director. The
function of the Investment Monitoring Committee includes providing recommendations to our Board of Directors regarding investment guidelines
and performing an on-going review of the fulfillment of established investment guidelines. The Investment Monitoring Committee convenes
for a meeting in accordance with our needs, but in any event at least twice per year.
Internal Auditor
Under the Companies Law,
the board of directors of an Israeli public company must appoint an internal auditor recommended by the audit committee and nominated
by the board of directors. An internal auditor may not be:
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a person (or a relative of a person) who holds more than 5% of the company’s shares; |
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• |
a person (or a relative of a person) who has the power to appoint a director or the general manager of the company; |
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• |
an executive officer or director of the company; or |
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a member of the company’s independent accounting firm. |
The role of the internal
auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. Our internal auditor is
Tali Yaron Adv. (LLB, LLM), a director at Deloitte Israel.
Approval of Related Party
Transactions under Israeli Law
Fiduciary duties of office
holders
The Companies Law imposes
a duty of care and a duty of loyalty on all office holders of a company. The duty of care of an office holder is based on the duty of
care set forth in connection with the tort of negligence under the Israeli Torts Ordinance (New Version) 5728-1968. This duty of care
requires an office holder to act with the degree of proficiency with which a reasonable office holder in the same position would have
acted under the same circumstances.
The duty of care includes
a duty to use reasonable means, in light of the circumstances, to obtain:
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information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position;
and |
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all other important information pertaining to these actions. |
The duty of loyalty requires
an office holder to act in good faith and for the benefit of the company, and includes the duty to:
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• |
refrain from any act involving a conflict of interest between the performance of his or her duties in the company and his or her
other duties or personal affairs; |
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• |
refrain from any activity that is competitive with the business of the company; |
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• |
refrain from exploiting any business opportunity of the company for the purpose of gaining a personal advantage for himself or herself
or others; and |
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disclose to the company any information or documents relating to the company’s affairs which the office holder received as
a result of his or her position as an office holder. |
We may approve an act
performed in breach of the duty of loyalty of an office holder provided that the office holder acted in good faith, the act or its approval
does not harm the company, and the office holder discloses his or her personal interest, as described below.
Disclosure of personal
interests of an office holder and approval of acts and transactions
The Companies Law requires
that an office holder promptly disclose to the company any personal interest that he or she may have and all related material information
or documents relating to any existing or proposed transaction by the company. An interested office holder’s disclosure must be made
promptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. An office
holder is not obliged to disclose such information if the personal interest of the office holder derives solely from the personal interest
of his or her relative in a transaction that is not considered as an extraordinary transaction.
The term personal interest
is defined under the Companies Law to include the personal interest of a person in an action or in the business of a company, including
the personal interest of such person’s relative or the interest of any corporation in which the person or any of his/her relatives
serves as a director or the chief executive officer, owns at least 5% of its issued share capital or its voting rights or has the right
to appoint a director or chief executive officer, but excluding a personal interest stemming solely from the fact of holding shares in
such corporation. A personal interest furthermore includes the personal interest of a person for whom the office holder holds a voting
proxy or the interest of the office holder with respect to his or her vote on behalf of the shareholder for whom he or she holds a proxy
even if such shareholder itself has no personal interest in the approval of the matter. An office holder is not, however, obliged to disclose
a personal interest if it derives solely from the personal interest of his or her relative in a transaction that is not considered an
extraordinary transaction.
Under the Companies Law,
an extraordinary transaction which requires approval is defined as any of the following:
|
• |
a transaction other than in the ordinary course of business; |
|
• |
a transaction that is not on market terms; or |
|
• |
a transaction that may have a material impact on the company’s profitability, assets or liabilities. |
Under the Companies Law,
once an office holder has complied with the disclosure requirement described above, a company may approve a transaction between the company
and the office holder or a third party in which the office holder has a personal interest, or approve an action by the office holder that
would otherwise be deemed a breach of duty of loyalty. However, a company may not approve a transaction or action that is adverse to the
company’s interest or that is not performed by the office holder in good faith.
Under the Companies Law,
unless the articles of association of a company provide otherwise, a transaction with an office holder, a transaction with a third party
in which the office holder has a personal interest, and an action of an office holder that would otherwise be deemed a breach of duty
of loyalty requires approval by the board of directors. Our Articles of Association do not provide otherwise. If the transaction or action
considered is (i) an extraordinary transaction or (ii) an action of an office holder that would otherwise be deemed a breach of duty of
loyalty and may have a material impact on a company’s profitability, assets or liabilities, then audit committee approval is required
prior to approval by the board of directors.
Under the Companies Law,
a transaction with an office holder in a public company regarding his or her terms of office and employment should be determined in accordance
with the company’s compensation policy. Nonetheless, provisions were established that allow a company, under special circumstances,
to approve terms of office and employment that are not in line with the approved compensation policy. The following are required
for the approval of the terms of office or employment of the officers of a public company:
|
• |
A transaction with an office holder in a public company that is neither a director nor the chief executive officer regarding his
or her terms of office and employment requires approval by the (i) compensation committee; and (ii) the board of directors. Approval of
terms of office and employment for such officers which do not comply with the compensation policy may nonetheless be approved subject
to two cumulative conditions: (i) the compensation committee and thereafter the board of directors, approved the terms after having taken
into account the various considerations and mandatory requirements set forth in the Companies Law with respect to office holder compensation,
and (ii) the shareholders of the company have approved the terms by means of the following special majority requirements, or the Special
Majority Requirements, as set forth in the Companies Law, pursuant to which the shareholder approval must either include at least one-half
of the shares held by non-controlling and disinterested shareholders who actively participate in the voting process (without taking abstaining
votes into account), or, alternatively, the total shareholdings of the non-controlling and disinterested shareholders who vote against
the transaction must not represent more than 2% of the voting rights in the company. However, the transaction may still be approved despite
shareholder rejection, provided that a company’s compensation committee and thereafter the board of directors have determined to
approve the proposal, based on detailed reasoning, after having re-examined the terms of office and employment, and taken the shareholder
rejection into consideration. |
|
• |
A transaction with the chief executive officer in a public company regarding his or her terms of office and employment requires approval
by the (i) compensation committee; (ii) the board of directors; and (iii) the shareholders of the company by the Special Majority Requirements.
Approval of terms of office and employment for the chief executive officer which do not comply with the compensation policy may nonetheless
be approved subject to two cumulative conditions: (i) the compensation committee and thereafter the board of directors, approved the terms
after having taken into account the various considerations and mandatory requirements set forth in the Companies Law with respect to office
holder compensation and (ii) the shareholders of the company have approved the terms by means of the Special Majority Requirements, as
detailed above. However, a transaction with a chief executive officer that is not approved by shareholders may still be approved despite
shareholder rejection, provided that a company’s compensation committee and thereafter the board of directors have determined to
approve the proposal, based on detailed reasoning, after having re-examined the terms of office and employment, and taken the shareholder
rejection into consideration. In addition, the compensation committee may exempt the transaction from shareholder approval of terms of
office and employment with a candidate for the office of chief executive officer where such officer has no relationship with the controlling
shareholder or the company, if it has found, based on detailed reasons, that bringing the transaction to the approval of the shareholders
meeting shall prevent the employment of such candidate by the company. Such approval may be given only in respect of terms of office and
employment which are in accordance with the company’s compensation policy. |
|
|
In July 2022, our shareholders voted against a proposal to grant Mr. Philip Serlin, our Chief Executive
Officer, equity compensation that had been determined by our Board of Directors to be reasonable and to comply with the requirements of
our Compensation Policy. In August 2022, our Board of Directors, on recommendation of our Compensation Committee, determined to approve
the proposal based on the criteria set forth above, i.e., the determination was based on detailed reasoning after having re-examined Mr.
Serlin’s terms of employment and having taken into account the rejection by the shareholders. |
|
• |
A transaction with a director who is not the chief executive officer of a public company regarding his or her terms of office and
engagement requires approval by the (i) compensation committee; (ii) the board of directors; and (iii) the shareholders of the company.
Approval of terms of office and employment for directors of a company which do not comply with the compensation policy may nonetheless
be approved subject to two cumulative conditions: (i) the compensation committee and thereafter the board of directors, approved the terms
after having taken into account the various considerations and mandatory requirements set forth in the Companies Law with respect to office
holder compensation and (ii) the shareholders of the company have approved the terms by means of the Special Majority Requirements, as
detailed above. In addition, pursuant to a relief provided under the Companies Regulations (Relief in Interested Party Transactions),
2000, the compensation committee may exempt the transaction from shareholder approval of the terms of office and engagement with a non-executive
director, if the compensation committee and board of directors determined that such terms of office are only for the benefit of the company,
or if the compensation terms of the director do not exceed the maximum compensation paid to external directors pursuant to the applicable
regulations. |
A director who has a
personal interest in a matter that is considered at a meeting of the board of directors or the audit committee may generally not be present
at the meeting or vote on the matter unless a majority of the directors or members of the audit committee have a personal interest in
the matter, or, unless the chairman of the audit committee or board of directors (as applicable) determines that he or she should be present
to present the transaction that is subject to approval. If a majority of the directors have a personal interest in the matter, such matter
also requires approval of the shareholders of the company by the Special Majority Requirements.
Disclosure of personal
interests of a controlling shareholder and approval of transactions
Under the Companies Law,
the disclosure requirements that apply to an office holder also apply to a controlling shareholder of a public company. See “—
Audit Committee” for the general definition of “controlling shareholder” under the Companies Law. In connection with
matters governing: (i) extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal
interest, (ii) certain private placements in which the controlling shareholder has a personal interest, (iii) certain transactions with
a controlling shareholder or relative with respect to services provided to or employment by the company, (iv) the terms of employment
and compensation of the general manager, and (v) the terms of employment and compensation of office holders of the company when such terms
deviate from the compensation policy previously approved by the company’s shareholders, the definition of “controlling shareholder”
also includes shareholders that hold 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights
in the company (and the holdings of two or more shareholders which each have a personal interest in such matter will be aggregated for
the purposes of determining such threshold).
Under the Companies Law,
extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, including a private
placement in which a controlling shareholder has a personal interest, as well as transactions for the provision of services whether directly
or indirectly by a controlling shareholder or his or her relative, or a company such controlling shareholder controls, require the approval
of the audit committee, the board of directors and the shareholders, in that order. Transactions concerning the terms of engagement of
a controlling shareholder or a controlling shareholder’s relative, whether as an office holder or an employee, require the approval
of the compensation committee, the board of directors and the shareholders, in that order. In addition, the approval of such extraordinary
transactions by the shareholders require at least a majority of the shares voted by the shareholders of the company participating and
voting in a shareholders’ meeting, provided that one of the following requirements is fulfilled:
|
• |
at least a majority of the shares held by shareholders who have no personal interest in the transaction and are voting at the meeting
must be voted in favor of approving the transaction, excluding abstentions; or |
|
• |
the shares voted by shareholders who have no personal interest in the transaction who vote against the transaction represent no more
than 2% of the voting rights in the company. |
If such transaction concerns
the terms of office and employment of such controlling shareholder, in his capacity as an office holder or an employee of the company,
such terms of office and employment approved by the compensation committee and board of directors shall be in accordance with the compensation
policy of the company. Nonetheless, the compensation committee and the board of directors may approve terms of office and compensation
of a controlling shareholder which do not comply with the company’s compensation policy, provided that the compensation committee
and, thereafter, the board of directors approve such terms, based on, among other things, the considerations and mandatory requirements
set forth in the Companies Law. Following such approval by the compensation committee and board of directors, shareholder approval would
be required.
