Forward-Looking Statements
This quarterly report on Form 10-Q contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and
other Federal securities laws, and is subject to the safe-harbor created by such
Act and laws. Forward-looking statements may include statements regarding our
goals, beliefs, strategies, objectives, plans, including product and technology
developments, future financial conditions, results or projections or current
expectations. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expect," "intend," "plan,"
"anticipate," "believe," "estimate," "predict," "potential" or "continue," the
negative of such terms, or other variations thereon or comparable terminology.
These statements are merely predictions and therefore inherently subject to
known and unknown risks, uncertainties, assumptions and other factors that may
cause actual results, performance levels of activity, or our achievements, or
industry results to be materially different from those contemplated by the
forward-looking statements. Such forward-looking statements appear in this Item
2 - "Management's Discussion and Analysis of Financial Condition and Results of
Operations," and may appear elsewhere in this Quarterly Report on Form 10-Q and
include, but are not limited to, statements regarding the following:
? the expected development and potential benefits from our products in treating
various medical conditions;
? our entering into certain contracts with third parties;
? the prospects of entering into additional license agreements, or other forms
of cooperation with other companies, research organizations and medical
institutions;
? our pre-clinical and clinical trials plans, including timing of initiation,
expansion, enrollment and conclusion of trials;
? achieving regulatory approvals, including under accelerated paths;
? receipt of future funding from the Israel Innovation Authority, or IIA, the
European Union's Horizon 2020 program, as well as grants from other
independent third parties;
? the receipt of funds pursuant to our finance agreement, or the EIB Finance
Agreement, with the European Investment Bank, or the EIB, and whether we will
achieve the milestones necessary to receive funds thereunder;
? developing capabilities for new clinical indications of placenta expanded, or
PLX, cells and new products;
? the progress of our regulated clinical multinational trial program for the
potential use of PLX cells in the treatment of patients suffering from ARDS
associated with COVID-19;
? our expectation to demonstrate a real-world impact and value from our
pipeline, technology platform and commercial-scale manufacturing capacity;
? our expectations regarding our short- and long-term capital requirements;
? our outlook for the coming months and future periods, including but not
limited to our expectations regarding future revenue and expenses;
? information with respect to any other plans and strategies for our business;
and
? our expectation regarding the impact of the COVID-19 pandemic, including on
our clinical trials and operations.
Our business and operations are subject to substantial risks, which increase the
uncertainty inherent in the forward-looking statements contained in this report.
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In addition, historic results of scientific research, clinical and preclinical
trials do not guarantee that the conclusions of future research or trials would
not suggest different conclusions. Also, historic results referred to in this
periodic report would be interpreted differently in light of additional
research, clinical and preclinical trials results. Except as required by law, we
undertake no obligation to release publicly the result of any revision to these
forward-looking statements that may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Further information on potential factors that could affect our business is
described under the heading "Risk Factors" in Part I, Item 1A, of our Annual
Report on Form 10-K for the fiscal year ended June 30, 2020, or the 2020 Annual
Report, as well as Item 1A of this Quarterly Report. Readers are also urged to
carefully review and consider the various disclosures we have made in that
report.
As used in this quarterly report, the terms "we", "us", "our", the "Company" and
"Pluristem" mean Pluristem Therapeutics Inc. and our wholly owned subsidiaries,
Pluristem Ltd. and Pluristem GmbH, unless otherwise indicated or as otherwise
required by the context.
Overview
We are a leading developer of placenta-based cell therapy product candidates for
the treatment of multiple inflammatory and hematologic conditions. Our
operations are focused on the research, development, manufacturing, conducting
clinical trials and business development of cell therapeutics and related
technologies.
PLX cells are derived from a class of placental cells that are harvested from
donated placenta at the time of full term healthy delivery of a baby. The cells
are grown using our proprietary three-dimensional expansion technology and can
be administered to patients off the-shelf, without blood or tissue matching
prior to administration. PLX cells are believed to release a range of
therapeutic proteins in response to the patient's condition such as
inflammation, muscle trauma, hematological disorders and radiation damage.
