ENTERA BIO LTD. The following discussion and analysis provides information we believe is relevant to an assessment and understanding of our results of operations, financial condition, liquidity and cash flows for the periods presented below. This discussion should be read in conjunction with the interim unaudited condensed consolidated financial statements and related notes contained elsewhere in this Quarterly Report and Item 1A-Risk Factors in this Quarterly Report and in our 2022 Annual Report. As discussed in the section above titled "Cautionary Note Regarding Forward-Looking Statements," the following discussion contains forward-looking statements that are based upon our current expectations, including with respect to our future revenues and operating results. Our actual results may differ materially from those anticipated in such forward-looking statements as a result of various factors. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" included under Part II, Item 1A below as well as in our 2022 Annual Report.
Unless otherwise provided, references to the "Company," "we," "us" and "our"
refer to
Overview
Entera is a clinical stage biopharmaceutical company and a leader in the development of orally delivered macromolecule therapeutics, including peptides and therapeutic proteins. Currently, most protein therapies are administered via frequent intravenous, subcutaneous, or intramuscular injections. In chronic diseases where patients require persistent management, these cumbersome, often painful and high-priced injections can create a major treatment gap. Furthermore, from a technical standpoint, oral delivery of therapeutic proteins has historically been challenging due to enzymatic degradation within the gastrointestinal tract, poor absorption into the blood stream and variable drug exposures. Entera's proprietary technology is designed to deliver orally administered proteins with sufficient bioavailability to meet treatment goals, using white mini tablets (around 6mm in diameter) of the desired protein. We strategically focus on underserved, chronic medical conditions where oral administration of a mini tablet peptide or peptide replacement therapy has the potential to significantly shift a treatment paradigm. We currently have two product candidates in the clinical stage of development: EB613 and EB612. Both candidates are first-in-class daily mini tablets of human parathyroid hormone (hPTH (1-34), teriparatide). To date, Entera's proprietary PTH tablets have been safely administered to a total of 72 healthy subjects in Phase 1 studies and 153 patients across Phase 2 studies in osteoporosis and hypoparathyroidism, two diseases that remain underserved with the current standard of care and which disproportionately affect women.
In addition to these product candidates, we have various internal early stage research programs targeting GLP-2, kappa opioid receptors and hGH..
Osteoporosis
Osteoporosis is a disease characterized by low bone mass and structural
deterioration of bone tissue, which leads to greater fragility of bones and an
increase in fracture risk. Osteoporosis is most frequently associated with
menopause in women, aging in both women and men and glucocorticoid steroid use
(greater than three months). The bone remodeling cycle can be separated into two
distinct processes: (i) bone resorption, where cells called osteoclasts function
in the resorption of mineralized tissue; and (ii) bone formation, where cells
called osteoblasts are responsible for bone matrix synthesis and subsequent
mineralization of the bone. In healthy individuals, bone resorption is matched
by new bone formation. Osteoporosis develops as the balance between bone
resorption by osteoclasts and bone formation by osteoblasts is not maintained,
and not enough bone tissue is formed, leading to frail and fracture-prone bones.
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Current osteoporosis drugs may be divided into two categories: antiresorptive
and anabolic. Drugs that inhibit bone resorption include oral and injectable
options such as estrogen (for postmenopausal women), oral and intravenous
bisphosphonates, selective estrogen receptor modulators (SERMs), the RANK-ligand
inhibitor (denosumab) and (salmon) calcitonin. The three currently approved
osteoanabolic drugs that stimulate bone formation all require daily or monthly
subcutaneous injections: teriparatide (hPTH[1-34]); abaloparatide (a PTH-related
protein analog); and romosozumab (an antibody that inhibits sclerostin and also
inhibits bone resorption). There are currently no FDA-approved oral anabolic
treatments for osteoporosis.
To date, we have completed two Phase 1 clinical trials and a six-month Phase 2
double-blind, placebo-controlled dose-ranging trial of EB613 in patients with
osteoporosis in Israel . The dose ranging Phase 2 study in postmenopausal women
with low bone mass met its primary -change in P1NP at Month 3- and key secondary
endpoints including bone mineral density (BMD) at Month 6 and was presented in a
late-breaker oral presentation at the 2021 ASBMR Annual Meeting.