To the extent that any
such transaction with a controlling shareholder is for a period extending beyond three years, approval, in the same manner described above,
is required once every three years, unless, with respect to extraordinary transactions with a controlling shareholder or in which a controlling
shareholder has a personal interest, the audit committee determines that the duration of the transaction is reasonable given the circumstances
related thereto.
Duties of shareholders
Under the Companies Law,
a shareholder has a duty to refrain from abusing its power in the company and to act in good faith and in an acceptable manner in exercising
its rights and performing its obligations to the company and other shareholders, including, among other things, voting at general meetings
of shareholders on the following matters:
|
• |
an amendment to the articles of association; |
|
• |
an increase in the company’s authorized share capital; |
|
• |
the approval of related party transactions and acts of office holders that require shareholder approval. |
A shareholder also has
a general duty to refrain from discriminating against other shareholders.
The remedies generally
available upon a breach of contract will also apply to a breach of the above-mentioned duties, and in the event of discrimination against
other shareholders, additional remedies are available to the injured shareholder.
In addition, any controlling
shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any shareholder that, under
a company’s articles of association, has the power to appoint or prevent the appointment of an office holder, or has another power
with respect to a company, is under a duty to act with fairness towards the company. The Companies Law does not describe the substance
of this duty except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach
of the duty to act with fairness, taking the shareholder’s position in the company into account.
Exculpation, insurance
and indemnification of office holders
Under the Companies Law,
a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office
holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty
of care but only if a provision authorizing such exculpation is included in its articles of association. Our Articles of Association include
such a provision. An Israeli company may not exculpate a director from liability arising out of a prohibited dividend or distribution
to shareholders.
An Israeli company may
indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed as an office holder, either
in advance of an event or following an event, provided a provision authorizing such indemnification is contained in its articles of association:
|
• |
financial liability imposed on him or her in favor of another person pursuant to a judgment, settlement or arbitrator’s award
approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then
such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s
activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors
as reasonable under the circumstances, and such undertaking shall detail the abovementioned events and amount or criteria; |
|
• |
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder as a result of an investigation or
proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (1) no
indictment was filed against such office holder as a result of such investigation or proceeding; and (2) no financial liability, such
as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding
or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent;
|
|
• |
a monetary liability imposed on an office holder in favor of an injured party at an Administrative Procedure (as defined below) pursuant
to Section 52(54)(a)(1)(a) of the Securities Law; |
|
• |
expenses incurred by an office holder or certain compensation payments made to an injured party that were instituted against an
office holder in connection with an Administrative Procedure under the Securities Law, including reasonable litigation expenses and reasonable
attorneys’ fees; and |
|
• |
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings
instituted against him or her by the company, on its behalf or by a third party or in connection with criminal proceedings in which the
office holder was acquitted or as a result of a conviction for an offense that does not require proof of criminal intent. |
An
“Administrative Procedure” is defined as a procedure pursuant to chapters H3 (Monetary Sanction by the Israeli Securities
Authority), H4 (Administrative Enforcement Procedures of the Administrative Enforcement Committee) or I1 (Arrangement to prevent Procedures
or Interruption of procedures subject to conditions) to the Securities Law, which may result in sanctions, including monetary sanctions
and certain restrictions on serving as a director or senior officer of a public company for certain periods of time.
An Israeli company may
insure an office holder against the following liabilities incurred for acts performed as an office holder if and to the extent provided
in the company’s articles of association:
|
• |
a breach of duty of loyalty to the company, to the extent that the office holder acted in good faith and had a reasonable basis to
believe that the act would not prejudice the company; |
|
• |
a breach of duty of care to the company or to a third party, including a breach arising out of the negligent (but not grossly negligent)
conduct of the office holder; |
|
• |
a financial liability imposed on the office holder in favor of a third party; |
|
• |
a monetary liability imposed on the office holder in favor of an injured party at an Administrative Procedure
pursuant to Section 52(54)(a)(1)(a) of the Securities Law; and |
|
• |
expenses
incurred by an office holder in connection with an Administrative Procedure instituted against him or her, including reasonable litigation
expenses and reasonable attorneys’ fees.
|
An Israeli company may
not indemnify or insure an office holder against any of the following, and any provision in a company’s articles of association
which allows for any of the following is invalid:
|
• |
a breach of duty of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe
that the act would not prejudice the company; |
|
• |
a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office
holder; |
|
• |
an act or omission committed with intent to derive illegal personal benefit; or |
|
• |
a fine or forfeit levied against the office holder. |
Under
the Companies Law and the regulations promulgated thereunder, exculpation, indemnification and insurance of office holders must be approved
by the compensation committee and the board of directors and must be provided in accordance with the Company’s Compensation Policy
duly adopted by the shareholders.
Our Articles of Association
allow us to indemnify and insure our office holders for any liability imposed on them as a consequence of an act (including any omission)
which was performed by virtue of being an office holder. In November 2011, our shareholders approved (i) the amendment of our Articles
of Association to authorize indemnification and insurance in connection with administrative enforcement proceedings, including without
limitation, the specific amendments to the Israeli Securities Law and the Companies Law described above and (ii) a new form of indemnification
letter for our directors and officers so as to reflect the amendment to our Articles of Association, which new form of letter was also
approved in October 2011 by our Audit Committee and Board of Directors, and in November 2011 by our shareholders. The terms of such agreements
are consistent with the provisions of the Compensation Policy which was approved by our shareholders in July 2022.
Our office holders are
currently covered by a directors’ and officers’ liability insurance policy. The terms of such directors’ and officers’
insurance are consistent with the provisions of the Compensation Policy which was approved by our shareholders in July 2022. The Compensation
Policy authorizes us to purchase insurance policies (including run-off policies) to cover the liability of directors and office holders
that are in office at such time and that shall be in office from time to time, including directors and office holders that may have a
controlling interest in the Company. Such insurance policies are authorized within the following limits: the Compensation Committee has
determined that the premium for each policy, the maximum deductible and the terms of the policy are consistent with market conditions
and not materially affect our profits, property or liabilities. In addition, the Compensation Committee is authorized to increase the
coverage purchased and/or the premium paid for such policies by up to 20% in any year, as compared to the previous year, or cumulatively
for a number of years, without an additional shareholders’ approval to the extent permitted under the Companies Law. See also “Related
Party Transactions — Indemnification Agreements.”
As of the date of this
Annual Report on Form 20-F, except as disclosed in Item 8.A below no claims have been filed under our directors’ and officers’
liability insurance policy, there is no pending litigation or proceeding against any of our directors or officers as to which indemnification
is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director
or officer.
For significant ways
in which our corporate governance practices differ from those required by the Nasdaq Rules, see “Item 16G. Corporate Governance.”
D. Employees
As of December 31,
2022, we had 49 employees, 42 of whom are employed in Israel and 7 of whom in the US. Of our employees, 17 hold M.D. or Ph.D. degrees.
|
|
December 31, |
|
|
|
2020 |
|
|
2021 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
Management and administration |
|
|
9 |
|
|
|
9 |
|
|
|
12 |
|
Research and development |
|
|
27 |
|
|
|
27 |
|
|
|
29 |
|
Sales and marketing |
|
|
2 |
|
|
|
2 |
|
|
|
8 |
|
Total |
|
|
38 |
|
|
|
38 |
|
|
|
49 |
|
While none of our employees
are party to any collective bargaining agreements, in Israel we are subject to certain labor statutes and national labor court precedent
rulings, as well as to certain provisions of the collective bargaining agreements between the Histadrut (General Federation of Labor in
Israel) and the Coordination Bureau of Economic Organizations (including the Industrialists’ Associations) which are applicable
to our employees by virtue of expansion orders issued in accordance with relevant labor laws by the Israel Ministry of Labor and Welfare,
and which apply such agreement provisions to our employees even though they are not directly part of a union that has signed a collective
bargaining agreement. The laws and labor court rulings that apply to our employees principally concern the minimum wage laws, procedures
for dismissing employees, determination of severance pay, leaves of absence (such as annual vacation or maternity leave), sick pay and
other conditions for employment. The expansion orders which apply to our employees principally concern the requirement for length of the
workday and work week, mandatory contributions to a pension fund, annual recreation allowance, travel expenses payment and other conditions
of employment. We generally provide our employees with benefits and working conditions beyond the required minimums.
We have never experienced
any employment-related work stoppages and believe our relationship with our employees is good.
E. Share Ownership
The following table sets
forth information regarding the beneficial ownership of our outstanding ordinary shares as of March 21, 2023 of each of our directors
and executive officers individually and as a group.
|
|
Number of |
|
|
|
|
|
|
Ordinary Shares |
|
|
|
|
|
|
Beneficially |
|
|
Percent of |
|
|
|
Held |
|
|
Class |
|
|
|
|
|
|
|
|
Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
Aharon Schwartz(1)
|
|
|
4,425,000 |
|
|
|
* |
|
Michael J. Anghel(2)
|
|
|
720,000 |
|
|
|
* |
|
B.J. Bormann(3) |
|
|
720,000 |
|
|
|
* |
|
Rami Dar(4) |
|
|
270,000 |
|
|
|
|
|
Raphael Hofstein(5)
|
|
|
720,000 |
|
|
|
* |
|
Avraham Molcho(6)
|
|
|
720,000 |
|
|
|
* |
|
Sandra Panem(7) |
|
|
720,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
Executive officers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip A. Serlin(8)
|
|
|
7,960,321 |
|
|
|
* |
|
Mali Zeevi(9) |
|
|
2,421,471 |
|
|
|
* |
|
Ella Sorani(10) |
|
|
2,171,580 |
|
|
|
* |
|
Tami Rachmilewitz, M.D.(11)
|
|
|
- |
|
|
|
* |
|
Holly May (12) |
|
|
- |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group (12 persons)(13)
|
|
|
20,848,372 |
|
|
|
1.6 |
% |
*
Less than 1.0%.
(1) |
Includes 4,425,000 ordinary shares issuable upon exercise of outstanding options within
60 days of March 21, 2023. Does not include 810,000 ordinary shares issuable upon exercise of outstanding options that are not exercisable
within 60 days of March 21, 2023. |
(2) |
Includes 720,000 ordinary shares issuable upon exercise of outstanding options within
60 days of March 21, 2023. Does not include 810,000 ordinary shares issuable upon exercise of outstanding options that are not exercisable
within 60 days of March 21, 2023. |
(3) |
Includes 720,000 ordinary shares issuable upon exercise of outstanding options within
60 days of March 21, 2023. Does not include 810,000 ordinary shares issuable upon exercise of outstanding options that are not exercisable
within 60 days of March 21, 2023. |
(4) |
Includes 270,000 ordinary shares issuable upon exercise of outstanding options within
60 days of March 21, 2023. Does not include 810,000 ordinary shares issuable upon exercise of outstanding options that are not exercisable
within 60 days of March 21, 2023. |
(5) |
Includes 720,000 ordinary shares issuable upon exercise of outstanding options within
60 days of March 21, 2023. Does not include 810,000 ordinary shares issuable upon exercise of outstanding options that are not exercisable
within 60 days of March 21, 2023. |
(6) |
Includes 720,000 ordinary shares issuable upon exercise of outstanding options within
60 days of March 21, 2023. Does not include 810,000 ordinary shares issuable upon exercise of outstanding options that are not exercisable
within 60 days of March 21, 2023. |
(7) |
Includes 720,000 ordinary shares issuable upon exercise of outstanding options within
60 days of March 21, 2023. Does not include 810,000 ordinary shares issuable upon exercise of outstanding options that are not exercisable
within 60 days of March 21, 2023. |
(8) |
Includes 7,960,321 issued ordinary shares upon exercise of outstanding options within
60 days of March 21, 2023. Does not include 8,517,853 ordinary shares issuable upon exercise of outstanding equity instruments that are
not exercisable within 60 days of March 21, 2023. |
(9) |
Includes 2,421,471 ordinary shares issuable upon exercise of outstanding options within
60 days of March 21, 2023. Does not include 1,942,713 ordinary shares issuable upon exercise of outstanding equity instruments that are
not exercisable within 60 days of March 21, 2023. |
(10) |
Includes 2,171,580 ordinary shares issuable upon exercise of outstanding options within
60 days of March 21, 2023. Does not include 2,018,479 ordinary shares issuable upon exercise of outstanding equity instruments that are
not exercisable within 60 days of March 21, 2023. |
(11) |
Does not include 1,740,000 ordinary shares issuable upon exercise of outstanding equity
instruments that are not exercisable within 60 days of March 21, 2023. |
(12) |
Does not include 8,566,005 ordinary shares issuable upon exercise of outstanding equity
instruments that are not exercisable within 60 days of March 21, 2023. |
|
|
(13) |
Includes 20,848,372 ordinary shares issuable upon exercise of outstanding options
within 60 days of March 21, 2023. Does not include 28,455,050 ordinary shares issuable upon exercise of outstanding equity instruments
that are not exercisable within 60 days of March 21, 2023. |
Change in Control
To our knowledge, (i)
we are not directly or indirectly owned or controlled by another corporation, by any foreign government or by any other natural or legal
person severally or jointly, except as disclosed in the above table regarding our major shareholders, and (ii) there are no arrangements
which would result in our change in control at a subsequent date.