We are currently enrolling patients in a multinational Phase III clinical study
for muscle recovery following surgery for hip fracture and two Phase II clinical
studies in Acute Respiratory Distress Syndrome, or ARDS, complicated by the
COVID-19 coronavirus in the U.S., EU and Israel. We also expect to expand our
COVID-19 program to Mexico following the receipt of all regulatory approvals. We
are currently in discussions with Innovare R&D, or Innovare, to amend our
existing collaboration agreement, which will include nominating Innovare as our
promoter for our potential future study relating to the treatment of ARDS
complicated by the COVID-19 in Mexico. Following this amendment, we expect that
we will hold the full commercialization rights in the territory, and we will
fund the study subject to receipt of regulatory approvals. In addition, we do
not expect Innovare to pay for the cells for the clinical study.
In addition, we are focusing on other clinical programs such as a Phase I
clinical study for incomplete recovery following bone marrow transplantation in
the U.S. and Israel, an Investigator-Led Phase I/II Chronic Graft vs Host
Disease Study, and acute radiation syndrome, under the FDA animal rule. We
believe that each of these indications is a severe unmet medical need.
Our manufacturing facility complies with the European, Japanese, Israeli, South
Korean and the FDA's current Good Manufacturing Practice, or cGMP, requirements
and has been inspected and approved by the European and Israeli regulators for
production of PLX-PAD for late stage trials. We have also granted
manufacturer/importer authorization and cGMP Certification by Israel's Ministry
of Health. If we obtain FDA and other regulatory approvals to market PLX cells,
we expect to have in-house production capacity to grow PLX cells in commercial
quantities.
Our goal is to make significant progress with our clinical pipeline and our
clinical trials in order to ultimately bring innovative, potent therapies to
patients who need new treatment options. We expect to demonstrate a real-world
impact and value from our pipeline, technology platform and commercial-scale
manufacturing capacity. Our business model for commercialization and revenue
generation includes, but is not limited to, direct sale of our products,
partnerships, licensing deals, and joint ventures with pharmaceutical companies.
We recently announced positive topline results in our first study in humans
evaluating PLX-R18 as a treatment for HCT, the results of which were disclosed
in our Current Report on Form 8-K filed with the Securities and Exchange
Commission, or the SEC, on April 29, 2021.
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RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED MARCH 31, 2021 COMPARED TO
THREE AND NINE MONTHS ENDED MARCH 31, 2020.
Revenues
We had no revenues for both the nine and three month periods ended March 31,
2021, as compared to $23,000 and zero, respectively, in the nine month and three
periods ended March 31, 2020. Revenues in 2020 were related to the sale of our
PLX cells for research use.
Research and Development Expenses, Net
Research and development expense, net (costs less participation and grants by
the Horizon 2020 program and the IIA) for the nine month period ended March 31,
2021 increased by 37% from $15,739,000 for the nine month period ended March 31,
2020 to $21,581,000. The increase is mainly attributed to: (1) an increase in
clinical trial subcontractor expenses for our ARDS associated with our COVID -
19 Phase II clinical trials, (2) an increase in materials purchased as part of
our production plan, (3) an increase in payroll expenses related to payroll
adjustments, increase in the average number of employees, and the strength of
the New Israel Shekel, or NIS, against the U.S. dollar, (4) an increase in
share-based compensation expenses related to the amount of restricted stock
units, or RSUs, granted and the share price at the time of the grant and (5) a
decrease in participation by the EU with respect to the Horizon 2020 program, as
a result of our utilizing the entirety of the grant under such program during
the nine month period ended March 31, 2020. The increase was partially offset by
lower depreciation expenses and lower travel abroad expenses.
Research and development expense, net (costs less participation and grants by
the Horizon 2020 program and the IIA) for the three month period ended March 31,
2021 increased by 34% from $5,717,000 for the three month period ended March 31,
2020 to $7,666,000. The increase is mainly attributed to: (1) an increase in
clinical trial subcontractor expenses for our ARDS associated with our COVID -
19 Phase II clinical trials, (2) an increase in payroll expenses related to
payroll adjustments and the strength of the NIS against the U.S. dollar and (3)
an increase in share-based compensation expenses related to the amount of RSUs
granted and the share price at the time of the grant. The increase was partially
offset due to higher participation by the IIA on the CRISPR-IL program, a
decrease in materials purchased and lower travel abroad expenses.
