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VBI VACCINES INC.

(VBIV)
  Report
Delayed Nasdaq  -  04:00 2022-09-30 pm EDT
0.7058 USD   -3.20%
09/29VBI Vaccines Starts Phase 1 Study On Multivalent Coronavirus Vaccine Candidate VBI-2901
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09/29VBI Vaccines Announces Initiation of Phase 1 Study of Multivalent Coronavirus Vaccine Candidate, VBI-2901
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09/29Vbi Vaccines Inc/bc : Regulation FD Disclosure, Financial Statements and Exhibits (form 8-K)
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VBI VACCINES INC/BC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/08/2022 | 08:04am EDT
The following discussion and analysis summarizes the significant factors
affecting our operating results, financial condition, liquidity, and cash flows
as of and for the periods presented below. The following discussion and analysis
of our financial condition and results of operations should be read in
conjunction with the audited consolidated financial statements and related notes
included elsewhere in this Form 10-Q. In addition to historical information,
this discussion and analysis here and throughout this Form 10-Q contains
forward-looking statements that involve risks, uncertainties and assumptions.
Our actual results may differ materially from those anticipated in these
forward-looking statements.



Overview



VBI Vaccines Inc. ("VBI") is a commercial stage biopharmaceutical company driven
by immunology in the pursuit of powerful prevention and treatment of disease.
Through our innovative approach to virus-like particles ("VLPs"), including a
proprietary enveloped VLP ("eVLP") platform technology, we develop vaccine
candidates that mimic the natural presentation of viruses, designed to elicit
the innate power of the human immune system. We are committed to targeting and
overcoming significant infectious diseases, including hepatitis B ("HBV"),
COVID-19 and coronaviruses, and cytomegalovirus ("CMV"), as well as aggressive
cancers including glioblastoma. We are headquartered in Cambridge,
Massachusetts, with research operations in Ottawa, Canada, and a research and
manufacturing site in Rehovot, Israel.



Product Pipeline



VBI's pipeline is comprised of vaccine and immunotherapeutic programs developed
by virus-like particle technologies to target two distinct, but often related,
disease areas - infectious disease and oncology. We prioritize the development
of programs for disease targets that are challenging, underserved, and where the
human immune system, when powered and stimulated appropriately, can be a
formidable opponent.



VLP vaccines are a type of sub-unit vaccine, in which only the portions of
viruses critical for eliciting an immune response are presented to the body.
Because of their structural similarity to viruses presented in nature, including
their particulate nature and repetitive structure, virus-like particles (VLPs)
can stimulate potent immune responses. VLPs can be customized to present any
protein antigen, including multiple antibody and T cell targets, making them, we
believe, ideal technologies for the development of both prophylactic and
therapeutic vaccines. However, only a few antigenic proteins self-assemble into
VLPs, which limit the number of potential targets. Notably, HBV antigens are
among those that are able to spontaneously form orderly VLP structures. Our eVLP
platform technology expands the list of potentially viable target indications
for VLPs by providing a stable core (Gag Protein) and lipid bilayer (the
"envelope"). It is a flexible platform that enables the synthetic manufacture of
an "enveloped" VLP, or "eVLP", which looks structurally and morphologically
similar to the virus, with no infectious material.



Our product pipeline includes an approved vaccine and multiple late- and
early-stage investigational programs. The investigational programs are in
various stages of clinical development and the scientific information included
about these therapeutics is preliminary and investigative. The investigational
programs have not been approved by the United States Food and Drug
Administration, European Medicines Agency, United Kingdom Medicines and
Healthcare products Regulatory Agency, Health Canada, or any other health
authority and no conclusion can or should be drawn regarding the safety or
efficacy of these investigational programs.



In addition to our existing pipeline programs, we may also seek to in-license
clinical-stage vaccines or vaccine-related technologies that we believe
complement our pipeline, as well as technologies that may supplement our efforts
in both immuno-oncology and infectious disease.



23





Key Targeted Disease Areas

Hepatitis B Virus ("HBV")




HBV infection can cause liver inflammation, fibrosis, and liver injury,
resulting in potentially life-threatening conditions through acute illness and
chronic disease, including liver failure, cirrhosis, and cancer. HBV remains a
significant public health burden with as many as 2.2 million
chronically-infected people in the United States ("U.S.") alone. Worldwide, this
number is estimated to be as high as 350 million, with approximately 800,000
deaths resulting from the consequences of HBV infection each year.



Despite the highly infectious nature of HBV, due to its often-asymptomatic
nature, it is estimated that as many as 67% of chronically infected adults in
the U.S. are unaware of their infection status. There is no cure available for
HBV infection and while public health initiatives highlight immunization as the
most effective strategy for the prevention of HBV infections, the U.S. adult HBV
vaccination rates remain persistently low at only about 30% of all adults age 19
years and older.



In April 2022, the Centers for Disease Control and Prevention (CDC) Advisory
Committee on Immunization Practices (ACIP) implemented a change to the adult HBV
vaccine recommendations. As incorporated in the CDC's 2022 Adult Immunization
Schedule and as published in the April 1, 2022, CDC Morbidity and Mortality
Weekly Report (MMWR), adults aged 19 to 59 years are now universally recommended
to be vaccinated against HBV infection. Additionally, while adults aged 60 years
and older with risk factors for HBV infection are still recommended to receive
HBV vaccinations, adults aged 60 years and older without known risk factors for
HBV may now also receive HBV vaccinations.



In addition to our approved vaccine, PreHevbrio (Hepatitis B Vaccine
[Recombinant]), there are four other vaccines approved in the U.S. for the
prevention of HBV infection in adults: Engerix-B® and Twinrix®, manufactured by
GSK, Recombivax HB®, manufactured by Merck &. Co., and Heplisav-B®, manufactured
by Dynavax Technologies Corporation.



COVID-19 and Other Coronaviruses




Coronaviruses are a large family of enveloped viruses that cause respiratory
illness of varying severities. Only seven coronaviruses are known to cause
disease in humans, four of which most frequently cause symptoms typically
associated with the common cold. Three of the seven coronaviruses, however, have
more serious outcomes in people. These more pathogenic coronaviruses are (1)
SARS-CoV-2, a novel coronavirus identified as the cause of COVID-19; (2)
MERS-CoV, identified in 2012 as the cause of Middle East Respiratory Syndrome
("MERS"); and (3) SARS-CoV, identified in 2002 as the cause of Severe Acute
Respiratory Syndrome ("SARS").



The virus that causes COVID-19 continues to evolve and several SARS-CoV-2 variants have emerged and certain of these variants have been identified as having a significant public health impact. To date, notable Variants of Concern ("VOC") include:

? Alpha (B.1.1.7) - First identified as in the United Kingdom ("UK"), VOC in

    December 2020
  ? Beta (B.1.351) - First identified in South Africa, VOC in December 2020
  ? Gamma (P.1) - First identified in Brazil, VOC in January 2021
  ? Delta (B.1.617.2) - First identified in India, VOC in May 2021

? Omicron (B.1.1.529; BA.1-BA.5) - First identified in South Africa, VOC in

    November 2021




Glioblastoma ("GBM")



Glioblastoma ("GBM") is among the most common and aggressive malignant primary
brain tumors in humans. In the U.S. alone, about 12,000 new GBM cases are
diagnosed each year. The current standard of care for GBM is surgical resection,
followed by radiation and chemotherapy. Even with intensive treatment, GBM
progresses rapidly and has a high mortality rate, with median overall survival
for primary GBM of about 14 months. Median overall survival for recurrent GBM is
even lower, at about 8 months.