Significant Changes in
the Ownership of Major Shareholders
To our knowledge, other
than as disclosed in the table above, our other filings with the SEC and this Annual Report, there has been no significant change in the
percentage ownership held by any major shareholder since January 1, 2019.
Major Shareholders Voting
Rights
Our major shareholders
do not have different voting rights.
Record Holders
Bank of New York Mellon,
or BNY, is the holder of record for the Company’s American Depositary Receipt program, pursuant to which each ADS represents 15
ordinary shares. As of December 31, 2022, BNY held 815,854,571 ordinary shares representing 88.4% of our issued share capital held at
that date. Certain of these ordinary shares were held by brokers or other nominees. As a result, the number of holders of record or registered
holders in the United States is not representative of the number of beneficial holders or of the residence of beneficial holders.
Equity Compensation Plan
2003 Share Incentive Plan
In 2003, we adopted the
BioLineRx Ltd. 2003 Share Incentive Plan, or the Plan. The Plan provides for the granting of options, ordinary shares, restricted stock
units and performance stock units to our directors, employees, consultants and service providers, and to the directors, employees, consultants
and service providers of our subsidiaries and affiliates. The Plan provides for equity grants to be made at the determination of our Board
of Directors in accordance with applicable law. As of March 15, 2022, there were 43.7 million ordinary shares issuable upon the exercise
of outstanding equity grants under the Plan.
In August 2013, our Board
of Directors approved amendments to the Plan to take into account changes in laws and regulations that had occurred since its adoption
and to extend the term of the plan until November 2023. In January 2016, our Board of Directors approved amendments to the Plan in order
to permit the granting of restricted stock units, or RSUs, and performance stock units, or PSUs, to eligible grantees.
From time to time,
our Board of Directors has approved an increase in the number of shares reserved for the purpose of equity grants pursuant to the Plan.
As of March 21, 2023, the number of shares so reserved was 72.4 million.
Administration of Our
Plan
Our Plan is administered
by our Board of Directors for the purposes of making equity grants and approving the terms of those grants, including, in the case of
options, exercise price, method of payment, vesting schedule, acceleration of vesting and the other matters necessary in the administration
of these plans. Equity grants made under the Plan to eligible employees and office holders are made under Section 102 of the Israel Income
Tax Ordinance pursuant to which the securities granted must be allocated or issued to a trustee and be held in trust for two years from
the date upon which such grant was made, provided that securities granted prior to January 1, 2006, or the ordinary shares issued upon
exercise of options, are subject to being held in trust for two years from the end of the year in which the securities are granted. Under
Section 102, any tax payable by an employee from the grant of securities or the exercise of options is deferred until the transfer of
the securities (or ordinary shares issued upon the exercise of options) by the trustee to the employee or upon the sale of the securities
or ordinary shares, as the case may be, and gains may qualify to be taxed as capital gains at a rate equal to 25%, subject to compliance
with specified conditions.
Options granted under
the Plan generally vest over four years, and they expire 10 years from the grant date. If we terminate an employee for cause, all of the
employee’s vested and unvested options expire immediately from the time of delivery of the notice of discharge, unless determined
otherwise by the Audit Committee or the Board of Directors. Upon termination of employment for any other reason, including due to death
or disability of the employee, vested options may be exercised within three months of the termination date, unless otherwise determined
by the Compensation Committee or the Board of Directors. Vested options which are not exercised and unvested options return to the pool
of reserved ordinary shares under the Plan for reissuance. The right to receive ordinary shares pursuant to PSUs granted under the Plan
will vest upon the achievement by BioLineRx of certain performance goals to be established by the Board of Directors.
In the event of a merger,
consolidation, reorganization or similar transaction or our voluntary liquidation or dissolution, all of our unexercised vested equity
grants and any unvested equity grants will be automatically terminated. However, in the event of a change of control, or merger, consolidation,
reorganization or similar transaction resulting in the acquisition of at least 50% of our voting power, or the sale or transfer of all
or substantially all of our outstanding shares assets, the equity grants then outstanding may be assumed or substituted for an appropriate
number of shares of each class of shares or other securities and/or assets of the successor company in such transaction (or a parent or
subsidiary or another affiliate of such successor company) as were distributed to our shareholders in respect of the transaction. In addition
to the foregoing, our Board of Directors has approved the inclusion in the option agreements of the Company’s officers of a provision
for accelerated vesting of options if both a change of control of the Company occurs and, following such change of control, the officer’s
employment is terminated or there is a significant demotion in the officer’s new job or position.
To our knowledge the
significant changes in the percentage of ownership held by our major shareholders reported in our Annual Reports on Form 20-F during the
past three year have been the decrease in 2020 below 5% in the percentage ownership held by BVF Partners L.P. and Senvest Management,
LLC.
F. Disclosure of a registrant’s
action to recover erroneously awarded compensation.
Not applicable.
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
Except as set forth in
“Item 6. Directors, Senior Management and Employees—E. Share Ownership,” to the best of our knowledge, no other person
who we know beneficially owns 5.0% or more of the Company’s ordinary shares outstanding as of March 21, 2023.
B. Related Party Transactions
Agreements with Directors
and Officers
Employment Agreements
We have entered into
employment agreements with each of our executive officers. See “Item 6. Directors, Senior Management and Employees — Compensation
of Directors and Senior Management.”
Indemnification Agreements
Our Articles of Association
and Compensation Policy approved by our shareholders permit us to exculpate, indemnify and insure our directors and office holders to
the fullest extent permitted by the Companies Law. We have entered into agreements with each of our office holders undertaking to indemnify
them to the fullest extent permitted by law, including with respect to liabilities resulting from this offering to the extent that these
liabilities are not covered by insurance. We have obtained directors’ and officers’ insurance for each of our officers and
directors. See “Item 6. Directors, Senior Management and Employees — Board Practices — Exculpation, insurance and indemnification
of office holders.”
GSAP Agreement
On February 9, 2023,
we entered into an agreement with GSAP Biomed Ltd., or GSAP, pursuant to which GSAP will provide ongoing quality assurance support services
to us. Rami Dar, one of the external directors of our board of directors who also serves as the chairman of our audit committee and as
a member of our compensation committee and investment committee, is a non-executive chairman of Novolog Ltd., which is the parent company
of GSAP. Under the agreement, we agreed to pay GSAP NIS 46,000/month (approximately $12,667 per month) as compensation for the services
provided thereunder.
C. Interests of Experts
and Counsel
Not applicable.
ITEM 8.
FINANCIAL INFORMATION
A. Consolidated Statements
and other Financial Information
See “Item 18. Financial
Statements.”
Legal Proceedings
On January 5, 2023, a
putative securities class action complaint captioned Winston Peete v. BioLineRx Ltd. and Philip A. Serlin (Case no: Case 2:23-cv-00041
was filed in the U.S. District Court for the District of New Jersey by purported shareholder Winston Peete, naming us and our chief executive
officer, Mr. Serlin, as defendants. The complaint asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
and Rule 10b-5 promulgated thereunder, claiming that the defendants made false and materially misleading statements and failed to disclose
material adverse facts pertaining to our financial position with regard to the development of motixafortide and that we would require
a loan and a securities offering to commercialize motixafortide. The complaint asserts a putative class period of February 23, 2021 to
September 19, 2022, inclusive and seeks certification as a class action and an unspecified amount of damages. In addition, on February
5, 2023, we received a lawsuit and motion to approve the lawsuit as a class action lawsuit pursuant to the Class Action Lawsuits Law 5766-2006
which was filed against us and Mr. Serlin in the Tel Aviv District Court (Economic Division). The motion asserts substantially similar
allegations as the U.S. action described above. The motion asserts to define the class as all shareholders who held the company's securities
traded on the Tel Aviv Stock Exchange, on September 19, 2022 and the class period relates to the company's statements between February
23, 2021, and September 19, 2022. The total amount claimed, if the lawsuit is certified as a class action, as set forth in the motion
is approximately NIS 113.5 million (approximately $32 million). The outcome of both legal proceedings is uncertain at this point. Based
on an initial evaluation of the lawsuits, we believe that they are without merit and intend to vigorously defend ourselves against such
actions.
Dividend Distributions
We have never declared
or paid cash dividends to our shareholders. Currently we do not intend to pay cash dividends. We currently intend to reinvest any future
earnings in developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion
of our Board of Directors and will depend on a number of factors, including future earnings, our financial condition, operating results,
contractual restrictions, capital requirements, business prospects, applicable Israeli law and other factors our Board of Directors may
deem relevant.
B. Significant Changes
None.
ITEM
9. THE OFFER AND LISTING
A. Offer and Listing
Details
Our ADSs have been trading
on Nasdaq under the symbol “BLRX” since July 2011. Our ordinary shares have been trading on the TASE under the symbol “BLRX”
since February 2007.
B. Plan of Distribution
Not applicable.
C. Markets
Our ADSs trade on Nasdaq
under the symbol “BLRX.” Our ordinary shares trade on the TASE under the symbol “BLRX.”
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
ITEM 10.
ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Articles of Association
A copy of our Articles
of Association is attached as Exhibit 2.1 to this Annual Report. Other than as disclosed below, the information called for by this Item
is set forth in Exhibit 2.2 to this Annual Report and is incorporated by reference into this Annual Report.
C. Material Contracts
For a discussion of our
out-licensing and in-licensing agreements, see “Item 4. Information on the Company.” The following are summary descriptions
of certain other material contracts to which we are a party. The descriptions provided below do not purport to be complete and are qualified
in their entirety by the complete agreements, which are attached as exhibits to this Annual Report on Form 20-F.
Loan Agreements with Kreos
Capital
In October 2018, we entered
into a loan agreement with Kreos Capital. The purpose of the loan was to finance the $10 million payment made by the Company to Biokine
as part of the consideration for amending the license agreement for motixafortide. See “Item 4. Information on the Company —
Business Overview — In-Licensing Agreements — motixafortide.” The loan had a 12-month interest-only period, which concluded
in September 2019, followed by a 36-month repayment period beginning in October 2019. Borrowings under the loan bore interest at a fixed
rate of 9.5% per annum. As security for the loan, Kreos Capital received a first-priority, secured interest in all Company assets, including
intellectual property. In connection with providing the loan, Kreos Capital received a warrant to purchase 63,837 ADSs at an exercise
price of $14.10 per ADS. The warrant is exercisable for a period of ten years from the date of issuance. In September 2022, this loan
was repaid in full.