General and Administrative Expenses
General and administrative expenses for the nine month period ended March 31,
2021 increased by 176% from $5,245,000 for the nine month period ended March 31,
2020 to $14,455,000. The increase is mainly attributed to: (1) an increase in
share-based compensation expenses related to the amount of RSUs granted, the
fair value of such grants at the time of the grants and the expected vesting
period, including RSU grants to our Chief Executive Officer and Executive
Chairman (see note 4f1 in the financial statements), (2) an increase in payroll
expenses, mostly related to the entitlement of our Executive Chairman to certain
adjustment fees pursuant to his amended consulting agreement, the accrual for
target bonuses for our Chief Executive Officer and Chief Financial Officer
according to their amended employment agreement, payroll adjustments and the
strength of the NIS against the U.S. dollar, (3) an increase in directors and
officers insurance premium expenses and (4) an increase in legal expenses
related to the EIB Finance Agreement. The increase was offset by a decrease in
restricted stock expenses relating to issuances to consultants and lower travel
abroad expenses.
General and administrative expenses for the three month period ended March 31,
2021 increased by 290% from $1,682,000 for the three month period ended March
31, 2020 to $6,559,000. The increase is mainly attributed to: (1) an increase in
share-based compensation expenses related to the amount of RSUs granted, the
fair value of such grants at the time of the grants and the expected vesting
period, including RSU grants to our Chief Executive Officer and Executive
Chairman (see note 4f1 in the financial statements) (2) an increase in payroll
expenses related to payroll adjustments, the accrual for target bonuses for our
Chief Executive Officer and Chief Financial Officer according to their amended
employment agreements, and the strength of the NIS against the U.S. dollar and
(3) an increase in directors and officers insurance premium expenses. The
increase was partially offset by a decrease in restricted stock expenses
relating to issuances to consultants and lower travel abroad expenses.
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Financial Income (Expense), Net
Financial income (expense), net, increased from a net financial expense of
($54,000) for the nine month period ended March 31, 2020 to a net financial
income of $739,000 for the nine month period ended March 31, 2021. This increase
is mainly attributable to exchange rate income derived from NIS against U.S.
dollar exchange rates on deposits linked to the NIS.
Financial income (expense), net, decreased from a net financial expense of
($108,000) for the three month period ended March 31, 2020 to a net financial
expense of ($29,000) for the three month period ended March 31, 2021. This
decrease is mainly attributable to interest income as a result of an increase in
deposits and decrease in financial expenses derived from hedging activity. The
increase in financial income was offset by exchange rate expenses on deposits
linked to NIS, derived from the strength of the NIS against U.S. dollar.
Net Loss
Net loss for the nine and three month periods ended March 31, 2021 was
$35,297,000 and $14,254,000, respectively, as compared to net loss of
$21,016,000 and $7,507,000 for the nine and three month periods ended March 31,
2020. The increases in net loss were mainly due to increases in research and
development and general and administrative expenses, as described above. Net
loss per share for the nine and three month periods ended March 31, 2021 was
$1.31 and $0.48, respectively, as compared to $1.28 and $0.42 for the nine and
three month periods ended March 31, 2020.
For the nine and three month periods ended March 31, 2021 and March 31, 2020, we
had weighted average common shares outstanding of 26,936,831, 29,617,233 and
16,376,377, 17,823,207, respectively, which were used in the computations of net
loss per share for the nine and three month periods.
The increase in weighted average common shares outstanding reflects the
issuances of shares pursuant to the Open Market Sale AgreementSM, or the Sales
Agreement, that we entered into with Jefferies on February 6, 2019, issuances of
shares pursuant to a securities purchase agreement with two institutional
investors in May 2020, issuances of shares pursuant to a securities purchase
agreement with certain institutional investors in February 2021, issuances of
shares pursuant to our new Open Market Sale Agreement SM, or the New ATM
Agreement, that we entered into with Jefferies LLC, or Jefferies, on July 16,
2020, and issuances of additional shares upon settlement of RSUs issued to
employees and consultants, and shares issued as a result of the exercise of
outstanding warrants and options.