Cytomegalovirus ("CMV")


CMV is a common virus that is a member of the herpes family. It infects one in
every two people in many developed countries. Most CMV infections are "silent",
meaning the majority of people who are infected exhibit no signs or symptoms.
Despite its typically asymptomatic nature in older children and adults, CMV may
cause severe infections in newborn children (congenital CMV) and may also cause
serious infections in people with weakened immune systems, such as solid organ
or bone marrow transplant recipients. Congenital CMV infection can be treated -
but not cured - and there are currently no approved vaccines available for the
prevention of infection in either the congenital or the transplant setting.


Zika


Zika is a mosquito-borne virus that is spread primarily through the bite of an
infected Aedes species mosquito, but can also be transmitted sexually, during
pregnancy, or during childbirth. Acute infections are typically mild, but Zika
has been associated with a number of neurological complications in newborns. The
first formal description of Zika virus was published in 1952, but it was not
until 2007 that the first Zika outbreak in humans was recorded. Over the past
decade, Zika has begun to spread globally, and between January 2014 and February
2016, 33 countries reported circulation of the Zika virus, including in North
America. There is currently no vaccine to prevent Zika infection.



Pipeline Programs


The table below is an overview of our commercial vaccine and our investigational programs as of August 4, 2022:



Indication                               Program          Technology   Current Status
Approved Vaccine                    PreHevbrio1,2,3          VLP       Registration/Commercial
? Hepatitis B                      Hepatitis B Vaccine
                                      (Recombinant)
Prophylactic Candidates
? COVID-19 (Beta variant)               VBI-2905             eVLP      Ongoing Phase Ib
? COVID-19 (Ancestral)                  VBI-2902             eVLP      Ongoing Phase Ia
? Cytomegalovirus                       VBI-1501             eVLP      Phase I Completed
? Pan-coronavirus (Multivalent)         VBI-2901             eVLP      

Pre-Clinical

? Coronaviruses (Multivalent)          Undisclosed           eVLP      Pre-Clinical
? Zika                                  VBI-2501             eVLP      Pre-Clinical

Therapeutic Candidates
? Hepatitis B                           VBI-2601             VLP       Ongoing Phase II
? Glioblastoma                          VBI-1901             eVLP      Ongoing Phase I/IIa
? Other CMV-Associated Cancers         Undisclosed           eVLP      Preclinical



1Approved for use in the U.S. for the prevention of infection caused by all known subtypes of hepatitis B virus in adults 18 years of age and older

2 Approved for use in the European Union/European Economic Area and the UK,
under the brand name PreHevbri, for active immunization against infection caused
by all known subtypes of the hepatitis B virus (HBV) in adults. It can be
expected that hepatitis B will also be prevented by immunization with PreHevbri
as hepatitis B (caused by the delta agent) does not occur in the absence of HBV
infection.

3 Approved for use in Israel, under the brand name Sci-B-Vac, for active immunization against hepatitis B virus (HBV infection)



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A summary of our marketed product, lead pipeline programs and recent developments follows.



Marketed Product


PreHevbrio (Hepatitis B Vaccine [Recombinant])




PreHevbrio (Hepatitis B Vaccine [Recombinant]) was approved by the FDA on
November 30, 2021 for the prevention of infection caused by all known subtypes
of HBV in adults age 18 years and older. PreHevbrio contains the S, pre-S2, and
pre-S1 HBV surface antigens, and is the only approved 3-antigen HBV vaccine for
adults in the U.S. On February 23, 2022, following discussion at the CDC's ACIP
meeting, PreHevbrio joined the list of recommended products for prophylactic
adult vaccination against HBV infection. The inclusion of PreHevbrio in the ACIP
recommendation was reflected in a CDC publication on April 1, 2022, and was a
notable milestone as many insurance plans and institutions require an ACIP
recommendation before a vaccine is able to be reimbursed or is made available to
patients. Additionally, PreHevbrio will be included in the next annual update of
the CDC Adult Immunization Schedule in 2023, which will summarize changes
throughout the coming year. VBI launched PreHevbrio in the U.S. at the end of
the first quarter of 2022, and revenue generation began in the second quarter of
2022.


Commercial and regulatory activity for VBI's 3-antigen HBV vaccine outside of the U.S. include:

? European Union ("EU"): On May 2, 2022, we announced that the European

Commission (the "EC") granted Marketing Authorization for PreHevbri [Hepatitis

B vaccine (recombinant, adsorbed)], following the February 2022 positive

opinion granted by EMA's Committee for Medicinal Products for Human Use

("CHMP"). The European Commission's centralized marketing authorization is

valid in all EU Member States as well as in the European Economic Area ("EEA")

countries (Iceland, Liechtenstein, and Norway). VBI expects PreHevbri will

available in certain European countries from early 2023.

? United Kingdom ("UK"): On June 1, 2022, we announced that the UK Medicines and

Healthcare Products Regulatory Agency ("MHRA") granted marketing authorization

for PreHevbri [Hepatitis B vaccine (recombinant, adsorbed)]. This follows the

EC centralized marketing authorization received recently and was conducted as

part of the EC Decision Reliance Procedures ("ESCDRP"). VBI expects to make

PreHevbri available in the UK in early 2023.

? Israel: Approved and commercially available under the brand name Sci-B-Vac®

? Canada: On December 9, 2021, we completed the filing of a New Drug Submission

("NDS") to Health Canada for our 3-antigen hepatitis B vaccine candidate.

Discussions are underway with regulatory agencies to determine the brand name

    for our 3-antigen HBV vaccine in Canada.



Prophylactic Investigational Candidates

VBI-2900: Coronavirus Vaccine Program (VBI-2901, VBI-2902, VBI-2905)




In response to the ongoing SARS-CoV-2 (COVID-19) pandemic, VBI initiated
development of a prophylactic coronavirus vaccine program. Coronaviruses are
enveloped viruses by nature which make them a prime target for VBI's flexible
eVLP platform technology.



On August 26, 2020, we announced data from three pre-clinical studies conducted
to enable selection of optimized clinical candidates for our coronavirus vaccine
program. As a result of these studies, VBI selected two vaccine candidates, with
the goal of bringing forward candidates that add meaningful clinical and medical
benefit to those already approved: (1) VBI-2901, a multivalent pan-coronavirus
vaccine candidate expressing the SARS-CoV-2, SARS, and MERS spike proteins; and
(2) VBI-2902, a monovalent vaccine candidate expressing an optimized "prefusion"
form of the SARS-CoV-2 spike protein.



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In March 2021, a Phase I study of VBI-2902 was initiated and on June 29, 2021 we
announced initial positive data from the Phase Ia portion of this study that
evaluated one- and two-dose regimens of 5µg of VBI-2902 in 61 healthy adults age
18-54 years. After two doses, VBI-2902 induced neutralization titers in 100% of
participants, with 4.3x higher geometric mean titer ("GMT") than that of the
convalescent serum panel (n=25), and peak antibody binding GMT of 1:4,047. The
study supports the assessment of a one-dose booster regimen in seropositive
individuals and two-dose regimens in seronegative individuals. VBI-2902 was also
well tolerated with no safety signals observed.



In response to the increased circulation of SARS-CoV-2 variants, the Phase Ib
portion of the ongoing Phase I study was initiated in September 2021 to assess
VBI-2905, our eVLP vaccine candidate directed against the SARS-CoV-2 Beta
variant. On April 5, 2022, we announced new data from the Phase 1b study (n=53).
A single-dose booster of VBI-2905 increased the geometric mean titer ("GMT") of
neutralizing antibodies directed against the Beta variant 3.8-fold, at day 28,
in participants who had previously received two-doses of an mRNA vaccine
(ancestral strain) - approximately 2-fold increases were also seen at day 28 in
antibody GMTs against both the ancestral and delta variant. New preclinical data
announced at the same time showed that against a panel of coronavirus variants
in mice, reactivity was seen with VBI-2902 against all variants including the
ancestral strain, Delta, Beta, Omicron, Lambda, and RaTG13 (a bat coronavirus
that is distant to circulating human strains). In this same panel, VBI-2901 was
able to elicit an even stronger response against all variants tested - as the
strains became more divergent from the ancestral strain, VBI-2901 elicited a
greater difference in GMT from VBI-2902, ranging from 2.5-fold higher against
the ancestral strain to 9.0-fold higher against the bat coronavirus.
Additionally, a validated pseudoparticle neutralization assay ("PNA")
benchmarked against the WHO reference standard demonstrated that VBI-2902
elicited neutralizing antibody responses of 176 IU50/mL in its Phase 1a study -
this international standard measure would predict a greater than 90% efficacy,
with two internationally approved vaccines estimated to have 90% efficacy at 83
and 140 IU50/mL (Gilbert, PB, 2021).