In November 2018 , we had a Pre-Investigational New Drug ("Pre-IND") meeting with
the FDA to discuss our EB613 program for the treatment of osteoporosis. In
December 2020 , we announced that the FDA had approved our 2020 IND Application.
In December 2021 , we held an end-of-Phase 2 meeting with the FDA to review the
six-month phase 2 results and a proposed Head-to-Head Non-Inferiority Phase 3
study protocol vs. Forteo®, our nonclinical and clinical development plan and
the use of BMD, rather than fracture incidence, as the primary endpoint to
support a potential NDA submission. In our End of Phase 2 Meeting Minutes
received in January 2022 , the FDA expressed concern that a Head-to-Head study
phase 3 design vs. Forteo® may not be favorable to support an NDA for EB613.
During early 2022 and considering FDA's suggestions and emerging data from the
ASBMR-FNIH SABRE program1, we redesigned our pivotal phase 3 study for EB613 as
a placebo-controlled trial with a total hip (TH) BMD primary endpoint. A Type C
meeting with the FDA in relation to Entera's re-designed Phase 3 registrational
study was held in August 2022 and in October 2022 , we announced FDA's
concurrence on the major design elements of the protocol; and that (1) a single
Phase 3 placebo-controlled study with a TH BMD primary endpoint along with (2) a
comparative PK study vs. Forteo® could support an NDA submission of EB613 (oral
hPTH (1-34), teriparatide tablets) under the 505(b)(2) regulatory pathway.
In February 2023 , we submitted the revised phase 3 protocol as part of a Type D
meeting with FDA in February 2023 . On April 3rd, 2023 , we reported the outcome
of our Type D meeting and the FDA's written responses to our two questions. On
the first question, "Based on the FDA's feedback provided in the Type C meeting
written response August 19, 2022 , and subsequent teleconference held on
September 27, 2022 , the Sponsor has updated the Phase 3 protocol design
including the use of Total Hip Bone Mineral Density (BMD) as the primary
endpoint. Does the FDA concur that the revised protocol meets its expectations?"
the FDA responded that it is not opposed to the use of BMD as a surrogate for
fracture, including initiating a study under the proposed Foundation for the
National Institutes of Health Bone Quality Project (FNIH BQP) pathway, which is
undergoing review. The FDA re-confirmed to Entera that a 24-month
placebo-controlled phase 3 trial with the primary efficacy analysis at 24 months
was acceptable and provided some guidance on the statistical evaluation of the
study.
On the second question, "Does FDA agree that the design of the population PK
(pharmacokinetic) and exposure response evaluation incorporated in the draft
Phase 3 study protocol meets FDA expectations?" FDA responded that the Company's
proposed PK sampling scheme in the phase 3 study seems reasonable.
On April 3rd , the Company announced that it plans on continuing its dialogue
with FDA in light of its review of the FNIH-BQP criteria and will not plan to
initiate a phase 3 study for EB613 until such a time that FDA provides final
guidance on the evaluation of its primary endpoint.
Hypoparathyroidism
Hypoparathyroidism is a rare condition in which the body either fails to produce sufficient amounts of PTH or the PTH produced lacks normal biologic activity. Individuals with a deficiency of parathyroid hormone may exhibit hypocalcemia and hyperphosphatemia. Hypocalcemia can cause weakness, muscle cramps, excessive nervousness, headaches and uncontrollable twitching and tetany. Hyperphosphatemia can result in soft tissue calcium deposition, which may lead to severe issues, including damage to the circulatory and central nervous systems. The most common cause of hypoparathyroidism is damage to, or removal of, the parathyroid glands due to surgery for another condition. Our product candidate for hypoparathyroidism, EB612, is the first oral formulation of PTH (1-34, teriparatide) hormone replacement treatment developed in a mini tablet form. The FDA and theEuropean Medicines Agency have granted EB612 orphan drug designation for the treatment of hypoparathyroidism. We believe that EB612 may have inherent advantages compared to injectable forms, including convenience of administration without any special preparation of the medication, as well as convenience of storage (room temperature or refrigeration for long term storage). In 2015, we successfully completed a Phase 2a trial for EB612. Although this pilot four-month Phase 2a trial involved a smaller number of patients, was conducted for a shorter duration and did not include an initial dose optimization in comparison to the design of the pivotal trial used for regulatory approval of Natpara® (the REPLACE trial), our study achieved its primary and secondary endpoints, including a reduction in calcium supplements, reductions in serum phosphate and 24-hour urine calcium excretion, maintenance of ACa within the reference range, and an improvement in quality of life.