Liquidity and Capital Resources
As of March 31, 2021, our total current assets were $49,820,000 and total
current liabilities were $9,916,000. On March 31, 2021, we had a working capital
surplus of $39,904,000, shareholders' equity of $68,136,000 and an accumulated
deficit of $315,453,000. We finance our operations, and plan to continue doing
so, from our existing cash, use of the funds that we may receive pursuant to the
EIB Finance Agreement once we meet the applicable milestones, issuances of our
securities, and other non-dilutive grants such as grants from the IIA, European
Union's Horizon 2020 program and Israel's Ministry of Economy.
Our cash and cash equivalents as of March 31, 2021 amounted to $12,265,000,
compared to $6,762,000 as of March 31, 2020, and compared to $8,270,000 as of
June 30, 2020. Cash balances changed in the nine months ended March 31, 2021 and
2020 for the reasons presented below.
Operating activities used cash of $21,313,000 in the nine months ended March 31,
2021, compared to $20,047,000 in the nine months ended March 31, 2020. Cash used
in operating activities in the nine months ended March 31, 2021 and 2020
consisted primarily of payments of fees to our suppliers, subcontractors,
professional services providers and consultants, including the costs of our
clinical studies, and payments of salaries to our employees, partially offset by
grants from the IIA, the EU's Horizon 2020 program, Israel's Ministry of Economy
and other research grants.
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Investing activities used cash of $12,057,000 in the nine months ended March 31,
2021, compared to cash provided of $11,334,000 for the nine months ended March
31, 2020. The investing activities in the nine month period ended March 31, 2021
consisted primarily of the investment of $13,688,000 in long term deposits and
payments of $331,000 related to investment in property and equipment, partially
offset by the withdrawal of $1,962,000 of short term deposits. The investing
activities in the nine month period ended March 31, 2020 consisted primarily of
the withdrawal of $11,490,000 of short term deposits, offset by payments of
$157,000 related to investment in property and equipment.
Financing activities generated cash of $36,992,000 during the nine months ended
March 31, 2021, compared to $11,362,000 for the nine months ended March 31,
2020. The cash generated in the nine months ended March 31, 2021 from financing
activities is related to net proceeds of $36,628,000 comprised of funds received
from our February 2021 registered direct offering and common shares issuances
made under the New ATM Agreement and, net proceeds of $364,000 from issuing our
common shares from the exercise of warrants. The cash generated in the nine
months ended March 31, 2020 from financing activities is related to net proceeds
of $11,362,000 from issuing our common shares under the Sales Agreement.
In April 2020, we and our subsidiaries, Pluristem Ltd. and Pluristem GmbH,
executed the EIB Finance Agreement for funding of up to €50 million in the
aggregate, payable in three tranches. The proceeds from the EIB Finance
Agreement are intended to support our research and development in the EU to
further advance our regenerative cell therapy platform, and to bring the
products in our pipeline to market, with a special focus on clinical development
of PLX cells as a treatment for complications associated with COVID-19. The
proceeds from the EIB Finance Agreement are expected to be deployed in three
tranches, subject to the achievement of certain clinical, regulatory and scaling
up milestones with the first tranche consisting of €20 million. To date, we have
not yet received the first tranche of funds from the EIB.
On February 6, 2019, we entered into the Sales Agreement, pursuant to which we
were entitled to issue and sell our common shares having an aggregate offering
price of up to $50,000,000 from time to time through Jefferies. We were not
obligated to make any sales of common shares under the Sales Agreement. On June
30, 2020, our shelf registration on Form S-3 declared effective by the SEC on
June 23, 2017 expired, and as a result thereof, the Sales Agreement was
terminated. On July 16, 2020, we entered into the New ATM Agreement, pursuant to
which we may issue and sell our common shares having an aggregate offering price
of up to $75,000,000 from time to time through Jefferies. Upon entering into the
New ATM Agreement, we filed a new shelf registration statement on Form S-3,
which was declared effective by the SEC on July 23, 2020. During the nine month
period ended March 31, 2021, we sold 1,045,097 of our common shares under the
New ATM Agreement at an average price of $8.50 per share for aggregate net
proceeds of approximately $8,509,000.