The new clinical and preclinical data for all three candidates continued to
support the potential of the eVLP platform against coronaviruses. The first
clinical study of VBI's multivalent candidate, designed to increase breadth of
protection against COVID-19 and related coronaviruses, is expected to begin
in
Q3 2022.



The VBI-2900 program is supported by a partnership with CEPI (the "CEPI Funding
Agreement"), with contributions of up to $33 million; a partnership with the
Strategic Innovation Fund ("SIF"), established by the Government of Canada, with
an award of up to CAD $56 million; contribution of up to CAD $1 million from the
Industrial Research Assistance Program ("IRAP") of the National Research Council
of Canada ("NRC"); and a collaboration with the NRC.



VBI-1501: Prophylactic CMV Vaccine Candidate

Our prophylactic CMV vaccine candidate uses the eVLP platform to express a modified form of the CMV glycoprotein B ("gB") antigen and is adjuvanted with alum, an adjuvant used in FDA-approved products.




Following the successful completion of the Phase I study in May 2018, and
positive discussions with Health Canada, we announced plans for a Phase II
clinical study evaluating VBI-1501 on December 20, 2018. We received similarly
positive guidance from the FDA in July 2019. The Phase II study is expected to
assess the safety and immunogenicity of dosages of VBI-1501 up to 20µg with
alum. We are currently evaluating the timing of the Phase II study.



Therapeutic Investigational Candidates

VBI-2601: HBV Immunotherapeutic Candidate




VBI-2601 (BRII-179) is our novel, recombinant, protein-based immunotherapeutic
candidate in development for the treatment of chronic HBV infection. VBI-2601
(BRII-179) is formulated to induce broad immunity against HBV, including T-cell
immunity which plays an important role in controlling HBV infection.



On April 12, 2021 and June 23, 2021, we announced data from the completed Phase
Ib/IIa clinical study in patients with chronic HBV infection, which was
conducted by our partner Brii Biosciences Limited ("Brii Bio"). The study was a
randomized, controlled study designed to assess the safety, tolerability,
antiviral and immunologic activity of VBI-2601. The study was a two-part,
dose-escalation study assessing different dose levels of VBI-2601 (BRII-179)
with and without an immunomodulatory adjuvant, conducted at multiple study sites
in New Zealand, Australia, Thailand, South Korea, Hong Kong SAR, and China.



The data from the Phase Ib/IIa for 33 evaluable patients across all study arms
suggest: (1) VBI-2601 (BRII-179) is well tolerated at all dose levels with and
without the adjuvant with no significant adverse events identified; (2) VBI-2601
(BRII-179) induced both B cell (antibody) and T cell responses in
chronically-infected HBV patients, (3) VBI-2601 (BRII-179) induced restimulation
of T cell responses to HBV surface antigens, including S, Pre-S1 and Pre-S2, in
greater than 50% of the evaluable patients compared to no detectable response in
the control arm; (4) the T cell responses and antibody responses were comparable
across the 20µg and 40µg unadjuvanted study arms; and (5) T cell response rates
between the adjuvanted and unadjuvanted cohorts were also comparable. Based on
the acceptable safety profile and vaccine-induced adaptive immune responses seen
in this study, VBI-2601 (BRII-179) has been advanced to Phase II studies.



On April 21, 2021, we announced that the first patient had been dosed in a Phase
II clinical study evaluating VBI-2601 (BRII-179) in combination with BRII-835
(VIR-2218), an investigational small interfering ribonucleic acid (siRNA)
targeting HBV, for the treatment of chronic HBV infection. To the best of our
knowledge, this is the first clinical trial in the field to evaluate the
combination of these two HBV mechanisms of action. The multi-center, randomized,
open-label study is designed to evaluate the safety and efficacy of this
combination with and without interferon-alpha as a co-adjuvant. Brii Bio has led
the design and implementation of this functional cure proof-of-concept study
with the support of VBI and Vir Biotechnology ("VIR"). The study will be
conducted at sites in Australia, China, Taiwan, Hong Kong SAR, South Korea, New
Zealand, Singapore, and Thailand. Interim topline clinical data from this study
is expected by the end of 2022.



26






On January 5, 2022, we announced that the first patient was dosed in a second
Phase IIa/IIb clinical study evaluating VBI-2601 (BRII-179). This newly
announced Phase II study will assess VBI-2601 as an add-on therapy to the
standard-of-care nucleos(t)ide reverse transcriptase inhibitor (nrtl) and
pegylated interferon (PEG-IFN-?,) therapy. Interim topline clinical data from
this Phase IIa/IIb clinical study is expected in the first half of 2023.



VBI-1901: Glioblastoma (GBM)


Our cancer vaccine immunotherapeutic program, VBI-1901, targets CMV proteins present in tumor cells. CMV is associated with a number of solid tumors including glioblastoma ("GBM"), breast cancer, and pediatric medulloblastoma.




In January 2018, we initiated dosing in a two-part, multi-center, open-label
Phase I/IIa clinical study of VBI-1901 in 38 patients with recurrent GBM. Phase
I (Part A) of the study was a dose-escalation phase that defined the safety,
tolerability, and optimal dose level of VBI-1901 adjuvanted with
granulocyte-macrophage colony-stimulating factor (GM-CSF) in recurrent GBM
patients with any number of prior recurrences. In December 2018, this phase
completed enrollment of 18 patients across three dose cohorts, the highest of
which (10 µg) was selected as the optimal dose level to test in the Phase IIa
portion (Part B) of the study. Phase IIa of the study, which initiated
enrollment in July 2019, is a subsequent extension of the 10 µg doses level
cohort. This phase is a two-arm study that enrolled 20 first-recurrent GBM
patients to receive 10 µg of VBI-1901 in combination with either GM-CSF or
GlaxoSmithKline Biologicals S.A. ("GSK") proprietary adjuvant system, AS01, as
immunomodulatory adjuvants. AS01 is provided pursuant to a Clinical
Collaboration and Support Study Agreement ("Collaboration Agreement") we entered
into with GSK on September 10, 2019. Enrollment of the 10 patients in the
VBI-1901 with GM-CSF arm was completed in March 2020 and enrollment of the 10
patients in the VBI-1901 with AS01 was completed in October 2020.



Data from the ongoing Phase IIa portion of the study was announced throughout
2020 and 2021, with the latest data presented in December 2021 at the World
Vaccine & Immunology Congress. The data from the Phase IIa portion of this study
demonstrate: (1) improvement in 6-month, 12-month, and 18-month overall survival
("OS") data compared to historical controls; (2) 12-month OS of 60% (n=6/10) in
the VBI-1901 + GM-CSF study arm and 70% (n=7/10) in the VBI-1901 + AS01 study
arm, compared to historical controls of ~30%; (3) 18-month OS of 30% (3/10) in
the VBI-1901 + GM-CSF study arm, 18-month OS not yet reached in the VBI-1901 +
AS01 study arm; (3) 2 partial tumor responses, one of which remains on protocol
past week 86 with a 93% tumor reduction relative to initiation of treatment at
the start of the study, and 7 stable disease observations across both study
arms; and (4) VBI-1901 continues to be safe and well tolerated at all doses
tested, with no safety signals observed.