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1 FNIH BQP is also known as the ASBMR FNIH-SABRE,
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We have since developed an improved formulation of EB612 based on new
intellectual property, optimization of its PK profile and the potential for
reduced daily dosing for hypoparathyroidism. We expect to carry out a PK study
for the new formulation of EB612 in the first half of 2023. If successful, the
phase 2b/3 clinical trial of EB612 in hypoparathyroidism may potentially support
a submission for regulatory approval of EB612.
Patent Transfer, Licensing Agreements and Grant Funding
Oramed Patent Transfer Agreement
In 2011, we entered into a patent transfer agreement with Oramed, or the Patent Transfer Agreement, pursuant to which Oramed assigned to us all of its rights, title and interest in the patent rights Oramed licensed to us when we were originally organized, subject to a worldwide, royalty-free, exclusive, irrevocable, perpetual and sub-licensable license granted to Oramed under the assigned patent rights to develop, manufacture and commercialize products or otherwise exploit such patent rights in the fields of diabetes and influenza. Additionally, we agreed not to engage, directly or indirectly, in any activities in the fields of diabetes and influenza. Under the terms of the Patent Transfer Agreement, we agreed to pay Oramed royalties equal to 3% of our net revenues generated, directly or indirectly, from exploitation of the assigned patent rights, including the sale, lease or transfer of the assigned patent rights or sales of products or services covered by the assigned patent rights.
Amgen Research Collaboration and License Agreement
OnDecember 10, 2018 , we entered into a research collaboration and license agreement with Amgen, which we refer to as the Amgen Agreement. Pursuant to the Amgen Agreement, we and Amgen had agreed to use our proprietary drug delivery platform to develop oral formulations for one preclinical large molecule program that Amgen has selected. In exchange for entering into the agreement, Amgen paid us a non-refundable and non-creditable initial access fee of$725 thousand in the first quarter of 2019, of which$500 thousand was attributed to the right to use the intellectual property and$225 thousand was attributed to the pre-clinical R&D services that we were obligated to perform under the Amgen Agreement. Since 2019, Amgen has paid$1.2 million for pre-clinical R&D services. Under certain circumstances, Amgen had been required to make aggregate payments to us of up to$270 million upon achievement of various clinical and commercial milestones or its exercise of options to select the additional two programs to include in the collaboration. OnMay 2, 2023 , the Company and Amgen agreed to terminate the Amgen Agreement in accordance with its terms, effective on such date. See Part II, Item 5 of this Quarterly Report for more information. 13
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The Israeli Innovation Authority Grants
We have received grants of approximately$0.5 million from theIsraeli Innovation Authority ("IIA") to partially fund our research and development. The grants are subject to certain requirements and restrictions under the Israeli Encouragement of Research, Development and Technological Innovation in Industry Law 5477-1984, or the Research Law. In general, until the grants are repaid with interest, royalties are payable to the Israeli government in the amount of 3% on revenues derived from sales of products or services developed in whole or in part using the IIA grants, including EB613, EB612 and any other oral PTH product candidates we may develop. The royalty rate may increase to 5%, with respect to approved applications filed following any year in which we achieve sales of over$70 million . The amount that must be repaid may be increased up to six times the amount of the grant received plus interest. The rate of royalties may be accelerated and the royalty liability may increase (up to three times the amount of the grant amount and the interest), if manufacturing of the products developed with the grant money is transferred outside of theState of Israel . Moreover, a payment of up to 600% of the grant received may be required upon the transfer of any IIA-funded know-how to a non-Israeli entity. We signed a contract with aU.K. -based contract manufacturing organization to produce and supply pills for trials performed worldwide. We believe that, because this production is not for commercial purposes, it will not affect the royalty rates to be paid to the IIA. Should the IIA successfully take a contrary position, the maximum royalties to be paid to the IIA will be approximately$1.5 million , which is three times the amount of the original grant plus interest thereon. Following the signing of the Amgen Agreement, we were required to pay 5.38% of each payment by Amgen and up to 600% of the grant received plus interest. ThroughMarch 31, 2023 , we had paid royalties to the IIA in the amount of$95 thousand related to the Amgen Agreement and other Master Service Agreements ("MTA"). In addition to paying any royalties due, we must abide by other restrictions associated with receiving such grants under the Research Law that continue to apply following repayment to the IIA.