In
September 2022, we entered into a new loan agreement with Kreos Capital, or the Loan Agreement. Under the Loan Agreement, Kreos Capital
will provide us with access to term loans in an aggregate principal amount of up to $40 million in three tranches as follows: (a) a loan
in the aggregate principal amount of up to $10 million, available for drawdown upon closing of the Loan Agreement and until April 1, 2023,
or Tranche A, (b) a loan in the aggregate principal amount of up to $20 million, available for drawdown upon achievement of certain milestones
and until April 1, 2024, or Tranche B, and (c) a loan in the aggregate principal amount of up to $10 million, available for drawdown upon
achievement of certain milestones and until October 1, 2024, or Tranche C and together with Tranche A and Tranche B, the Loans. We drew
down the initial tranche of $10 million following execution of the agreement in September 2022.
We
intend to use the proceeds of the Loans, together with cash on-hand, to facilitate the commercial launch of motixafortide in autologous
stem cell mobilization for multiple myeloma patients, as well as for general corporate purposes.
Until
July 1, 2023, Tranche A is payable on an interest-only basis, and thereafter in up to 36 equal monthly payments of principal and interest
accrued thereon, subject to extension of the interest-only payment period if certain milestones are met, with a corresponding reduction
in the principal and interest payment period through July 1, 2026. Until July 1, 2024, Tranche B is payable on an interest-only basis,
and thereafter in up to 36 equal monthly payments of principal and interest accrued thereon, subject to extension of the interest-only
payment period if certain milestones are met, with a corresponding reduction in the principal and interest payment period through July
1, 2027. Until January 1, 2025, Tranche C is payable on an interest-only basis, and thereafter in up to 30 equal monthly payments of principal
and interest accrued thereon, subject to extension of the interest-only payment period if certain milestones are met, with a corresponding
reduction in the principal and interest payment period through July 1, 2027.
Interest
on each tranche of the Loans accrues at a fixed rate of 9.5% per annum from the drawdown date until repayment in full of the tranche.
In addition, the Lender will be entitled to mid-to-high single-digit royalties on motixafortide sales for stem cell mobilization, up to
$13.5 million.
We
may prepay all, but not less than all, of the outstanding balance of any of the Loans. In case of prepayment within 12 months of a drawdown,
we will pay a sum equal to (i) the principal balance then outstanding, and (ii) an aggregate of all remaining interest payments that would
have been paid on the Loans throughout the remainder of the term of the Loan, discounted back at the secured overnight financing rate
administered by the Federal Reserve Bank of New York. In case of prepayment within 13-24 months of the effective date of the Loan Agreement,
we will pay a sum equal to 102% of principal balance then outstanding. In case of prepayment within 25-36 months of the effective date
of the Loan Agreement, we will pay a sum equal to 101% of the principal balance then outstanding. In connection with any prepayment, we
will also pay an end of loan payment equal to 5% of the amount of each tranche drawn down upon the final repayment of each such tranche,
or the End of Loan Payment, and any other unpaid fees or costs, if any. In addition, if we prepay the Loans in the first 24 months from
the first drawdown and, in the event that the combined cash return to Kreos Capital from the drawn down Loans under the Loan Agreement,
including prepayment amounts and any revenue based payments, or the Combined Loan Cash Economics, do not reach 1.3 times the aggregate
amount of drawn down Loans, or the Minimum Cash Return Amount, we shall pay Kreos Capital an additional cash amount equal to the difference
between the Combined Loan Cash Economics paid or payable and the Minimum Cash Return Amount.
The
Loans are subject to mandatory accelerated repayment provisions that require repayment of the outstanding principal amount of the Loans,
and all accrued and unpaid interest thereon, upon the occurrence of an event of default, subject to certain limitations and cure rights.
In addition, in the event of acceleration upon an event of default (a) we will be required to pay the aggregate of the monthly interest
payments scheduled to be paid by the Company for the period from the date of acceleration to the expiry of the applicable Loan, in each
case discounted from the applicable monthly repayment date to the date of prepayment at the rate of 2% per annum and (b) the End of Loan
Payment.
In
connection with entering into the Loan Agreement, we agreed to pay the Lender a fee of up to $30,000 plus value-added-tax for legal and
other ancillary fees. Pursuant to the Loan Agreement, upon the execution of the agreement, we agreed to pay Kreos Capital a transaction
fee equal to $500,000, and, upon the drawdown of each tranche of the Loans, we shall pay Kreos Capital an advance payment of the last
month’s payment of principal and interest for such tranche. Additionally, we will be required to pay an End of Loan Payment.
Outstanding
borrowings under the Loan Agreement are secured by (a) a first priority fixed charge over certain assets and intellectual property of
the Company as well as all shares held by the Company in BioLineRx USA, Inc, or the Fixed Charge, (b) a first priority floating charge
over all our assets as of the date of the Loan Agreement or thereafter acquired, other than the assets charged under the Fixed Charge
or as otherwise specifically excluded pursuant to the terms of the floating charge, and (c) subject to the provisions of the Fixed Charge,
a security interest in our intellectual property.
The Loan Agreement contains customary representations
and warranties, indemnification provisions in favor of the Lender, events of default and affirmative and negative covenants, including,
among others, covenants that limit or restrict the Company’s ability to, among other things, incur additional indebtedness, merge
or consolidate, make acquisitions, pay dividends or other distributions or repurchase equity, and dispose of assets, in each case subject
to certain exceptions. In addition, the Company is required to maintain a cash balance of at least $10 million. The Company has also granted
Kreos Capital certain information rights.
Collaboration Agreement
with GenFleet
In June 2022, we entered
into a collaboration agreement with GenFleet, an immuno-oncology focused biopharmaceutical company based in China, to advance motixafortide
through a randomized Phase 2b clinical trial in PDAC. Under the terms of the agreement, GenFleet will fully fund, design and execute a
randomized Phase 2b clinical trial that will enroll approximately 200 first-line metastatic PDAC patients in China. This randomized controlled
study will aim to evaluate the superiority of motixafortide in combination with an anti-PD-1 and chemotherapy compared to chemotherapy
alone, the current standard of care and is expected to commence in 2023 (although timelines are ultimately controlled by the independent
investigator and are therefore subject to change). As part of the collaboration, we will supply motixafortide, while GenFleet will supply
the other study drugs for the trial. Trial oversight will be administered by a Joint Development Committee. GenFleet will be eligible
to receive low-to-mid-single digit tiered percentage royalties on future motixafortide sales, if approved.
D. Exchange Controls
There are no Israeli
government laws, decrees or regulations that restrict or that affect our export or import of capital or the remittance of dividends, interest
or other payments to non-resident holders of our securities, including the availability of cash and cash equivalents for use by us and
our wholly owned subsidiaries, except or otherwise as set forth under “Item 10E. Additional Information — Taxation.”
E. Taxation
The
following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition
of our ordinary shares or ADSs, both referred to in this Item 10E as the ordinary shares. You should consult your own tax advisor concerning
the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local,
non-U.S., including Israeli, or other taxing jurisdiction.
Israeli Tax Considerations
The following is a summary
of the material Israeli tax laws applicable to us. This section also contains a discussion of material Israeli tax consequences concerning
the ownership and disposition of our shares. This summary does not discuss all the aspects of Israeli tax law that may be relevant to
a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment
under Israeli law. Examples of this kind of investor include residents of Israel or traders in securities who are subject to special tax
regimes not covered in this discussion. Because certain parts of this discussion are based on new tax legislation that has not yet been
subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept
the views expressed in this discussion.
General Corporate Tax
Structure in Israel
Israeli companies are
generally subject to corporate tax on their taxable income. The regular corporate tax rate in Israel is 23% for the year 2018 and thereafter.
Capital gains derived by an Israeli company are now generally subject to tax at the same rate as the corporate tax rate.
As of December 31, 2022,
the tax loss carryforwards of BioLineRx were approximately $330 million. The tax loss carryforwards have no expiration date.
Taxation
of Israeli Individual Shareholders on Receipt of Dividends.
Israeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our ordinary shares (other than
bonus shares or share dividends) at a rate of either 25% or 30%, if the recipient of such dividend is a substantial shareholder (as defined
below) at the time of distribution or at any time during the preceding 12-month period.
Taxation
of Israeli Resident Corporations on Receipt of Dividends.
Israeli resident corporations are generally exempt from Israeli corporate tax for dividends paid on our ordinary shares.
Taxation
of Non-Israeli Shareholders on Receipt of Dividends. Non-residents
of Israel (individuals or corporations) are generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares
at the rate of 25% (or 30% if such person is a “substantial shareholder” at the time receiving the dividend or on any date
in the 12 months preceding such date), which tax will be withheld at the source, unless a lower rate is provided in the Ordinance or under
a tax treaty between Israel and the shareholder’s country of residence and subject to the receipt in advance of a valid certificate
from the Israeli Tax Authorities.
Under the U.S.-Israel
Tax Treaty (the “Treaty”), Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general,
exceed 25%. Where the recipient is a U.S. corporation owning 10% or more of the voting stock of the paying corporation during the part
of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable
year (if any) and the dividend is not paid from the profits of a Benefited Enterprise, the Israeli tax withheld may not exceed 12.5%,
subject to certain conditions.
A “substantial
shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular
basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control”
generally include the right to vote, receive profits, nominate a director, a general manager of the company or holders of similar offices
in other bodies of persons, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner
in which he or she is to exercise such right(s), and all regardless of the source of such right.
A non-resident of Israel
who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of such income,
provided that: (1) such income was not derived from a business conducted in Israel by the taxpayer (2) the taxpayer has no other
taxable sources of income in Israel with respect to which a tax return is required to be filed and (3) the taxpayer is not obliged to
pay excess tax.
Payers of dividends on
our shares, including the Israeli stockbroker effectuating the transaction or the financial institution through which the securities are
held, are required, subject to any of the foregoing exemptions, reduced tax rates and the demonstration of a shareholder of his, her or
its foreign residency, to withhold taxes upon the distribution of dividends at a rate of 25%, provided that the shares are registered
with a nominee company.
Taxation
of Capital Gains. Israeli law imposes a capital gains tax
on the sale of any capital assets by residents of Israel, as defined for Israeli tax purposes, and on the sale of assets located in Israel,
including shares in Israeli companies, by non-residents of Israel, unless a specific exemption is available or unless a tax treaty between
Israel and the shareholder’s country of residence provides otherwise and subject to the receipt in advance of a valid certificate
from the Israeli Tax Authorities. The law distinguishes between real capital gain and inflationary surplus. The inflationary surplus is
a portion of the total capital gain that is equivalent to the increase of the relevant asset’s purchase price which is attributable
to the increase in the Israeli consumer price index or, in certain circumstances, a foreign currency exchange rate, between the date of
purchase and the date of sale. The real capital gain is the excess of the total capital gain over the inflationary surplus.
Capital
Gains Taxes Applicable to Israeli Resident Shareholders. An
individual is subject to a tax at a rate of 25% on real capital gains derived from the sale of shares, as long as the individual is not
a substantial shareholder at the time of sale or at any time during the 12-month period preceding the company’s issuance of the
shares.
An individual who is
a substantial shareholder at the time of sale or at any time during the preceding 12-month period is subject to tax at a rate of 30% in
respect of real capital gains derived from the sale of shares issued by the company in which he or she is a substantial shareholder.
Capital
Gains Taxes Applicable to Non-Israeli Resident Shareholders.
Shareholders that are not Israeli residents are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange
or disposition of our ordinary shares, provided that such shareholders did not acquire their ordinary shares prior to our initial public
offering on the TASE and such gains were not derived from a permanent establishment or business activity of such shareholders in Israel.