On June 8, 2021, we announced that the FDA granted Fast-Track Designation for
VBI-1901 formulated with GM-CSF for the treatment of recurrent GBM patients with
first tumor recurrence. The designation was granted based on data from the
Phase
I/IIa study.


On June 22, 2022, we announced that the FDA granted Orphan Drug Designation for VBI-1901 for the treatment of GBM.




Based on the data seen to-date, as part of the next phase of development, we
anticipate assessing VBI-1901 in randomized, controlled studies in both primary
and recurrent GBM patients. In the recurrent setting, we aim to expand the
number of patients in the current trial and add a control arm, with the
potential to support an accelerated approval application based on tumor response
rates and improvement in overall survival. Subject to discussion with the FDA,
the amended protocol is expected to initiate enrollment of additional patients
in the third quarter of 2022. In the primary setting, we expect to evaluate
VBI-1901 as part of the INSIGhT adaptive platform trial in patients first
diagnosed with GBM, which, subject to approval from regulatory bodies, is
expected to begin in the fourth quarter of 2022.



27





Third Party License and Assignment Agreements




We currently are dependent on licenses from third parties for certain of our key
technologies, including the license granted pursuant to an agreement between
Savient Pharmaceuticals Inc. and SciGen Ltd dated June 2004, as subsequently
amended (the "Ferring License Agreement") and a license from L'Universite Pierre
et Marie Curie, now Sorbonne Université ("UPMC"), Institut National de la Santé
et de la Recherche Médicale ("INSERM") and L'école Normale Supérieure de Lyon.
Under the Ferring License Agreement, we are committed to pay Ferring royalties
equal to 7% of net sales (as defined therein) of HBsAg "Product" (as defined
therein). Under an Assignment Agreement between FDS Pharm LLP and SciGen Ltd.,
dated February 14, 2012 (the "SciGen Assignment Agreement"), we are required to
pay royalties to SciGen Ltd. equal to 5% of net sales (as defined in the Ferring
License Agreement) of Product. Under the Ferring License Agreement and the
SciGen Assignment Agreement, we originally were to pay royalties on a
country-by-country basis until the date 10 years after the date of commencement
of the first royalty year in respect of such country. In April 2019, we
exercised our option to extend the Ferring License Agreement in respect of all
the countries that still make up the territory for an additional 7 years by
making a one-time payment to Ferring of $0.1 million. Royalties under the
Ferring License Agreement and SciGen Assignment Agreement will continue to be
payable for the duration of the extended license periods. Under our license
agreement with UPMC and other licensors relating to eVLP technology, we have an
exclusive license to a family of patents that is expected to expire in the
United States in 2022 and expired in other countries in 2021. Under this
agreement, we are required to pay UPMC between 0.75% to 1.75% of net sales and
certain lump-sum milestone payments. UPMC is also a co-owner of the patent
family covering our VBI-1501 CMV vaccine and we are currently negotiating an
agreement with UPMC to cover this patent family. During the three and six months
ended June 30, 2022, we did not make any milestone payments.



Financial Operations Overview

At present, our operations are focused on:

? continuing our commercial launch of PreHevbrio in the United States;

? manufacturing our 3-antigen HBV vaccine at commercial scale to meet demand in

the U.S., Europe, and Israel, where it is approved, and to prepare for supply

in markets where we may obtain marketing authorization;

? preparing for commercialization of our 3-antigen HBV vaccine in Europe where we

have received regulatory approval under the brand name PreHevbri, and in

Canada, where we may obtain regulatory approval;

? supporting the ongoing review of the regulatory submissions for our 3-antigen

HBV vaccine by Health Canada in Canada;

? conducting the Phase I/IIa clinical study of our GBM vaccine immunotherapeutic

candidate, VBI-1901;

? preparing for the next phase of development for our GBM vaccine

immunotherapeutic candidate, VBI-1901;

? conducting the Phase I clinical study of our prophylactic COVID-19 vaccine

candidates, VBI-2902 and VBI-2905 (Beta variant);

? preparing for a Phase I/II clinical study of our pan-coronavirus candidate,

VBI-2901;

? continuing our development and scaling-up production processes for our

prophylactic coronavirus vaccine candidates using a Contract Development and

Manufacturing Organization ("CDMO") located in Canada;

? developing VBI-2601 (BRII-179), our protein-based immunotherapeutic candidate

for treatment of chronic HBV, in collaboration with Brii Bio;

? preparation for further development of VBI-1501, our preventative CMV vaccine

  candidate;




28






? continuing the research and development ("R&D") of our other pipeline

candidates, including the exploration and development of new pipeline

candidates;

? implementing operational, compliance, financial, and management information

systems, including through third party partners, to support our

commercialization activities;

? maintaining, expanding, and protecting our intellectual property portfolio; and

? developing our internal systems and processes for regulatory affairs, legal,

  and compliance.



VBI's revenue generating activities have been the sale of our 3-antigen HBV
vaccine in Israel under the name Sci-B-Vac, and recently the sale of PreHevbrio
in the U.S. In addition, we sell through named patient programs in countries
where our 3-antigen HBV vaccine is not approved, though those markets have
generated a limited number of sales to-date.  We have also generated revenue
from various business development transactions and R&D services generating fees.
To date, we have financed our operations primarily with proceeds from sales of
our common stock, our long-term debt agreements, and contribution agreements and
partnerships with CEPI and the Government of Canada.



VBI has incurred significant net losses and negative operating cash flows since
inception and expects to continue incurring losses and negative cash flows from
operations as we carry out planned clinical, regulatory, R&D, commercial, and
manufacturing activities with respect to the advancement of our 3-antigen HBV
vaccine and new pipeline candidates. As of June 30, 2022, VBI had an accumulated
deficit of approximately $443.3 million and stockholders' equity of
approximately $105.6 million. Our ability to maintain our status as an operating
company and to realize our investment in our In Process Research & Development
("IPR&D") assets, which consist of our CMV and GBM programs, is dependent upon
obtaining adequate cash to finance our clinical development, manufacturing, our
administrative overhead and our research and development activities, and
ultimately to profitably monetize our IPR&D. We expect that we will need to
secure additional financing to finance our business plans, which may be a
combination of proceeds from the issuance of equity securities, the issuance of
additional debt, structured asset financings, government or non-governmental
organization grants or subsidies, and revenues from potential business
development transactions, if any. There is no assurance we will manage to obtain
these sources of financing, if required. These factors raise substantial doubt
about our ability to continue as a going concern. The accompanying financial
statements have been prepared assuming that we will continue as a going concern.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classifications of liabilities that may result should we be unable to
continue as a going concern.



We have incurred operating losses since inception, have not generated
significant product sales revenue and have not achieved profitable operations.
We incurred net losses of $67.0 million for the six months ended June 30, 2022,
and we expect to continue to incur substantial losses in future periods. We
anticipate that we will continue to incur substantial operating expenses as we
continue our research and development and clinical studies, and as we continue
the commercialization of PreHevbrio in the United States, PreHevbri in Europe
and the UK, and, if approved, out 3-antigen HBV vaccines in Canada. These
include expenses related to the focus of our operations highlighted above.



In addition, we have incurred and will continue to incur significant expenses as
a public company, which subject us to the reporting requirements of the Exchange
Act, the Sarbanes-Oxley Act, the rules and regulations of the NASDAQ Capital
Market, and the Canadian securities regulators.



Overall Performance



The Company had net losses of $45,699 and $17,476 for the three months ended
June 30, 2022 and 2021, respectively, and $66,953 and $35,123 for the six months
ended June 30, 2022 and 2021, respectively. We had an accumulated deficit of
$443,259 at June 30, 2022. We had $82,414 of cash and net working capital of
$52,220 as of June 30, 2022.