Financial Overview
Since our inception, we have raised a total of$84.7 million from a combination of public and private equity offerings, grants and the exercise of options and warrants. Since inception, we have incurred significant losses. For the three months endedMarch 31, 2023 and 2022, our operating losses were$2.2 million and$3.8 million , respectively, and we expect to continue to incur significant expenses and losses for the foreseeable future. As ofMarch 31, 2023 , we had an accumulated deficit of$97.7 million . Our losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials, our expenditures on research and development activities, and payments under any future collaborations into which we may enter. As a result of our recurring losses from operations, negative cash flows and lack of liquidity, management is of the opinion that there is substantial doubt as to the Company's ability to continue as a going concern. Our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of, and for the year ended,December 31, 2022 , expressing the existence of substantial doubt about our ability to continue as a going concern. The unaudited condensed consolidated financial statements included herein have been prepared assuming that we will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. If we are unable to raise the requisite funds, we will need to delay certain program initiation, curtail or cease operations. See "Item 1A-Risk Factors-Risks Related to Our Financial Position and Need forAdditional Capital " contained in our 2022 Annual Report. As ofMarch 31, 2023 , we had cash and cash equivalents of$10.7 million . We believe that our existing cash resources will be sufficient to meet our projected operating requirements into the third quarter of 2024, which includes the capital required to fund our ongoing operations, including R&D and the completion of the Phase 1 PK study related to the new formulation EB612. However, this does not include the capital required to fund our proposed Phase 3 pivotal study for EB613 in osteoporosis and comparative PK study of EB613 and Forteo®. Our ability to commence such studies will depend on finalizing discussions with the FDA and will require additional funding, which may not be available on reasonable terms, or at all. Any delay or our inability to secure such funding will delay or prevent the commencement of these studies. 14 -------------------------------------------------------------------------------- In order to fund further operations, we will need to raise additional capital. We may raise these funds through a variety of means, including private or public equity offerings, debt financings, strategic collaborations and licensing arrangements. Additional financing may not be available when we need it or may not be available on terms that are favorable to us.
As of
Revenue
To date, we have not generated any revenue from sales of our products, and we do not expect to receive any revenue from our product candidates unless and until we obtain regulatory approval and successfully commercialize our products.
Under the Amgen Agreement, from 2019 through
We recognize revenues, including revenues under the Amgen Agreement, according to ASC 606, "Revenues from Contracts with Customers".
According to ASC 606, a performance obligation is a promise to provide a
distinct good or service or a series of distinct goods or services. Goods and
services that are not distinct are bundled with other goods or services in the
contract until a bundle of goods or services that is distinct is created. A good
or service promised to a customer is distinct if the customer can benefit from
the good or service either on its own or together with other resources that are
readily available to the customer and the entity's promise to transfer the good
or service to the customer is separately identifiable from other promises in the
contract. Options granted to the customer that do not provide a material right
to the customer that it would not receive without entering into the contract do
not give rise to performance obligations. We identified two performance
obligations in the agreement: the license to use the Company's proprietary drug
delivery platform and pre-clinical research and development services
("pre-clinical R&D services"). The license to our intellectual property has
significant standalone functionality because we are not required to continue to
support, develop or maintain the intellectual property transferred and will not
undertake any activities to change the standalone functionality of the
intellectual property. Therefore, we recognized the revenues related to this
performance obligation in December 2018 at the point in time that control of the
license was transferred to Amgen. The preclinical R&D services that we provide
from time-to-time under the Amgen Agreement include discovery, research and
design preclinical activities relating to the programs selected by Amgen.
Revenues attributed to the preclinical R&D services are recognized during the
period the pre-clinical R&D services are provided according to the input model
method on a cost-to-cost basis. Each of these items met the definition of
distinct performance obligation.
Under ASC 606, the consideration that we would be entitled to upon the
achievement of contractual milestones, which are contingent upon the occurrence
of future events of development and commercial progress, are a form of variable
consideration. When assessing the portion, if any, of such milestone-related
consideration to be included in the transaction price, we first assess the most
likely outcome for each milestone, and exclude the consideration related to
milestones of which the occurrence is not considered the most likely outcome. We
then evaluate if any of the variable consideration determined in the first step
is constrained. Variable consideration is included in the transaction price if,
in our judgment, it is probable that a significant future reversal of cumulative
revenue under the contract will not occur. Estimates of variable consideration
and determination of whether to include estimated amounts in the transaction
price are based largely on an assessment of our anticipated performance and all
information (historical, current and forecasted) that is reasonably available.