However, non-Israeli corporations will not be entitled to the foregoing exemptions if one or more Israeli residents (a) have a controlling
interest of more than 25% in such non-Israeli corporation or (b) are the beneficiaries of or are entitled to 25% or more of the revenues
or profits of such non-Israeli corporation, whether directly or indirectly.
In addition, under the
Treaty, the sale, exchange or disposition of our ordinary shares by a shareholder who is a U.S. resident (for purposes of the Treaty)
holding the ordinary shares as a capital asset is exempt from Israeli capital gains tax unless (1) the shareholder holds, directly or
indirectly, shares representing 10% or more of our voting capital during any part of the 12-month period preceding such sale, exchange
or disposition; (2) the capital gains arising from such sale are attributable to a permanent establishment of the shareholder located
in Israel; (3) a shareholder who is an individual is present in Israel for a period or periods aggregating 183 days or more during a taxable
year. In either case, the sale, exchange or disposition of ordinary shares would be subject to Israeli tax, to the extent applicable (subject
to the receipt in advance of a valid certificate from the Israeli tax authorities); however, under the Treaty, the U.S. resident would
be permitted to claim a credit for the tax against the U.S. federal income tax imposed with respect to the sale, exchange or disposition,
subject to the limitations in U.S. laws applicable to foreign tax credits. The Treaty does not relate to U.S. state or local taxes.
Shareholders may be required
to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale.
The purchaser, the Israeli
stockbrokers or financial institution through which the shares are held are obliged, subject to the above mentioned exemptions, to withhold
tax upon the sale of securities on the amount of the consideration paid upon the sale of the securities (or on the Real Capital Gain realized
on the sale, if known), at the rate of 25% in respect of an individual or at a corporate rate in respect of a corporation (23%).
Upon the sale of securities
traded on a stock exchange, a detailed return, including a computation of the tax due, must be filed and an advance payment must be paid
on January 31 and July 31 of every tax year in respect of sales of securities made within the previous six months. However, if all tax
due was withheld at source according to applicable provisions of the Israel Income Tax Ordinance and regulations promulgated thereunder,
the aforementioned return need not be filed and no advance payment must be paid. Capital gain is also reportable on the annual income
tax returns.
Excess
Tax. Individuals who are subject to tax in Israel (whether
such individual is an Israeli resident or non-Israeli resident) are also subject to an additional tax at a rate of 3% on annual income
exceeding NIS 698,280 for 2023 and thereafter, (which amount is linked to the annual change in the Israeli consumer price index), including,
but not limited to, dividends, interest and capital gains.
U.S. Federal Income Tax
Considerations
The following is a general
summary of certain material U.S. federal income tax considerations relating to the purchase, ownership and disposition of our ordinary
shares and ADSs by U.S. Investors (as defined below) that are initial purchasers of such ordinary shares or ADSs and that hold such ordinary
shares or ADSs as capital assets for U.S. federal income tax purposes (generally, property held for investment). This summary is based
on the Internal Revenue Code of 1986, as amended, or the Code, the regulations of the U.S. Department of the Treasury issued pursuant
to the Code, or the Treasury Regulations, the Treaty, and administrative and judicial interpretations thereof, all as in effect on the
date hereof and all of which are subject to change, possibly with retroactive effect, or to different interpretation. No ruling has been
sought from the IRS with respect to any U.S. federal income tax consequences described below, and there can be no assurance that the IRS
or a court will not take a contrary position. This summary is for general information only and does not address all of the tax considerations
that may be relevant to specific U.S. Investors in light of their particular circumstances or to U.S. Investors subject to special treatment
under U.S. federal income tax law (such as, without limitation, banks, insurance companies, tax-exempt entities, retirement plans, regulated
investment companies, partnerships, dealers in securities, brokers, real estate investment trusts, grantor trusts, persons who acquire
our ordinary shares through the exercise or cancellation of employee stock options or otherwise as compensation for their services, certain
former citizens or residents of the United States, persons who acquire our ordinary shares or ADSs as part of a straddle, hedge, conversion
transaction or other integrated investment, persons that have a “functional currency” other than the Dollar, persons that
own (or are deemed to own, indirectly or by attribution) 10% or more of our ordinary shares or ADSs (by vote or value), persons subject
to special tax accounting rules under section 451(b), or persons that generally mark their securities to market for U.S. federal income
tax purposes). This summary does not address any U.S. state or local or non-U.S. tax considerations, any U.S. federal estate, gift or
alternative minimum tax considerations or any additional U.S. federal tax consequences other than U.S. federal income tax consequences.
As used in this summary,
the term “U.S. Investor” means a beneficial owner of our ordinary shares or ADSs that is, for U.S. federal income tax purposes,
(i) an individual citizen or resident of the United States, (ii) a corporation, or other entity taxable as a corporation for U.S. federal
income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (iii)
an estate the income of which is subject to U.S. federal income tax regardless of its source or (iv) a trust with respect to which a court
within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority
to control all of its substantial decisions, or a trust that has validly elected to be treated as a U.S. person for U.S. federal income
tax purposes, whose status as a U.S. person is not overwritten by an applicable tax treaty.
If an entity treated
as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs, the tax treatment of such entity and each person
treated as a partner thereof will generally depend upon the status and activities of the entity and such person. An investor that is treated
as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal income tax considerations
applicable to it and its partners of the purchase, ownership and disposition of its ordinary shares or ADSs.
Prospective investors
should be aware that this summary does not address the tax consequences to investors who are not U.S. Investors. Prospective investors
should consult their own tax advisors as to the particular tax considerations applicable to them relating to the purchase, ownership and
disposition of their ordinary shares or ADSs, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.
Taxation of U.S. Investors
The discussions under
“— Distributions,” and under “— Sale, Exchange or Other Disposition of Ordinary Shares or ADSs” below
assumes that we will not be treated as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. However, we
have not determined whether we will be a PFIC for the taxable year ending December 31, 2023, and it is possible that we will be a PFIC
for the taxable year ending December 31, 2023 or in any subsequent year. For a discussion of the rules that would apply if we are treated
as a PFIC, see the discussion under “— Passive Foreign Investment Company.”
Distributions.
We have no current plans to pay dividends. To the extent
we pay any dividends, a U.S. Investor will be required to include in gross income as a taxable dividend the amount of any distributions
made on the ordinary shares or ADSs, including the amount of any Israeli taxes withheld, when actually or constructively received, to
the extent that those distributions are paid out of our current or accumulated earnings and profits as determined for U.S. federal income
tax purposes. Any distributions in excess of our earnings and profits will be applied against and will reduce the U.S. Investor’s
tax basis in its ordinary shares or ADSs and to the extent they exceed that tax basis, will be treated as gain from the sale or exchange
of those ordinary shares or ADSs. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore,
a U.S. Investor should expect that a distribution will be treated as a dividend even if that distribution would otherwise be treated as
a non-taxable return of capital or as capital gain under the rules described above. If we were to pay dividends to holders of our
ordinary shares, we expect to pay such dividends in NIS; however, dividends paid to holders of our ADSs will be paid in dollars. A dividend
paid in NIS, including the amount of any Israeli taxes withheld, will be includible in a U.S. Investor’s income as a dollar amount
calculated by reference to the exchange rate in effect on the date such dividend is received, regardless of whether the payment is in
fact converted into dollars. If the dividend is converted to dollars on the date of receipt, a U.S. Investor generally will not recognize
a foreign currency gain or loss. However, if the U.S. Investor converts the NIS into dollars on a later date, the U.S. Investor must include,
in computing its income, any gain or loss resulting from any exchange rate fluctuations. The gain or loss will be equal to the difference
between (i) the dollar value of the amount included in income when the dividend was received and (ii) the amount received on the conversion
of the NIS into dollars. Such gain or loss will generally be ordinary income or loss and United States source for U.S. foreign tax credit
purposes. U.S. Investors should consult their own tax advisors regarding the tax consequences to them if we pay dividends in NIS or any
other non-U.S. currency.
Subject to certain significant
conditions and limitations, including potential limitations under the Treaty, any Israeli taxes paid on or withheld from distributions
from us and not refundable to a U.S. Investor may be credited against the investor’s U.S. federal income tax liability or, alternatively,
may be deducted from the investor’s taxable income. This election is made on a year-by-year basis and applies to all foreign taxes
paid by a U.S. Investor or withheld from amounts paid to a U.S. Investor that year. Dividends paid on the ordinary shares or ADSs generally
will constitute income from sources outside the United States and be categorized as “passive category income” or, in the case
of some U.S. Investors, as “general category income” for U.S. foreign tax credit purposes.
As a result of recent
changes to the U.S. foreign tax credit rules, a withholding tax generally will need to satisfy certain additional requirements in orders
to be considered a creditable tax for a U.S. investor. We have not determined whether these requirements have been met and, accordingly,
no assurance can be given that any withholding tax on dividends paid by us will be creditable. Since the rules governing foreign tax credits
are complex, U.S. Investors should consult their own tax advisor regarding the availability of foreign tax credits in their particular
circumstances.
Dividends paid on the
ordinary shares and ADSs will not be eligible for the “dividends-received” deduction generally allowed to corporate U.S. Investors
with respect to dividends received from U.S. corporations.
Distributions treated
as dividends that are received by an individual U.S. Investor from “qualified foreign corporations” generally qualify for
a reduced maximum tax rate so long as certain holding period and other requirements are met. A non-U.S. corporation (other than a PFIC
for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign
corporation (i) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury
of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information program,
or (ii) with respect to any dividend it pays on stock which is readily tradable on an established securities market in the United States.
Any dividend paid by us in a taxable year in which we are a PFIC (or with respect to which we were a PFIC in the preceding taxable year)
will be subject to tax at regular ordinary income rates. As mentioned above, we believe we were not a PFIC for our 2022 taxable year and
have not determined whether we will be a PFIC for our 2023 taxable year. U.S. Investors should consult their own tax advisors regarding
the availability of the lower rate for dividends paid with respect to our ordinary shares and ADSs.
The additional 3.8% Medicare
tax (described below) may apply to dividends received by certain U.S. Investors who meet certain modified adjusted gross income thresholds.
Sale,
Exchange or Other Disposition of Ordinary Shares and ADSs. Subject
to the discussion under “— Passive Foreign Investment Company” below, a U.S. Investor generally will recognize capital
gain or loss upon the sale, exchange or other taxable disposition of ordinary shares or ADSs in an amount equal to the difference between
the amount realized on the sale, exchange or other taxable disposition and the U.S. Investor’s adjusted tax basis in such ordinary
shares or ADSs. This capital gain or loss will be long-term capital gain or loss if the U.S. Investor’s holding period in the ordinary
shares or ADSs exceeds one year. Preferential tax rates for long-term capital gain will apply to individual U.S. Investors. The deductibility
of capital losses is subject to limitations. The gain or loss will generally be income or loss from sources within the United States for
U.S. foreign tax credit purposes, subject to certain possible exceptions under the Treaty. The additional 3.8% Medicare tax (described
below) may apply to gains recognized upon the sale, exchange, or other taxable disposition of our ordinary shares or ADSs by certain U.S.
Investors who meet certain modified adjusted gross income thresholds.
U.S. Investors should
consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currency other than Dollars upon the disposition
of ordinary shares or ADSs.
Medicare
Tax. In addition, certain U.S. persons, including individuals,
estates and trusts, will be subject to an additional 3.8% Medicare tax, or net investment income tax, on unearned income. For individuals,
the additional Medicare tax applies to the lesser of (i) “net investment income” or (ii) the excess of “modified adjusted
gross income” over $200,000 ($250,000 if married and filing jointly or $125,000 if married and filing separately). “Net investment
income” generally equals the taxpayer’s gross investment income reduced by the deductions that are allocable to such income.