29






Revenue, net


Revenues, net consist of product sales of PreHevbrio in the U.S and Sci-B-Vac in Israel, as well as R&D services revenue recognized as part of the License Agreement with Brii Bio and other R&D services.

In the U.S., in the second quarter, PreHevbrio was sold to a limited number of
wholesalers and specialty distributors (collectively, our "Customers"). We
expect to continue to expand this group of Customers over the coming months.
Revenues from product sales are recognized when we have satisfied our
performance obligations, which is the transfer of control of our product upon
delivery to the Customer. The timing between the recognition of revenue for
product sales and the receipt of payment is not significant. Because our
standard credit terms are short-term and we expect to receive payment in less
than one year, there is no significant financing component on the related
receivables. Taxes collected from Customers relating to product sales and
remitted to governmental authorities are excluded from revenues.



In Israel, Sci-B-Vac is sold through procurement requests from four health funds ("HMOs") (collectively, the "Sci-B-Vac Customers").




Overall, product revenues, net, reflects our best estimates of the amount of
consideration to which we are entitled based on the terms of the contract. The
amount of variable consideration is included in the net sales price only to the
extent that it is probable that a significant reversal in the amount of the
cumulative revenue recognized will not occur in a future period. If our
estimates differ significantly from actuals, we will record adjustments that
would affect product revenues, net in the period of adjustment.



Pursuant to the License Agreement with Brii Bio, we provide R&D services to Brii Bio as part of the development of VBI-2601 (BRII-179).

In addition, pursuant to an agreement with the Israel Innovation Authority
(formerly the Office of the Chief Scientist of Israel), we are required to make
services available for the biotechnology industry in Israel. These services
include relevant activities for development and manufacturing of therapeutic
proteins according to international standards and cGMP quality level suitable
for toxicological studies in animals. Service activities include analytics/bio
analytics methods for development and process development of therapeutic
proteins starting with a candidate clone through manufacturing. These R&D
services are primarily marketed to the Israeli research community in academia
and Israeli biotechnology companies in the life sciences industry lacking the
infrastructure or experience in the development and production of therapeutic
proteins to the standards and quality required for clinical trials for human
use. During the three and six months ended June 30, 2022, we provided services
to biotechnology companies including analytical development.



Cost of Revenues


Cost of revenues consist primarily of costs incurred for manufacturing our 3-antigen HBV vaccine which includes cost of materials, consumables, supplies, contractors, and salaries.

Research and Development ("R&D") Expenses




R&D expenses, net of government grants and funding arrangements, consist
primarily of costs incurred for the advancement of our lead programs, including:
our 3-antigen HBV vaccine; VBI-1901, our GBM vaccine immunotherapeutic
candidate; VBI-1501, our CMV vaccine candidate; VBI-2601 (BRII-179), our
hepatitis B immunotherapeutic candidate; and VBI-2900, our coronavirus vaccine
program. These costs include:



? the cost of acquiring, developing, and manufacturing clinical study materials,

and other consumables and lab supplies used in our pre-clinical studies;

? expenses incurred under agreements with contractors or CDMOs or Contract

Research Organizations to advance the vaccines into and through completion of

    clinical studies; and

  ? employee-related expenses, including salaries, benefits, travel, and
    stock-based compensation expense.



We expense R&D costs when we incur them.

General and Administrative ("G&A") Expenses




G&A expenses consist principally of commercialization costs, salaries and
related costs for executive and other administrative personnel and consultants,
including stock-based compensation, and travel expenses. Other general and
administrative expenses include professional fees for legal, patent protection,
consulting and accounting services, travel and conference fees, board of
directors meeting costs, scientific and commercial advisory board meeting costs,
rent, maintenance of facilities, depreciation, office supplies, information
technology costs and expenses, insurance, and other general expenses. G&A
expenses are expensed when incurred.



We expect that our general and administrative expenses will increase in the
future as a result of adding employees and scaling our operations commensurate
with commercializing products, advancing clinical candidates, and continuing to
support a public company infrastructure. These increases will likely include
increased costs for insurance, hiring of additional personnel, board committees,
outside consultants, investor relations, lawyers and accountants, among other
expenses.


Interest Expense, Net of Interest Income

Interest expense is associated with our long-term debt as discussed in Note 9 of the Notes to the Condensed Consolidated Financial Statements.



30






Results of Operations


Three and Six Months Ended June 30, 2022 Compared to the Three and Six Months Ended June 30, 2021




All dollar amounts stated below are in thousands, unless otherwise indicated.



                                              Three months ending
                                                    June 30
                                              2022            2021         Change $       Change %
Revenues, net                              $       346     $      142     $      204             144 %

Expenses:
Cost of revenues                                 2,522          2,634           (112 )            (4 )%
Research and development                         5,643          4,582          1,061              23 %
General and administrative                      15,084          9,367          5,717              61 %
Total operating expenses                        23,249         16,583          6,666              40 %

Loss from operations                           (22,903 )      (16,441 )       (6,462 )            39 %
Interest expense, net of interest income          (901 )         (845 )    
     (56 )             7 %
Foreign exchange loss                          (21,895 )         (190 )      (21,705 )        11,424 %
Loss before income taxes                       (45,699 )      (17,476 )      (28,223 )           161 %

Income tax expense                                   -              -              -               - %

NET LOSS                                   $   (45,699 )   $  (17,476 )   $  (28,223 )           161 %




                                         Six months ending
                                              June 30
                                        2022           2021         Change $       Change %
Revenues, net                        $      472     $      443     $       29               7 %

Expenses:
Cost of revenues                          5,276          5,046            230               5 %
Research and development                  8,005         11,421         (3,416 )           (30 )%
General and administrative               26,014         16,114          9,900              61 %
Total operating expenses                 39,295         32,581          6,714              21 %

Loss from operations                    (38,823 )      (32,138 )       (6,685 )            21 %

Interest expense, net of interest
income                                   (1,841 )       (2,657 )          816             (31 )%
Foreign exchange loss                   (26,289 )         (328 )      (25,961 )         7,915 %
Loss before income taxes                (66,953 )      (35,123 )      (31,830 )            91 %

Income tax expense                            -              -              -               - %

NET LOSS                             $  (66,953 )   $  (35,123 )   $  (31,830 )            91 %




Revenues, net


Revenues, net for the three months ended June 30, 2022 was $346 as compared to
$142 for the three months ended June 30, 2021. Revenues for the three months
ended June 30, 2022 increased by $204 or 144% due to an increase in product
revenue as a result of the launch of PreHevbrio in the U.S. late in Q1 2022 with
revenue generation beginning in Q2 2022. Over the coming months, VBI expects to
expand the number of Customers, continuing to broaden access to PreHevbrio
in
the U.S.



Revenues, net for the six months ended June 30, 2022 was $472 as compared to
$443 for the six months ended June 30, 2021. Revenues, net for the six months
ended June 30, 2022 increased by $29 or 7% due to an increase in product revenue
as a result of the launch of PreHevbrio in the U.S. late in Q1 2022 with revenue
generation beginning in Q2 2022, offset by a decrease in R&D services revenue
for VBI-2601, being developed in collaboration with Brii Bio, as fewer
manufacturing and non-clinical research services were required in the six months
ended June 30, 2022 compared to the six months ended June 30, 2021



Revenues, net Composition



                          Three months ended           Six months ended
                                June 30                     June 30
                         2022            2021          2022          2021

Product revenue, net   $     331       $      71     $    422       $  238
R&D service revenue           15              71           50          205
Total revenues, net    $     346       $     142     $    472       $  443




31





Revenues, net by Geographic Region



                                       Three months ending
                                             June 30
                                      2022            2021        $ Change      % Change
Revenue net in United States        $     207       $       -     $     207           100 %
Revenue, net in Israel                    126              87            39            45 %
Revenue, net in China / Hong Kong          13              55           (42
)         (76 )%
Total Revenues, net                 $     346       $     142     $     204           144 %




                                      Six months ending
                                           June 30
                                      2022           2021       $ Change      % Change
Revenue, net in United States       $     207       $    -     $      207           100 %
Revenue, net in Israel                    221          256            (35 )         (14 )%
Revenue, net in China / Hong Kong          38          183           (145 )
        (79 )%
Revenue, net in Europe                      6            4              2            50 %
Total Revenues, net                 $     472       $  443     $       29             7 %




Cost of Revenues


Cost of revenues for the three months ended June 30, 2022 were $2,522 as compared to $2,634 for the three months ended June 30, 2021. The cost of revenues in the three months ended June 30, 2022 is comparable to the three months ended June 30, 2021.