On February 2, 2021, we entered into a securities purchase agreement with
several institutional investors, or the Investors, pursuant to which we sold, in
a registered direct offering, or the Registered Direct Offering, directly to the
Investors, 4,761,905 common shares, for gross proceeds of $30,000,000. The
aggregate net proceeds were approximately $28,077,000, net of issuance expenses
of approximately $1,923,000.
During the nine months ended March 31, 2021, warrants were exercised by
investors at an exercise price of $7.00 per share, resulting in the issuance of
51,999 our common shares for net proceeds of approximately $364,000.
During the nine months ended March 31, 2021, we received cash of approximately
$58,000 from the IIA towards our research and development expenses. According to
the IIA grant terms, we are required to pay royalties at a rate of 3% on sales
of products and services derived from technology developed using this and other
IIA grants until 100% of the dollar-linked grants amount plus interest are
repaid. In the absence of such sales, no payment is required. Through March 31,
2021, total grants obtained from the IIA aggregated to approximately $27,743,000
and total royalties paid and accrued amounted to $169,000.
In May 2020, we were selected as a member of the CRISPR-IL consortium, a group
funded by the IIA. CRISPR-IL brings together the leading experts in life science
and computer science from academia, medicine, and industry, to develop AI based
end-to-end genome-editing solutions. CRISPR-IL is funded by the IIA with a total
budget of approximately $10,000,000 of which, an amount of approximately
$480,000 is a direct grant allocated to us, for a period of 18 months, with a
potential for extension of an additional 18 months and additional budget from
the IIA. CRISPR-IL participants include leading companies, and medical and
academic institutions. As of March 31, 2021, we received total grants of
approximately $401,000 in cash from the IIA pursuant to the CRISPR-IL consortium
program. The CRISPR-IL consortium program does not require any obligation to pay
royalties. As of March 31, 2021, we received total grants of approximately
$5,997,000 in cash from the EU research and development consortiums pursuant to
the EU's Horizon 2020 program.
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The currency of our financial portfolio is mainly in U.S. dollars and we use
options contracts in order to hedge our exposures to currencies other than the
U.S. dollar. For more information, please see Item 7A. - "Quantitative and
Qualitative Disclosures about Market Risk" in the 2020 Annual Report on form
10-K for the fiscal year ended June 30, 2020.
We have an effective Form S-3 registration statement (File No. 333-239890),
filed under the Securities Act of 1933, as amended, or the Securities Act, with
the SEC using a "shelf" registration process. Under this shelf registration
process, we may, from time to time, sell our common shares, preferred shares and
warrants to purchase common shares, and units of two or more of such securities
in one or more offerings up to a total dollar amount of $250,000,000. As of May
6, 2021, other than the $75,000,000 we are eligible to sell pursuant to the New
ATM Agreement, and the $30,000,000 we sold in the Registered Direct Offering, no
common shares, preferred shares or warrants to purchase common shares were sold
pursuant to our effective Form S-3 registration statement.
Outlook
We have accumulated a deficit of $315,453,000 since our inception in May 2001.
We do not expect to generate any significant revenues from sales of products in
the next twelve months. Our cash needs may increase in the foreseeable future.
We expect to generate revenues, from the sale of licenses to use our technology
or products, but in the short and medium terms will unlikely exceed our costs of
operations.
We may be required to obtain additional liquidity resources in order to support
the commercialization of our products and maintain our research and development
and clinical trials activities.
We are continually looking for sources of funding, including non-diluting
sources such as the EIB Finance Agreement, grants from the IIA, EU's Horizon
2020 program, Israel's Ministry of Economy and other research grants,
collaboration with other companies and sales of our common shares.
We believe that we have sufficient cash to fund our operations for at least the
next 12 months.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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