Investment income generally includes passive income such as interest, dividends, annuities, royalties, rents, and capital gains. U.S.
Investors are urged to consult their own tax advisors regarding the implications of the additional Medicare tax resulting from their ownership
and disposition of ordinary shares or ADSs.
Passive Foreign Investment
Company
In general, a corporation
organized outside the United States will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either
(i) at least 75% of its gross income is “passive income” or (ii) on average at least 50% of its assets by value produce passive
income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, certain
dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property
that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including
those raised in the public offering. Assets that produce or are held for the production of passive income may include cash, even if held
as working capital or raised in a public offering, as well as marketable debt securities and other assets that may produce passive income.
In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it
owns, directly or indirectly, at least a 25% interest (by value) is taken into account.
Under the tests described
above, whether or not we are a PFIC will be determined annually based upon the composition of our income and the composition and valuation
of our assets, all of which are subject to change.
We believe that we were
a PFIC for U.S. federal income tax purposes for taxable years ended prior to December 31, 2009 and for taxable years ended December 31,
2011, 2012 and 2014 through 2019. We believe we were not a PFIC for taxable years ended 2009, 2010, 2013, 2020, 2021 and 2022, and we
have not determined whether we will be a PFIC for the taxable year ending December 31, 2023. Because the PFIC determination is highly
fact intensive and made at the end of each taxable year, there can be no assurance that we will not be a PFIC for taxable year ending
December 31, 2023 or in any subsequent year. Upon request, we intend to annually inform U.S. Investors if we and any of our subsidiaries
were a PFIC with respect to the preceding year.
U.S. Investors should
be aware of certain tax consequences of investing directly or indirectly in us if we are a PFIC. A U.S. Investor is subject to different
rules depending on whether the U.S. Investor makes an election to treat us as a “qualified electing fund,” known as a QEF
election, for the first taxable year that the U.S. Investor holds ordinary shares or ADSs, which is referred to in this disclosure as
a “timely QEF election,” makes a “mark-to-market” election with respect to the ordinary shares or ADSs (if such
election is available) or makes neither election.
QEF
Election. A U.S. Investor who makes a timely QEF election,
referred to in this disclosure as an “Electing U.S. Investor,” with respect to us must report for U.S. federal income tax
purposes his pro rata share of our ordinary earnings and net capital gain, if any, for our taxable year that ends with or within the taxable
year of the Electing U.S. Investor. The “net capital gain” of a PFIC is the excess, if any, of the PFIC’s net long-term
capital gains over its net short-term capital losses. The amount so included in income generally will be treated as ordinary income to
the extent of such Electing U.S. Investor’s allocable share of the PFIC’s ordinary earnings and as long-term capital gain
to the extent of such Electing U.S. Investor’s allocable share of the PFIC’s net capital gains. Such Electing U.S. Investor
generally will be required to translate such income into Dollars based on the average exchange rate for the PFIC’s taxable year
with respect to the PFIC’s functional currency. Such income generally will be treated as income from sources outside the United
States for U.S. foreign tax credit purposes. Amounts previously included in income by such Electing U.S. Investor under the QEF rules
generally will not be subject to tax when they are distributed to such Electing U.S. Investor. The Electing U.S. Investor’s tax
basis in ordinary shares or ADSs generally will increase by any amounts so included under the QEF rules and decrease by any amounts not
included in income when distributed.
An Electing U.S. Investor
will be subject to U.S. federal income tax on such amounts for each taxable year in which we are a PFIC, regardless of whether such amounts
are actually distributed to such Electing U.S. Investor. However, an Electing U.S. Investor may, subject to certain limitations, elect
to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If an Electing U.S. Investor is an
individual, any such interest will be treated as non-deductible “personal interest.”
Any net operating losses
or net capital losses of a PFIC will not pass through to the Electing U.S. Investor and will not offset any ordinary earnings or net capital
gain of a PFIC recognized by Electing U.S. Investors in subsequent years.
So long as an Electing
U.S. Investor’s QEF election with respect to us is in effect with respect to the entire holding period for ordinary shares or ADSs,
any gain or loss recognized by such Electing U.S. Investor on the sale, exchange or other disposition of such ordinary shares or ADSs
generally will be long-term capital gain or loss if such Electing U.S. Investor has held such ordinary shares or ADSs for more than one
year at the time of such sale, exchange or other disposition. Preferential tax rates for long-term capital gain will apply to individual
U.S. Investors. The deductibility of capital losses is subject to limitations.
A U.S. Investor makes
a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. A QEF election
generally may not be revoked without the consent of the IRS. Upon request, we intend to annually furnish U.S. Investors with information
needed in order to complete IRS Form 8621 (which form would be required to be filed with the IRS on an annual basis by the U.S. Investor)
and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. A QEF election will not
apply to any taxable year during which we are not a PFIC but will remain in effect with respect to any subsequent taxable year in which
we become a PFIC. Each U.S. Investor is encouraged to consult its own tax advisor with respect to tax consequences of a QEF election with
respect to us.
Mark-to-Market
Election. Alternatively, if our ordinary shares or ADSs
are treated as “marketable stock,” a U.S. Investor would be allowed to make a “mark-to-market” election with respect
to our ordinary shares or ADSs, provided the U.S. Investor completes and files IRS Form 8621 in accordance with the relevant instructions
and related Treasury Regulations. If that election is made, the U.S. Investor generally would include as ordinary income in each taxable
year the excess, if any, of the fair market value of the ordinary shares or ADSs at the end of the taxable year over such investor’s
adjusted tax basis in the ordinary shares or ADSs. Thus, the U.S. Investor may recognize taxable income without receiving any cash to
pay its tax liability with respect to such income. The U.S. Investor would also be permitted an ordinary loss in respect of the excess,
if any, of the U.S. Investor’s adjusted tax basis in the ordinary shares or ADSs over their fair market value at the end of the
taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A U.S.
Investor’s tax basis in the ordinary shares or ADSs would be adjusted to reflect any such income or loss amount. Gain realized on
the sale, exchange or other disposition of the ordinary shares or ADSs would be treated as ordinary income, and any loss realized on the
sale, exchange or other disposition of the ordinary shares or ADSs would be treated as ordinary loss to the extent that such loss does
not exceed the net mark-to-market gains previously included in income by the U.S. Investor, and any loss in excess of such amount will
be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualified
dividend income or long-term capital gains.
Generally, stock will
be considered marketable stock if it is “regularly traded” on a “qualified exchange” within the meaning of applicable
Treasury Regulations. A class of stock is regularly traded on an exchange during any calendar year during which such class of stock is
traded, other than in de minimis quantities, on at least 15 days during each calendar quarter.
To be marketable stock, our ordinary shares or ADSs must be regularly traded on a qualifying exchange (i) in the United States that is
registered with the SEC or a national market system established pursuant to the Exchange Act or (ii) outside the United States that is
properly regulated and meets certain trading, listing, financial disclosure and other requirements. A mark-to-market election will not
apply to our ordinary shares or ADSs held by a U.S. Investor for any taxable year during which we are not a PFIC, but will remain in effect
with respect to any subsequent taxable year in which we become a PFIC unless our ordinary shares or ADSs cease to be marketable. A mark-to-market
election generally may not be revoked without the consent of the IRS. Such election will not apply to any PFIC subsidiary that we own.
Each U.S. Investor is encouraged to consult its own tax advisor with respect to the availability and tax consequences of a mark-to-market
election with respect to our ordinary shares or ADSs.
Default
PFIC Rules. A U.S. Investor who does not make a timely
QEF election or a mark-to-market election, referred to in this disclosure as a “Non-Electing U.S. Investor,” will be subject
to special rules with respect to (a) any “excess distribution” (generally, the portion of any distributions received by the
Non-Electing U.S. Investor on the ordinary shares or ADSs in a taxable year in excess of 125% of the average annual distributions received
by the Non-Electing U.S. Investor in the three preceding taxable years, or, if shorter, the Non-Electing U.S. Investor’s holding
period for the ordinary shares or ADSs), and (b) any gain realized on the sale or other disposition of such ordinary shares or ADSs. Under
these rules:
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the excess distribution or gain would be allocated ratably over the Non-Electing U.S. Investor’s holding period for the ordinary
shares or ADSs; |
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the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and
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the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable
class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting
tax attributable to each such other taxable year. |
If a Non-Electing U.S.
Investor who is an individual dies while owning our ordinary shares or ADSs, the Non-Electing U.S. Investor’s successor would be
ineligible to receive a step-up in tax basis of the ordinary shares or ADSs. Non-Electing U.S. Investors are encouraged to consult their
tax advisors regarding the application of the PFIC rules to their specific situation.
A Non-Electing U.S. Investor
who wishes to make a QEF election for a subsequent year may be able to make a special “purging election” pursuant to Section
1291(d) of the Code. Pursuant to this election, a Non-Electing U.S. Investor would be treated as selling his or her ordinary shares or
ADSs for fair market value on the first day of the taxable year for which the QEF election is made. Any gain on such deemed sale would
be subject to tax under the rules for Non-Electing U.S. Investors as discussed above. Non-Electing U.S. Investors are encouraged to consult
their tax advisors regarding the availability of a “purging election” as well as other available elections.
To the extent a distribution
on our ordinary shares or ADSs does not constitute an excess distribution to a Non-Electing U.S. Investor, such Non-Electing U.S. Investor
generally will be required to include the amount of such distribution in gross income as a dividend to the extent of our current or accumulated
earnings and profits (as determined for U.S. federal income tax purposes) that are not allocated to excess distributions. The tax consequences
of such distributions are discussed above under “— Taxation of U.S. Investors — Distributions.” Each U.S. Investor
is encouraged to consult its own tax advisor with respect to the appropriate U.S. federal income tax treatment of any distribution on
our ordinary shares or ADSs.
If we are treated as
a PFIC for any taxable year during the holding period of a Non-Electing U.S. Investor, we will continue to be treated as a PFIC for all
succeeding years during which the Non-Electing U.S. Investor is treated as a direct or indirect Non-Electing U.S. Investor even if we
are not a PFIC for such years. A U.S. Investor is encouraged to consult its tax advisor with respect to any available elections that may
be applicable in such a situation, including the “deemed sale” election of Section 1298(b)(1) of the Code. In addition, U.S.
Investors should consult their tax advisors regarding the IRS information reporting and filing obligations that may arise as a result
of the ownership of shares in a PFIC, including IRS Form 8621.
We may invest in the
equity of foreign corporations that are PFICs or may own subsidiaries that own PFICs. U.S. Investors will be subject to the PFIC rules
with respect to their indirect ownership interests in such PFICs, such that a disposition of the shares of the PFIC or receipt by us of
a distribution from the PFIC generally will be treated as a deemed disposition of such shares or the deemed receipt of such distribution
by the U.S. Investor, subject to taxation under the PFIC rules. There can be no assurance that a U.S. Investor will be able to make a
QEF election or a mark-to-market election with respect to PFICs in which we invest. Each U.S. Investor is encouraged to consult its own
tax advisor with respect to tax consequences of an investment by us in a corporation that is a PFIC.
The U.S. federal income
tax rules relating to PFICs are complex. U.S. Investors are urged to consult their own tax advisors with respect to the purchase, ownership
and disposition of ordinary shares or ADSs, any elections available with respect to such ordinary shares or ADSs and the IRS information
reporting obligations with respect to the purchase, ownership and disposition of ordinary shares or ADSs.
Certain Reporting Requirements
Certain U.S. Investors
may be required to file IRS Form 926, Return by U.S. Transferor of Property to a Foreign Corporation and IRS Form 5471, Information Return
of U.S. Persons With Respect to Certain Foreign Corporations, reporting transfers of cash or other property to us and information relating
to the U.S. Investor and us. Substantial penalties may be imposed upon a U.S. Investor that fails to comply.