Cost of revenues for the six months ended June 30, 2022 were $5,276 as compared
to $5,046 for the six months ended June 30, 2021. The cost of revenues in the
six months ended June 30, 2022 is comparable to the six months ended June 30,
2021.


Research and Development Expenses




R&D expenses, net of government grants and funding arrangements, for the three
months ended June 30, 2022 were $5,643 as compared to $4,582for the three months
ended June 30, 2021. R&D expenses were offset by $1,018 for the three months
ended June 30, 2022 and $3,333 for the three months ended June 30, 2021 due to
government grants and funding arrangements. The increase in net R&D expenses of
$1,061 or 23% is mainly a result of (1) an increase in R&D expenses related to
continued development of our vaccine and vaccine candidates, specifically
VBI-1901, our GBM vaccine immunotherapeutic candidate, as we prepare for the
next phase of development, offset by (2) a decrease in the costs related to our
coronavirus vaccine program that are not offset by government grants and funding
arrangements, specifically VBI-2902, as the clinical trial of VBI-2902 began
during the three months ended June 30, 2021.



R&D expenses, net of government grants and funding arrangements, for the six
months ended June 30, 2022 were $8,005 as compared to $11,421for the six months
ended June 30, 2021. R&D expenses were offset by $3,856 for the three months
ended June 30, 2022 and $6,030 for the six months ended June 30, 2021 due to
government grants and funding arrangements. The decrease in net R&D expenses of
$3,416 or 30% is mainly a result of the items discussed above in addition to a
decrease in U.S. regulatory fees related to PreHevbrio that occurred during the
six months ended June 30, 2021, with no similar regulatory fees that occurred
during the six months ended June 30, 2022.



General and Administrative Expenses




G&A expenses, net of government grants and funding arrangements, for the three
months ended June 30, 2022 were $15,084 as compared to $9,367 for the three
months ended June 30, 2021. G&A expenses were offset by $111 for the three
months ended June 30, 2022 and $56 for the three months ended June 30, 2021 due
to government grants and funding arrangements. The net G&A expense increase of
$5,717 or 61% is mainly a result of the increase in commercial activities
related to our 3-antigen HBV vaccine, most notably the deployment of our
commercial field teams and development of our distribution infrastructure, as
FDA regulatory approval of PreHevbrio occurred in late 2021. Additional costs
include increased insurance costs, increased professional costs, and increased
labor costs.



G&A expenses, net of government grants and funding arrangements, for the six
months ended June 30, 2022 were $26,014 as compared to $16,114 for the six
months ended June 30, 2021. G&A expenses were offset by $419 for the six months
ended June 30, 2022 and $195 for the six months ended June 30, 2021 due to
government grants and funding arrangements. The net G&A expense increase of
$9,900 or 61% is a result of the items discussed above.



32






Loss from Operations


The net loss from operations for the three months ended June 30, 2022 was $22,903 as compared to $16,441 for the three months ended June 30, 2021. The $6,462 increase in the net loss from operations resulted from the items discussed above.

The net loss from operations for the six months ended June 30, 2022 was $38,823 as compared to $32,138 for the six months ended June 30, 2021. The $6,685 increase in the net loss from operations resulted from the items discussed above.

Interest Expense, Net of Interest Income




Interest expense, net of interest income for the three months ended June 30,
2022 was $901 as compared to $845 for the three months ended June 30, 2021. The
increase in interest expense, net of interest income of $56 or 7% is due to
increased interest rates on our long-term debt, offset by increased interest
rates earned on cash.


Interest expense, net of interest income for the six months ended June 30, 2022
was $1,841 as compared to $2,657 for the three months ended June 30, 2021. The
decrease in interest expense, net of interest income of $816 or 31% is due to
due the conversion of $2,000 of the secured term loan to common shares in the
six months ended June 30 2021, which resulted in $1,161 of additional interest
accretion being recognized in interest expense, net of interest income; offset
by an increase in long term debt of $12,000 and an increase in interest rates on
our long-term debt during the six months ended June 30, 2022.



Foreign Exchange Loss


Foreign exchange loss for the three months ended June 30, 2022 was $21,895 as
compared to $190 for the three months ended June 30, 2021. Certain intercompany
loans between us and our subsidiaries are denominated in a currency other than
the functional currency of each entity. The primary driver of the increase in
foreign exchange loss was the impact of the relative strengthening of the U.S.
and Canadian Dollars against the New Israeli Shekel upon translation of these
intercompany loans.


Foreign exchange loss for the six months ended June 30, 2022 was $26,289 as compared to $328 for the six months ended June 30, 2021. The increase in foreign exchange loss is the result of the changes discussed above.



Net Loss


Net loss for the three months ended June 30, 2022 was $45,699 compared to $17,476 for the three months ended June 30, 2021, and was a result of the items discussed above.




Net loss for the six months ended June 30, 2022 was $66,953 compared to $35,123
for the six months ended June 30, 2021, and was a result of the items discussed
above.


Liquidity and Capital Resources




                       June 30, 2022       December 31, 2021      $ Change      % Change

Cash                  $        82,414     $           121,694     $ (39,280 )         (32 )%
Current Assets                 92,752                 130,284       (37,532 )         (29 )%
Current Liabilities            40,532                  32,586         7,946            24 %
Working Capital                52,220                  97,698       (45,478 )         (47 )%
Accumulated Deficit          (443,259 )              (378,371 )     (64,888 )          17 %




As of June 30, 2022, we had cash of $82,414 as compared to $121,694 as of
December 31, 2021. As of June 30, 2022, we had working capital of $52,220 as
compared to working capital of $97,698 at December 31, 2021. Working capital is
calculated by subtracting current liabilities from current assets.



Net Cash Used in Operating Activities




The Company incurred net losses of $66,953 and $35,123 in the six months ended
June 30, 2022 and 2021, respectively. The Company used $37,375 and $17,362 in
cash for operating activities during the six months ended June 30, 2022 and
2021, respectively. The increase in cash outflows is largely a result of an
increase in net loss attributable to commercial expenses for the launch of
PreHevbrio, and a decrease in net change in operating working capital as we
received $8,285 of cash in advance from the CEPI Funding Agreement during the
six months ended June 30, 2021, compared to $964 cash received in advance from
the CEPI Funding Agreement during the six months ended June 30, 2022.



Net Cash Used in Investing Activities




Net cash flows used by investing activities was $1,592 for the six months ended
June 30, 2022 compared to cash provided in investing activities of $24,191 for
the six months ended June 30, 2021. The decrease in cash flows in investing
activities is largely as a result of the redemption of short-term investments of
$25,151 during the six months ended June 30, 2021.



Net Cash Provided by Financing Activities

Net cash flows provided by financing activities was $12 for the six months ended
June 30, 2022 compared to cash flows provided by financing activities of $34,346
during the six months ended June 30, 2021 which was due to common shares issued
for cash and proceeds from debt financing.