We did not recognize any revenues from milestone payments.
An entity should recognize revenue for a sales-based or usage-based royalty promised in exchange for a license of intellectual property only when (or as) the later of the following events occurs:
• The subsequent sale or usage occurs; and
• The performance obligation to which some or all of the sales-based or
usage-based royalty has been allocated has been satisfied (or partially
satisfied).
We did not recognize any revenues from royalties because royalties are payable
based on future commercial sales, as defined in the Amgen Agreement and there
were no commercial sales as of March 31, 2023 .
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Research and Development Expenses
Research and development expenses consist of costs incurred for the development of our drug delivery technology and our product candidates. Those expenses include:
• employee-related expenses, including salaries, bonuses and share-based
compensation expenses for employees and service providers in the research and
development function;
• expenses incurred in operating our laboratories including our small-scale
manufacturing facility;
• expenses incurred under agreements with CROs, and investigative sites that
conduct our clinical trials;
• expenses related to outsourced and contracted services, such as external
laboratories, consulting and advisory services;
• supply, development and manufacturing costs relating to clinical trial
materials; and
• other costs associated with pre-clinical and clinical activities.
Research and development activities are the primary focus of our business.
Product candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect that our research and development expenses will increase significantly
in future periods as we advance EB613 and EB612 into later stages of clinical
development and invest in additional preclinical candidates.
Our research and development expenses may vary substantially from period to
period based on the timing of our research and development activities, including
due to the timing of initiation of clinical trials and the enrollment of
patients in clinical trials. For the three months ended March 31, 2023 and 2022,
our research and development expenses were $0.9 million and $1.7 million ,
respectively. Research and development expenses for the three months ended March
31, 2023 and 2022 were primarily for the development of EB613. The successful
development of our product candidates is highly uncertain. At this time we
cannot reasonably estimate the nature, timing and estimated costs of the efforts
that will be necessary to complete the development of, or the period, if any, in
which material net cash inflows may commence from, any of our product
candidates. This is due to numerous risks and uncertainties associated with
developing drugs, including:
• the uncertainty of the scope, rate of progress, results and cost of our
clinical trials, nonclinical testing and other related activities;
• the cost of manufacturing clinical supplies and establishing commercial
supplies of our product candidates and any products that we may develop;
• the number and characteristics of product candidates that we pursue; • the cost, timing and outcomes of regulatory approvals;
• the cost and timing of establishing any sales, marketing, and distribution
capabilities; and
• the terms and timing of any collaborative, licensing and other arrangements
that we may establish, including any milestone and royalty payments
thereunder.
A change in the outcome of any of these variables with respect to the
development of EB613, EB612 or any other product candidate that we may develop
could mean a significant change in the costs and timing associated with the
development of such product candidate. For example, if the FDA or other
regulatory authority were to require us to conduct preclinical and/or clinical
studies beyond those which we currently anticipate will be required for the
completion of clinical development, if we experience significant delays in
enrollment in any clinical trials or if we encounter difficulties in
manufacturing our clinical supplies, then we could be required to expend
significant additional financial resources and time on the completion of the
clinical development.
General and Administrative Expenses
General and administrative expenses consist principally of salaries, benefits, share-based compensation and related costs for directors and personnel in executive and finance functions. Other general and administrative expenses include D&O insurance and other insurance, communication expenses, professional fees for legal and accounting services, patent counseling and portfolio maintenance and business development expenses.
We expect that our general and administrative expenses will increase in the future as we increase our headcount and expand our administrative function to support our operations.
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Financial Income, Net
Financial income, net is composed primarily of exchange rate differences of certain currencies against our functional currency.