Certain U.S. Investors
owning “specified foreign financial assets” with an aggregate value in excess of $50,000 on the last day of the taxable year
or $75,000 at any time during the taxable year (or such higher dollar amount as may be prescribed by applicable IRS guidance) may be required
to file IRS Form 8938, Statement of Specified Foreign Financial Assets, with respect to such assets with their tax returns. “Specified
foreign financial assets” generally include any financial accounts maintained by foreign financial institutions, as well as any
of the following held for investment and not held in accounts maintained by financial institutions: (i) stocks and securities issued by
non-U.S. persons, which may include the ordinary shares or ADSs, (ii) financial instruments and contracts held for investment that have
non-U.S. issuers or counterparties and (iii) interests in foreign entities. The IRS has issued guidance exempting “specified foreign
financial assets” held in a financial account from reporting under this provision (although the financial account itself, if maintained
by a foreign financial institution, may remain subject to this reporting requirement). U.S. Investors are urged to consult their tax advisors
regarding the application of these requirements to their ownership of the ordinary shares or ADSs.
If we are treated as
a PFIC, U.S. Investors generally are required to file annual tax returns (including on IRS Form 8621) containing such information as the
U.S. Treasury requires (whether or not a mark-to-market election is or has been made). A U.S. Investor that is not otherwise required
to file a U.S. tax return must still file IRS Form 8621 in accordance with the instructions for the Form. Failure to file IRS Form 8621
for each applicable taxable year may result in substantial penalties and the statute of limitations on the assessment and collection of
U.S. federal income taxes of such U.S. Investor for the related taxable year may not close until three years after the date on which the
required information is filed. U.S. Investors should consult their tax advisors regarding the IRS information reporting and filing obligations
that may arise as a result of the ownership of shares in a PFIC, including IRS Form 8621.
Backup Withholding Tax
and Information Reporting Requirements
Generally, information
reporting requirements will apply to distributions on our ordinary shares or ADSs or proceeds on the disposition of our ordinary shares
or ADSs paid within the United States (and, in certain cases, outside the United States) to U.S. Investors other than certain exempt recipients,
such as corporations. Furthermore, backup withholding may apply to such amounts if the U.S. Investor fails to (i) provide a correct taxpayer
identification number, (ii) report interest and dividends required to be shown on its U.S. federal income tax return, or (iii) make other
appropriate certifications in the required manner. U.S. Investors who are required to establish their exempt status generally must provide
such certification on IRS Form W-9.
Backup withholding is
not an additional tax. Amounts withheld as backup withholding from a payment may be credited against a U.S. Investor’s U.S. federal
income tax liability and such U.S. Investor may obtain a refund of any excess amounts withheld by timely filing the appropriate claim
for refund with the IRS and furnishing any required information in a timely manner.
U.S. Investors should
consult their own tax advisors concerning the tax consequences relating to the purchase, ownership and disposition of the ordinary shares
or ADSs.
F. Dividends and Paying
Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are currently subject
to the information and periodic reporting requirements of the Exchange Act, and file periodic reports and other information with the SEC
through its electronic data gathering, analysis and retrieval (EDGAR) system. As a foreign private issuer, all documents which were filed
after September 24, 2010 on the SEC’s EDGAR system are available for retrieval on the SEC’s website at www.sec.gov.
As a foreign private
issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,
directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16
of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial
statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act.
In addition, since our
ordinary shares are traded on the TASE, we also file periodic and immediate reports with, and furnish information to, the TASE and the
ISA, or the ISA, as required under Chapter Six of the Israel Securities Law, 1968 and the regulations enacted pursuant thereof, as applicable
to a public company which also trades on Nasdaq. Copies of our filings with the ISA can be retrieved electronically through the MAGNA
distribution site of the ISA (www.magna.isa.gov.il) and the TASE website (www.maya.tase.co.il).
We maintain a corporate
website at www.biolinerx.com. Information contained on, or that can be accessed through, our website
does not constitute a part of this Annual Report on Form 20-F. We have included our website address in this Annual Report on Form 20-F
solely as an inactive textual reference.
I. Subsidiary Information
Not applicable.
J. Annual Report to Security
Holders
Not applicable.
ITEM
11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ON MARKET RISK
We are exposed to a variety
of risks in the ordinary course of our business, including, but not limited to, interest rate risk, foreign exchange risk, liquidity risk
and credit risk, as discussed below. We regularly assess each of these risks to minimize any adverse effects on our business as a result
of those factors. See Note 3 to our consolidated financial statements, which are included elsewhere in this Annual Report, for further
discussion of our exposure to these risks.
Risk of Interest Rate
Fluctuation
Our investments consist
primarily of cash, cash equivalents and short-term bank deposits. We may also invest in investment-grade marketable securities with maturities
of up to three years, including commercial paper, money market funds, and government/non-government debt securities. The primary objective
of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly
increasing risk and loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest
income and the fair market value of our investments. We manage this exposure by performing ongoing evaluations of our investments. Due
to the short-term maturities of our investments to date, their carrying value has always approximated their fair value. It will be our
policy to hold investments to maturity in order to limit our exposure to interest rate fluctuations.
Foreign Currency Exchange
Risk
Our reporting and functional
currency is the dollar. However, we pay a significant portion of our expenses in NIS and in euro, and we expect this to continue. If the
dollar weakens against the NIS or the euro in the future, there may be a negative impact on our results of operations. The revenues from
our current out-licensing and co-development arrangements are payable in dollars and euros. Although we expect our revenues from future
licensing arrangements to be denominated primarily in dollars, we are exposed to the currency fluctuation risks relating to the recording
of our revenues in currencies other than dollars. For example, if the euro strengthens against the dollar, our reported revenues in dollars
may be lower than anticipated. To date, fluctuations in the exchange rates have not materially affected our results of operations or financial
condition for the periods under review.
From time to time, we
have engaged in currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of our
principal operating currencies, and we may continue to do so in the future. These measures, however, may not adequately protect us from
the material adverse effects of such fluctuations.
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
D. American Depositary
Shares
Set forth below is a
summary of some of the material terms of the deposit agreement among BioLineRx, The Bank of New York Mellon as depositary, or the Depositary,
and the owners and holders from time to time of our ADSs.
Description of the ADSs
Each of our ADSs represents
15 of our ordinary shares deposited with the principal Tel Aviv office of Bank Leumi Le-Israel, as Custodian for the Depositary. Our ADSs
trade on Nasdaq.
The form of the deposit
agreement for the ADS and the form of American Depositary Receipt (ADR) that represents an ADS have been incorporated by reference as
exhibits to this Annual Report on Form 20-F. Copies of the deposit agreement are available for inspection at the principal office of The
Bank of New York Mellon, located at 101 Barclay Street, New York, New York 10286.
Charges of Depositary
We will pay the fees,
reasonable expenses and out-of-pocket charges of the Depositary and those of any registrar only in accordance with agreements in writing
entered into between us and the Depositary from time to time. The following charges shall be incurred by any party depositing or withdrawing
ordinary shares or by any party surrendering ADRs or to whom ADRs are issued (including, without limitation, issuance pursuant to a stock
dividend or stock split declared by us or an exchange of stock regarding the ADRs or deposited ordinary shares or a distribution of ADRs
pursuant to the terms of the deposit agreement):
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taxes and other governmental charges; |
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any applicable transfer or registration fees; |
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certain cable, telex and facsimile transmission charges as provided in the deposit agreement; |
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any expenses incurred in the conversion of foreign currency; |
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a fee of $5.00 or less per 100 ADSs (or a portion thereof) for the execution and delivery of ADRs and the surrender of ADRs, including
if the deposit agreement terminates; |
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a fee of $.05 or less per ADS (or portion thereof) for any cash distribution made pursuant to the deposit agreement; |
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a fee for the distribution of securities pursuant to the deposit agreement; |
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in addition to any fee charged for a cash distribution, a fee of $.05 or less per ADS (or portion thereof) per annum for depositary
services; |
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a fee for the distribution of proceeds of rights that the Depositary sells pursuant to the deposit agreement; and |
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any other charges payable by the Depositary, any of the Depositary’s agents, or the agents of the Depositary’s agents
in connection with the servicing of ordinary shares or other Deposited Securities. |
The Depositary may own
and deal in our securities and in ADSs.
The Depositary collects
its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal
or from intermediaries acting for them. The Depositary collects fees for making distributions to investors by deducting those fees from
the amounts distributed or by selling a portion of distributable property to pay the fees. The Depositary may collect its annual fee for
depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts
of participants acting for them. The Depositary may collect any of its fees by deduction from any cash distribution payable (or by selling
a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The Depositary may generally
refuse to provide fee-attracting services until its fees for those services are paid.
From time to time, the
Depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the
ADS program, waive fees and expenses for services provided to us by the Depositary or share revenue from the fees collected from ADS holders.
In performing its duties under the deposit agreement, the Depositary may use brokers, dealers, foreign currency dealers or other service
providers that are owned by or affiliated with the Depositary and that may earn or share fees, spreads or commissions.
The Depositary may convert
currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent, advisor,
broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will
retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency
conversion made under the deposit agreement and the rate that the Depositary or its affiliate receives when buying or selling foreign
currency for its own account. The Depositary makes no representation that the exchange rate used or obtained in any currency conversion
under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will
be determined will be the most favorable to ADS holders, subject to the Depositary’s obligations under the deposit agreement. The
methodology used to determine exchange rates used in currency conversions is available upon request.
Liability of Holders
for Taxes, Duties or Other Charges
Any tax or other governmental
charge with respect to ADSs or any deposited ordinary shares represented by any ADS shall be payable by the holder of such ADS to the
Depositary. The Depositary may refuse to effect transfer of such ADS or any withdrawal of deposited ordinary shares represented by such
ADS until such payment is made, and may withhold any dividends or other distributions or may sell for the account of the holder any part
or all of the deposited ordinary shares represented by such ADS and may apply such dividends or distributions or the proceeds of any such
sale in payment of any such tax or other governmental charge and the holder of such ADS shall remain liable for any deficiency.
ITEM
13. DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15.
CONTROLS AND PROCEDURES
a. |
Disclosure Controls and Procedures
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We have performed an
evaluation of the effectiveness of our disclosure controls and procedures that are designed to ensure that the material financial and
non-financial information required to be disclosed to the SEC is recorded, processed, summarized and reported timely. Based on our evaluation,
our Chief Executive Officer, or the CEO, and the Chief Financial Officer, or the CFO, have concluded that our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report are effective.
Notwithstanding the foregoing, there can be no assurance that our disclosure controls and procedures will detect or uncover all failures
of persons within the Company to disclose material information otherwise required to be set forth in our reports.
b. |
Management’s Annual Report on Internal
Control over Financial Reporting |
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) promulgated
under the Exchange Act. Our internal control system was designed to provide reasonable assurance to our management and board of directors
regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements for external
purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with policies or procedures may deteriorate.
Our management, including
the CEO and CFO, conducted an evaluation, pursuant to Rule 13a-15(c) promulgated under the Exchange Act, of the effectiveness, as of the
end of the period covered by this Annual Report, of its internal control over financial reporting based on the framework in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based
on the results of this evaluation, management concluded that our internal control over financial reporting was effective as of December
31, 2022.
c. |
Attestation Report of Registered Public Accounting
Firm |
Kesselman & Kesselman,
a member firm of PricewaterhouseCoopers International Ltd., our independent registered public accounting firm, has issued an attestation
report on the effectiveness of our internal control over financial reporting, appearing under “Item 18. Financial Statements”
on page F-2.
d. |
Changes in Internal Control over Financial
Reporting |
There were no changes
in our internal control over financial reporting that occurred during the year ended December 31, 2022 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM
16. [RESERVED]
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERTS
Our Board of Directors
has determined that Mr. Rami Dar is the audit committee financial expert. Mr. Dar is one of our independent directors for the purposes
of the Nasdaq Rules.