Sources of Liquidity


Jefferies Open Market Sale Agreement ("ATM")




On July 31, 2020, the Company entered into an Open Market Sale Agreement with
Jefferies LLC ("Jefferies"), pursuant to which the Company may offer and sell
its common shares having an aggregate price of up to $125,000 from time to time
through Jefferies, acting as agent or principal (the "ATM Program"). Common
shares were offered pursuant to a sales agreement prospectus included in the
Company's automatic shelf registration on Form S-3 (the "S-3ASR") filed with the
SEC on July 31, 2020. On September 3, 2021, the Company and Jefferies entered in
to a second Open Market Sale Agreement for the sale of common shares having an
aggregate price of up to $125,000 from time to time, which the Company could
choose to use when no shares remain available for issuance under the ATM
Program, and filed a prospectus supplement to the base prospectus included in
the S-3ASR. The Company is no longer a well-known seasoned issuer, and
accordingly, the Company will not make any sales under the ATM Program or
pursuant to the second sales agreement, unless and until a new registration
statement and/or a new prospectus is filed. During the year ended December 31,
2021, the Company issued 9,135,632 common shares under the ATM Program, for
total gross proceeds of $33,293 at an average price of $3.64. The Company
incurred $1,117 of share issuance costs related to the common shares issued
resulting in net proceeds of $32,176.



K2 HealthVentures LLC Long Term Debt




On May 22, 2020, the Company (along with its subsidiary VBI Cda) entered into
the Loan and Guaranty Agreement (the "Loan Agreement") with K2 HealthVentures
LLC and any other lender from time-to-time party thereto (the "Lenders")
pursuant to which we received the first tranche secured term loan of $20,000
(the "First Tranche Term Loan"). The Lenders originally agreed to make available
the following additional tranches subject to the following conditions and upon
the submission of a loan request by the Company: (1) up to $10,000 available
between January 1, 2021 and April 30, 2021 upon achievement of certain
milestones (the "Second Tranche Term Loan"), (2) $10,000 available between the
closing date and December 31, 2021, subject to achievement of a certain U.S.
Food and Drug Administration ("FDA") approval (the "Third Tranche Term Loan"),
and (3) a final tranche of up to $10,000 that could be made available any time
prior to June 30, 2022, subject to the advance of the Third Tranche Term Loan,
satisfactory review by the administrative agent of our financial and operating
plan, and approval by the Lenders' investment committee. The Company obtained
FDA approval on November 30, 2021 but elected not to draw down the Third Tranche
Term Loan. As the Third Tranche Term Loan availability period has passed, the
final tranche will not be made available. Pursuant to the Loan Agreement, the
Lenders originally had the ability to convert, at the Lenders' option, up to
$4,000 of the secured term loan into common shares of the Company at a
conversion price of $1.46 per share ("K2 conversion feature") until the maturity
date of June 1, 2024. On February 3, 2021, pursuant to the Loan Agreement, the
Lenders, converted $2,000 of the secured term loan into 1,369,863 common shares
at a conversion price of $1.46. The Lenders have the ability to convert an
additional $2,000 at the Lenders' option.



33






On May 17, 2021, the Company entered into the First Amendment with the Lenders
to: (1) increase the Second Tranche Term Loan from $10,000 to $12,000; (2)
extend the availability period of the Second Tranche Term Loan beyond April 30,
2021, subject to certain conditions; (3) amend the Second Tranche Term Loan
interest rate equal to the greater of (a) 7.75% and (b) prime rate plus 4.50%;
and (4) extend the date as of which amortization of the loans under the Loan
Agreement shall begin from July 1, 2022 to January 1, 2023.



In connection with the Loan Agreement, on May 22, 2020, the Company issued the
Lenders a warrant to purchase up to 625,000 common shares (the "Original K2
Warrant") at an exercise price of $1.12 (the "Warrant Price"). On May 17, 2021,
in connection with the First Amendment, the Company issued the Lenders an
amended and restated warrant to purchase an additional 312,500 common shares for
a total of 937,500 common shares (the "Restated K2 Warrant") with the same
Warrant Price of $1.12. The Restated K2 Warrant may be exercised either for cash
or on a cashless "net exercise" basis and expires on May 22, 2030.



As a result of the Original K2 Warrant and K2 conversion feature, the debt was
issued at a discount of $3.8 million. We also incurred $1.0 million of debt
issuance costs and are required to make a final payment equal to 6.95% of the
aggregate original secured term loan principal on the maturity date of the term
loan, or upon earlier prepayment of the term loans in accordance with the Loan
Agreement, resulting in an additional discount of $1.4 million related to the
First Tranche Term Loan. The total initial debt discount was $6.2 million.



The Second Tranche Term Loan, issued pursuant to the Loan Agreement, as amended
by the First Amendment, resulted in the Company incurring an additional $0.02
million of debt issuance costs, $0.2 million of third-party costs and being
required to make a final payment of $0.8 million, which is equal to 6.95% of the
Second Tranche Term Loan.


The total principal amount of the loan under the Loan Agreement, as amended by
the First Amendment, outstanding at June 30, 2022, including the $2.2 million
final payment discussed above, is $32.2 million. The principal amount of the
loan made under the Loan Agreement prior to the First Amendment accrues interest
at an annual rate equal to the greater of (a) 8.25% or (b) prime rate plus
5.00%. The principal amount of the Second Tranche Term Loan made under the Loan
Agreement, as amended by the First Amendment, accrues interest at an annual rate
equal to the greater of (a) 7.75% or (b) prime rate plus 4.50%. The interest
rate as of June 30, 2022 was 9.75% for the First Tranche Term Loan and 9.25% for
the Second Tranche Term Loan. The Company is required to pay only interest
until
January 1, 2023.



CEPI Partnership



On March 9, 2021, the Company and CEPI announced a partnership, the CEPI Funding
Agreement, to develop eVLP vaccine candidates against SARS-COV-2 variants,
including the Beta variant, also known as the B.1.351 variant and 501Y.V2, first
identified in South Africa. CEPI agreed to provide up to $33,018 to support the
advancement of VBI-2905, a monovalent eVLP candidate expressing the pre-fusion
form of the spike protein from the Beta variant, through Phase I clinical
development. This funding will also support preclinical expansion of additional
multivalent vaccine candidates designed to evaluate the potential breadth of our
eVLP technology. The preclinical expansion is intended to develop clinic-ready
vaccine candidates capable of addressing emerging variants. Since inception of
the CEPI Funding Agreement in 2021, the Company received $19,327 from CEPI and
the Company had $8,639 recorded as deferred funding, recorded in other current
liabilities on the condensed consolidated balance sheet.



Plan of Operations and Future Funding Requirements




The report of our independent registered public accounting firm on our
consolidated financial statements for the year ended December 31, 2021 contains
an explanatory paragraph regarding our ability to continue as a going concern.
VBI has incurred significant net losses and negative operating cash flows since
inception and expects to continue incurring losses and negative cash flows from
operations as we carry out our planned clinical, regulatory, R&D, commercial,
and manufacturing activities with respect to the advancement of our 3-antigen
HBV vaccine and pipeline candidates. As of June 30, 2022, VBI had an accumulated
deficit of $443,259 and stockholders' equity of $105,558



Our ability to maintain our status as an operating company and to realize our
investment in our IPR&D assets is dependent upon obtaining adequate cash to
finance our clinical development, manufacturing, our commercialization
activities, our administrative overhead and our research and development
activities. We expect that we will need to secure additional financing to
finance our business plans, which may be a combination of proceeds from the
issuance of equity securities, the issuance of additional debt, structured asset
financings, government or non-government grants or subsidies, and revenues from
potential business development transactions, if any. There is no assurance we
will manage to obtain these sources of financing. The accompanying financial
statements have been prepared assuming that we will continue as a going concern;
however, the above conditions raise substantial doubt about our ability to do
so. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classifications of liabilities that may result should we be
unable to continue as a going concern. Our long-term success and ability to
continue as a going concern is dependent upon obtaining sufficient capital to
fund the research and development of our products, to bring about their
successful commercial release, to generate revenue, and, ultimately, to attain
profitable operations, or, alternatively, to advance our products and technology
to such a point that they would be attractive candidates for acquisition by
others in the industry.