Taxes on Income
We have not generated taxable income since our inception, and, as ofMarch 31, 2023 , we had carry-forward tax losses of$69.2 million . We anticipate that we will be able to carry forward these tax losses indefinitely to future tax years. Accordingly, we do not expect to pay taxes inIsrael until we have taxable income after the full utilization of our carryforward tax losses. We provided a full valuation allowance with respect to the deferred tax assets related to these carry forward losses of the Company. The Company's subsidiary,Entera Bio, Inc. , is taxed separately underU.S. tax laws. As ofMarch 31, 2023 ,Entera Bio Inc. had tax loss carry-forwards of$26 thousand . Results of Operations
Comparison of Three Months Ended
Three Months Ended
March 31, Increase (Decrease)
2023 2022 $ %
(In thousands, except for percentage information)
Revenues $ - $ 68 $ (68 ) (100 ) %
Cost of revenues $ - $ 54 (54 ) (100 ) %
Operating expenses:
Research and development expenses $ 931 $ 1,690 $ (759 ) (45 ) %
General and administrative expenses
$ (877 ) (40 ) % Other income $ (13 )$ (12 ) $ (1 ) (8 ) % Operating loss$ 2,212 $ 3,835 $ (1,623 ) (42 ) % Financial income, net $ (22 )$ (44 ) $ 22 (50 ) % Income tax benefit $ -$ (7 ) $ 7 (10 ) % Net loss$ 2,190 $ 3,784 $ (1,594 ) (42 ) % Revenue Revenues for the three months endedMarch 31, 2022 of$68,000 were mainly attributable to pre-clinical R&D services provided to Amgen under the Amgen Agreement. We did not recognize any revenue for the three months endedMarch 31, 2023 due to finalization of third year pre-clinical R&D services. We did not generate any revenues prior to entering into the Amgen Agreement. 17
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Cost of Revenues
Cost of revenues for the three months endedMarch 31, 2022 of$54,000 were mainly attributable to pre-clinical R&D services provided to Amgen under the Amgen Agreement. The decrease in cost was due to the lack of revenues under the Amgen Agreement, as described above, for the three months endedMarch 31, 2023 .
Research and Development Expenses
Research and development expenses for three months endedMarch 31, 2023 were$0.9 million , as compared to$1.7 million for the three months endedMarch 31, 2022 . The decrease of$0.8 million was primarily due to a decrease of$0.6 million in continued materials and production costs and others consultants and a decrease of$0.2 million in employee compensation including share-based compensation.
General and Administrative Expenses
General and administrative expenses for the three months endedMarch 31, 2023 were$1.3 million , as compared to$2.2 million for the three months endedMarch 31, 2022 . The decrease of$0.9 million was mainly attributable to a decrease of$0.6 million in employee compensation, including share-based compensation, a decrease of$0.2 million in professional fees and a decrease of$0.1 million in D&O insurance costs. Financial Income, Net Financial income, net for the three months endedMarch 31, 2023 and 2022 was$22,000 and$44,000 , respectively. Our financial income is composed mainly of exchange rate differences of certain currencies against our functional currency, which is theU.S. Dollar.
Liquidity and Capital Resources
Since inception, we have incurred significant losses. For the three months endedMarch 31, 2023 and 2022, our operating losses were$2.2 million and$3.8 million , respectively. As ofMarch 31, 2023 , we had an accumulated deficit of$97.7 million . We expect to continue to incur significant expenses and losses for the next several years as we advance our products through development and provide administrative support for our operations. As a result of our recurring losses from operations, negative cash flows and lack of liquidity, management is of the opinion that there is substantial doubt as to the Company's ability to continue as a going concern. If we are unable to raise the requisite funds, we will need to curtail or cease operations. See in "Item 1A-Risk Factors" in our 2022 Annual Report. Since our inception, we have raised a total of$84.7 million , including$25.3 million through completed or terminated at-the-market-offering ("ATM") programs,$14.3 million in ourDecember 2019 private placement,$11.2 million in our IPO in 2018 and$33.9 million in aggregate funding from a combination of grants, exercise of options and warrants and private placements of Ordinary Shares, preferred shares and debt prior to our IPO. In addition, as ofMarch 31, 2023 , we had received approximately$1.7 million under the Amgen Agreement. As ofMarch 31, 2023 , we had cash and cash equivalents of$10.7 million . Our primary uses of cash have been to fund research and development, general and administrative and working capital requirements, and we expect these will continue to be our primary uses of cash. OnSeptember 2, 2022 , we entered into a Sales Agreement withSVB Securities LLC , as sales agent, to implement an at-the-market offering program, under which we may from time to time offer and sell up to 5,000,000 Ordinary Shares (the "SVB ATM Program") under our currently effective Registration Statement on Form S-3 and a related prospectus supplement forming a part thereof. The sales agent is entitled to a fixed commission of 3% of the aggregate gross proceeds as well as and reimbursement of expenses. As ofMarch 31, 2023 , we had not sold any shares under the SVB ATM Program. 18
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Funding Requirements