ITEM 16B.
CODE OF ETHICS
In July 2011, our Board
of Directors adopted a Code of Business Conduct and Ethics, or the Code of Conduct, that applies to all our employees, including without
limitation our CEO, CFO and controller. Our Code of Conduct may be viewed on our website at www.biolinerx.com .
A copy of our Code of Conduct may be obtained, without charge, upon a written request addressed to our investor relations department,
2 HaMa’ayan Street, Modi’in 7177871, Israel (Telephone no. +972-8-642-9100) (e-mail: info@BioLineRx.com).
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees Paid to Independent
Registered Public Accounting Firm
The following table sets
forth, for each of the years indicated, the fees billed by Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International
Ltd., our independent registered public accounting firm.
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Year Ended December 31, |
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2021 |
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2022 |
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Services Rendered |
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(in thousands of U.S. dollars) |
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Audit Fees(1) |
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130 |
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130 |
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Audit-Related Fees(2)
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25 |
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4 |
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Tax Fees(3) |
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20 |
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18 |
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All Other Fees |
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- |
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- |
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Total |
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175 |
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152 |
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(1) |
Audit fees consist of services that would normally be provided in connection with statutory and regulatory
filings or engagements, including services that generally only the independent accountant can reasonably provide. |
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(2) |
Audit-related services relate to reports to the IIA and work regarding a public listing or offering.
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(3) |
Tax fees relate to tax compliance, planning and advice. |
Our Audit Committee,
in accordance with its charter, reviews and pre-approves all audit services and permitted non-audit services (including the fees and other
terms) to be provided by our independent auditors.
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G.
CORPORATE GOVERNANCE
Nasdaq Listing Rules
and Home Country Practices
The Sarbanes-Oxley Act,
as well as related rules subsequently implemented by the SEC, requires foreign private issuers, such as us, to comply with various corporate
governance practices. In complying with the Nasdaq Rules, we have elected to follow certain corporate governance practices permitted under
the Companies Law and the rules of the TASE in lieu of compliance with certain corporate governance requirements otherwise required by
the Nasdaq Rules.
In accordance with Israeli
law and practice and subject to the exemption set forth in Rule 5615 of the Nasdaq Rules, we follow the provisions of the Companies Law,
rather than the Nasdaq Rules, with respect to the following requirements:
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Distribution of annual and quarterly reports to shareholders. Under Israeli law, as a public company whose shares are traded on the
TASE, we are not required to distribute annual and quarterly reports directly to shareholders and the generally accepted business practice
in Israel is not to distribute such reports to shareholders but to make such reports publicly available through the website of the ISA
and the TASE. In addition, we make our audited financial statements available to our shareholders at our offices. As a foreign private
issuer, we are generally exempt from the SEC’s proxy solicitation rules. |
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• |
Quorum. While the Nasdaq Rules require that the quorum for purposes of any meeting of the holders of a listed company’s common
voting stock, as specified in the company’s bylaws, be no less than 33 1/3% of the company’s outstanding common voting stock,
under Israeli law, a company is entitled to determine in its articles of association the number of shareholders and percentage of holdings
required for a quorum at a shareholders meeting. Our Articles of Association provide that a quorum of two or more shareholders holding
at least 25% of the voting rights in person or by proxy is required for commencement of business at a general meeting. However, the quorum
set forth in our Articles of Association with respect to an adjourned meeting consists of any number of shareholders present in person
or by proxy. |
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• |
Independent Directors. Our Board of Directors includes two external directors in accordance with the provisions contained in Sections
239-249 of the Companies Law and Rule 10A-3 of the general rules and regulations promulgated under the Securities Act, rather than a majority
of independent directors. Israeli law does not require, nor do our independent directors conduct, regularly scheduled meetings at which
only they are present. We are required, however, to ensure that all members of our Audit Committee are “independent” under
the applicable Nasdaq and SEC criteria for independence (as a foreign private issuer we are not exempt from the SEC independence requirement),
and we must also ensure that a majority of the members of our Audit Committee are independent directors as defined in the Companies Law.
Furthermore, Israeli law does not require, nor do our independent directors conduct, regularly scheduled meetings at which only they are
present, which the Nasdaq Rules otherwise require. |
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• |
Audit Committee. Our Audit Committee complies with all of the requirements under Israeli law, and is composed of two external directors,
which are all of our external directors, and only one other director, who cannot be the chairman of our Board of Directors. Consistent
with Israeli law, the independent auditors are elected at a meeting of shareholders instead of being appointed by the Audit Committee.
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• |
Nomination of our Directors. With the exception of our external directors and directors elected by our Board of Directors due to
vacancy, our directors are elected by a general or extraordinary meeting of our shareholders, to hold office until they are removed from
office by the majority of our shareholders at a general or extraordinary meeting of our shareholders. See “Item 6. Directors, Senior
Management and Employees — Board Practices — Board of Directors.” The nominations for directors, which are presented
to our shareholders, are generally made by our directors, but nominations may be made by one or more of our shareholders as provided under
the Companies Law or in an agreement between us and our shareholders. Currently, there is no agreement between us and any shareholder
regarding the nomination of directors. In accordance with our Articles of Association, under the Companies Law, any one or more shareholders
holding, in the aggregate, either (1) at least 5% of our outstanding shares and at least 1% of our outstanding voting power or (2) at
least 5% of our outstanding voting power, may nominate one or more persons for election as directors at a general or special meeting by
delivering a written notice of such shareholder’s intent to make such nomination or nominations to our registered office. Each such
notice must set forth all of the details and information as required to be provided in the Companies Law. |
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• |
Compensation Committee and Compensation of Officers. Israeli law, and our Articles of Association, do not require that a compensation
committee composed solely of independent members of our Board of Directors determine (or recommend to the board of directors for determination)
an executive officer’s compensation, as required under Nasdaq’s listing standards related to compensation committee independence
and responsibilities; nor do they require that the Company adopt and file a compensation committee charter. Instead, our Compensation
Committee has been established and conducts itself in accordance with provisions governing the composition of and the responsibilities
of a compensation committee as set forth in the Companies Law, and is comprised of all of our external directors (who must comprise the
majority of the members of the Compensation Committee), and at least one additional director who is entitled to the same compensation
payable to our external directors, and who is not the chairman of our Board of Directors or otherwise employed by or a provider of services
to, the Company. Additionally, we comply with the requirements set forth under the Companies Law, pursuant to which transactions with
office holders regarding their terms of office and employment, and a transaction with a controlling shareholder in a company regarding
his or her employment and/or his or her terms of office with the company, may require the approval of the compensation committee, the
board of directors and under certain circumstances the shareholders, either in accordance with our compensation policy or, in special
circumstances in deviation therefrom, taking into account certain considerations set forth in the Companies Law. See “Item 6. Directors,
Senior Management and Employees — Board Practices — Compensation Committee” for information regarding the Compensation
Committee, and “Item 6. Directors, Senior Management and Employees — Approval of Related Party Transactions under Israeli
Law” for information regarding the special approvals required with respect to approval of terms of office and employment of office
holders, pursuant to the Companies Law. The requirements for shareholder approval of any office holder compensation, and the relevant
majority or special majority for such approval, are all as set forth in the Companies Law. Thus, we will seek shareholder approval for
all corporate actions with respect to office holder compensation requiring such approval under the requirements of the Companies Law,
including seeking prior approval of the shareholders for the compensation policy and for certain office holder compensation, rather than
seeking approval for such corporate actions in accordance with Nasdaq Listing Rules. |
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• |
Approval of Related Party Transactions. All related party transactions are approved in accordance with the requirements and procedures
for approval of interested party acts and transactions, set forth in sections 268 to 275 of the Companies Law, and the regulations promulgated
thereunder, which require the approval of the audit committee, the compensation committee, the board of directors and shareholders, as
may be applicable, for specified transactions, rather than approval by the audit committee or other independent body of our Board of Directors
as required under the Nasdaq Rules. |
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• |
Shareholder Approval. We seek shareholder approval for all corporate actions requiring such approval in accordance with the requirements
of the Companies Law, which are different or in addition to the requirements for seeking shareholder approval under Nasdaq Listing Rule
5635, rather than seeking approval for corporation actions in accordance with such listing rules. |
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• |
Equity Compensation Plans. We do not necessarily seek shareholder approval for the establishment of, and amendments to, stock option
or equity compensation plans (as set forth in Nasdaq Listing Rule 5635(c)), as such matters are not subject to shareholder approval under
Israeli law. Our equity compensation plan is available to our employees, none of whom are currently U.S. employees, and provides features
necessary to comply with applicable non-U.S. tax laws. |
ITEM
16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
ITEM 17.
FINANCIAL STATEMENTS
The Registrant has responded
to Item 18 in lieu of responding to this Item.
ITEM 18.
FINANCIAL STATEMENTS
See the financial statements
beginning on page F-1. The following financial statements are filed as part of this Annual Report on Form 20-F together with the report
of the independent registered public accounting firm.
ITEM 19.
EXHIBITS
Exhibit
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101 |
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The following financial information from BioLineRx Ltd.’s Annual Report on Form
20-F for the fiscal year ended December 31, 2022 formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Statements
of Financial Position at December 31, 2022 and 2021; (ii) Consolidated Statements of Comprehensive Loss for the years ended December 31,
2022, 2021 and 2020; (iii) Statements of Changes in Equity for the years ended December 31, 2022, 2021 and 2020; (iv) Consolidated Cash
Flow Statements for the years ended December 31, 2022, 2021 and 2020; and (v) Notes to the Consolidated Financial Statements. |
Portions of this exhibit have been omitted
and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.
(1) |
Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on February 23, 2021.
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(2) |
Incorporated by reference to Exhibit 1 of the Registration Statement on Form F-6EF (No. 333-218969) filed
by the Bank of New York Mellon on June 26, 2017 with respect to the Registrant’s American Depositary Shares. |
(3) |
Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on March 23, 2017.
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(4) |
Incorporated by reference to the Registrant’s Registration Statement on Form 20-F (No. 001-35223)
filed on July 1, 2011. |
(5) |
Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on March 10, 2016.
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(6) |
Incorporated by reference to the Registrant’s Annual Report on Form 20-F/A filed on May 31, 2016.
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(7) |
Incorporated by reference to the Registrant’s Form 6-K filed on October 3, 2018. |
(8) |
Incorporated by reference to the Registrant’s Form 6-K filed on May 27, 2022. |
(9) |
Incorporated by reference to the Registrant’s Annual Report
on Form 20-F filed on March 12, 2020. |
(10) |
Incorporated by reference to the Registrant’s Annual Report
on Form 20-F filed on March 23, 2015. |
(11) |
Incorporated by reference to the Registrant’s Annual Report on Form 20-F/A filed on September 22,
2015. |
(12) |
Incorporated by reference to the Registrant’s Form 6-K filed on February 7, 2019. |
(13) |
Incorporated by reference to the Registrant’s Form 6-K filed on January 21, 2021. |
(14) |
Incorporated by reference to the Registrant’s Form 6-K filed on September 3, 2021. |
(15) |
Incorporated by reference to the Registrant’s Form 6-K filed on September 15, 2022. |
(16) |
Incorporated by reference to the Registrant’s Form 6-K
filed on September 21, 2022. |
(17) |
Incorporated by reference to the Registrant’s
Annual Report on Form 20-F filed on March 16, 2022. |
SIGNATURES
The Registrant hereby certifies that it
meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report
on its behalf.
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BIOLINERX LTD. |
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By: |
/s/ Philip A. Serlin |
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Philip A. Serlin |
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Chief Executive Officer |
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Date: March 22, 2023