34






We will require additional funds to conduct clinical and non-clinical trials,
achieve regulatory approvals, and, subject to such approvals, commercially
launch our products, and will need to secure additional financing in the future
to support our operations and to realize our investment in our IPR&D assets. We
base this belief on assumptions that are subject to change, and we may be
required to use our available cash and cash equivalent resources sooner than we
currently expect. Our actual future capital requirements will depend on many
factors, including the progress and results of our ongoing clinical trials, the
duration and cost of discovery and preclinical development, laboratory testing
and clinical trials for our pipeline candidates, the timing and outcome of
regulatory review of our products, product sales outside of Israel, the costs
involved in preparing, filing, prosecuting, maintaining, defending, and
enforcing patent claims and other intellectual property rights, the number and
development requirements of other pipeline candidates that we pursue, and the
costs of commercialization activities, including product marketing, sales,
and
distribution.


We expect to finance our future cash needs through public or private equity
offerings, debt financings, government grants or non-government funding,
structured asset financings, or business development transactions. Pursuant to
the Contribution Agreement, we will receive up to CAD $55,976 as a government
grant to support the development of the Company's coronavirus vaccine program,
though Phase II clinical studies, and pursuant to the CEPI Funding Agreement, we
will receive up to $33,018 in funding to support the development of the
Company's coronavirus vaccine program, specifically SARS-COV-2 variants. We may
need to raise additional funds more quickly if one or more of our assumptions
prove to be incorrect or if we choose to expand our product development efforts
more rapidly than we presently anticipate. We may also decide to raise
additional funds even before we need them if the conditions for raising capital
are favorable. Additional equity, debt, structured asset financing, government
grants or non-government funding, or business development transactions may not
be available on acceptable terms, if at all. If adequate funds are not
available, we may be required to delay, reduce the scope of or eliminate our R&D
programs, reduce our planned commercialization efforts or obtain funds through
arrangements with collaborators or others that may require us to relinquish
rights to certain pipeline candidates that we might otherwise seek to develop or
commercialize independently.



To the extent we raise additional capital by issuing equity securities or
obtaining borrowings convertible into equity, ownership dilution to existing
stockholders will result and future investors may be granted rights superior to
those of existing stockholders. The incurrence of indebtedness or debt financing
would result in increased fixed obligations and could also result in covenants
that would restrict our operations. Our ability to obtain additional capital may
depend on prevailing economic conditions and financial, business, and other
factors beyond our control. The ongoing COVID-19 pandemic and the continuing
armed conflict between Russia and Ukraine, and inflation has caused an unstable
economic environment globally. Disruptions in the global financial markets may
adversely impact the availability and cost of credit, as well as our ability to
raise money in the capital markets. Current economic conditions have been, and
continue to be, volatile. Continued instability in these market conditions may
limit our ability to access the capital necessary to fund and grow our business.



The Company's long-term success and ability to continue as a going concern are
dependent upon obtaining sufficient capital to fund the research and development
of its pipeline candidates, to bring about their successful commercial release,
to generate revenue and, ultimately, to attain profitable operations or,
alternatively, to advance its products and technology to such a point that they
would be attractive candidates for acquisition by others in the industry.



To date, the Company has been able to obtain financing as and when it was needed? however, there is no assurance that financing will be available in the future, or if it is, that it will be available at acceptable terms.




As of June 30, 2022, we have no off-balance sheet transactions, arrangements,
obligations (including contingent obligations), or other relationships with
unconsolidated entities or other persons that have, or may have, a material
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures, or capital
resources.


NASDAQ Minimum Bid Price Requirement




On July 1, 2022, we received a letter from the Listing Qualifications Department
of the Nasdaq Stock Market ("NASDAQ") indicating that, based upon the closing
bid price of our common shares for the 30 consecutive business day period
between May 18, 2022 through June 30, 2022, we did not meet the minimum bid
price of $1.00 per share required for continued listing on The NASDAQ Capital
Market pursuant to NASDAQ Listing Rule 5550(a)(2). The letter also indicated
that we will be provided with a compliance period of 180 calendar days, or until
December 28, 2022 (the "Compliance Period"), in which to regain compliance
pursuant to NASDAQ Listing Rule 5810(c)(3)(A).



In order to regain compliance with NASDAQ's minimum bid price requirement, our
common shares must maintain a minimum closing bid price of $1.00 for a minimum
of ten consecutive business days during the Compliance Period. In the event that
we do not regain compliance by the end of the Compliance Period, we may be
eligible for additional time to regain compliance. To qualify, we will be
required to meet the continued listing requirement for the market value of our
publicly held shares and all other initial listing standards for NASDAQ, 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, by effecting a reverse stock split if necessary. If we meet these
requirements, we may be granted an additional 180 calendar days to regain
compliance. We have not regained compliance as of the date of this Form 10-Q,
and if we fail to regain compliance during the Compliance Period or any
subsequent grace period granted by NASDAQ, our common shares will be subject to
delisting by NASDAQ, which could seriously decrease or eliminate the value of an
investment in our common shares and result in significantly increased
uncertainty as to the Company's ability to raise additional capital.



35





Known Trends, Events, and Uncertainties




As with other companies that are in the process of commercializing novel
pharmaceutical products, we will need to successfully manage normal business and
scientific risks. Research and development of new technologies is, by its
nature, unpredictable. We cannot assure you that our technology will be adopted,
that we will ever earn revenues sufficient to support our operations, or that we
will ever be profitable. The impact of the ongoing COVID-19 pandemic, including
the Omicron variant of COVID-19, which appears to be the most transmissible
variant to-date, and the new subvariant, BA.5, is currently indeterminable and
rapidly evolving, and has adversely affected and may continue to adversely
affect our operations and the global economy. In addition, the consequences of
the ongoing conflict between Russia and Ukraine, including related sanctions and
countermeasures, are difficult to predict, and could adversely impact
geopolitical and macroeconomic conditions, the global economy, and contribute to
increased market volatility, which may in turn adversely affect our business and
operations. Furthermore, other than as discussed in this report, we have no
committed source of financing and may not be able to raise money as and when we
need it to continue our operations. If we cannot raise funds as and when we need
them, we may be required to severely curtail, or even to cease, our operations.



Other than as discussed above and elsewhere in this report, we are not aware of
any trends, events or uncertainties that are likely to have a material effect on
our financial condition.


Critical Accounting Policies and Estimates




There have been no changes to our critical accounting policies during the six
months ended June 30, 2022. Critical accounting policies and the significant
accounting estimates made in accordance with such policies are regularly
discussed with the Audit Committee of the Company's board of directors. Those
policies are discussed under "Critical Accounting Policies" in our "Management's
Discussion and Analysis of the Financial Condition and Results of Operations"
included in Item 7 of our Annual Report on Form 10-K for the year ended December
31, 2021, as well as in our consolidated financial statements and the footnotes
thereto, included in the Annual Report on Form 10-K.



Recent Accounting Pronouncements

See Note 3 of Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2022 3,92 M - -
Net income 2022 -98,1 M - -
Net Debt 2022 - - -
P/E ratio 2022 -1,91x
Yield 2022 -
Capitalization 182 M 182 M -
Capi. / Sales 2022 46,5x
Capi. / Sales 2023 9,06x
Nbr of Employees 152
Free-Float 79,2%
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Managers and Directors
Jeffrey R. Baxter President, Chief Executive Officer & Director
Christopher McNulty CFO, Director & Head-Business Development
Steven H. Gillis Chairman
David Evander Anderson Chief Scientific Officer
Francisco Diaz-Mitoma Chief Medical Officer
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