We believe that our existing capital resources will be sufficient to meet our projected operating requirements into the third quarter of 2024, which includes the capital required to fund our ongoing operations, including R&D and the completion of the Phase 1 PK study related to the new formulation EB612. However, this does not include the capital required to fund our proposed Phase 3 pivotal study for EB613 in osteoporosis and comparative PK study of EB613 and Forteo®. Our ability to commence such studies will depend on finalizing discussions with the FDA and will require additional funding, which may not be available on reasonable terms, or at all. Any delay or our inability to secure such funding will delay or prevent the commencement of these studies. We have based these estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of our product candidates, and the extent to which we may enter into collaborations with third parties for development of these or other product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our current and future product candidates. Our future capital requirements will depend on many factors, including:
• the costs, timing and outcome of clinical trials for, and regulatory review
of, EB613, EB612 and any other product candidates we may develop;
• the costs of development activities for any other product candidates we may
pursue;
• the costs of preparing, filing and prosecuting patent applications,maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims; and
• our ability to establish collaborations on favorable terms, if at all.
We do not have any committed external sources of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our then-existing shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that may adversely affect our existing shareholders' rights as shareholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may include requirements to hold minimum levels of funding. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or collaborations, when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our oral PTH product candidates and any other product candidates that we would otherwise prefer to develop and market ourselves. Our unaudited condensed consolidated financial statements as of and for the three months endedMarch 31, 2023 included elsewhere in this Quarterly Report note that there is substantial doubt about our ability to continue as a going concern as of such date. This means that our management has expressed substantial doubt about our ability to continue our operations without an additional infusion of capital from external sources. The unaudited condensed consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that may be necessary should we be unable to continue as a going concern. If we are unable to finance our operations, our business would be in jeopardy, and we might not be able to continue operations and might have to liquidate our assets. In that case, investors might receive less than the value at which those assets are carried on our financial statements, and it is likely that investors would lose all or a part of their investment. 19
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Cash Flows
Three Months Ended
The following table sets forth the primary sources and uses of cash for each of
the periods set forth below:
Three Months Ended March 31 ,
(unaudited)
2023 2022
(in thousands)
(11 ) (23 )
Net Cash provided by financing activities - -
Net decrease in cash and cash equivalents
Net cash used in operating activities for the three months endedMarch 31, 2023 was$1.6 million , consisting primarily of our operating loss of$2.2 million and a decrease of$0.1 million in our working capital, which was partially offset by approximately$0.5 million of share-based compensation and depreciation expenses. Net cash used in operating activities for the three months endedMarch 31, 2022 was$4.8 million , consisting primarily of our operating loss of$3.8 million and an increase of$2.0 million in our working capital, which was partially offset by approximately$1.0 million of share-based compensation and depreciation expenses. The decrease of$3.2 million in cash used in operating activities for the three months endedMarch 31, 2023 compared to the same period in 2022 was mainly attributed to a decrease of$1.6 million in our operating loss, a decrease of$2.1 in working capital mainly due to a decrease in payments to suppliers and services providers, which were partially offset by a decrease of$0.5 million in share-based compensation.
Net cash used in investing activities for the three months ended
Net Cash Provided by Financing Activities
For the three months ended
Contractual Obligations
There have not been any material changes in our assessment of material contractual obligations and commitments as set forth in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2022 Annual Report.
Critical Accounting Policies and Estimates
See Part II, Item 7 "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Critical Accounting Policies" and our consolidated
financial statements and related notes included in the 2022 Annual Report for
accounting policies and related estimates we believe are the most critical to
understanding our consolidated financial statements, financial condition and
results of operations and which require complex management judgment and
assumptions, or involve uncertainties. The preparation of consolidated financial
statements also requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue, expenses and related
disclosures. We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances. There have
been no changes to our critical accounting policies or their application since
the date of the 2022 Annual Report.
20--------------------------------------------------------------------------------
Recently Issued Accounting Pronouncements
Certain recently issued accounting pronouncements are discussed in Note 2 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
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