BioLineRx - 20-F annual report 2023

Certain Definitions

In this Annual Report on Form 20-F, unless the context otherwise requires:

Forward-Looking Statements

Some of the statements under the sections entitled “Item 3. Key Information – Risk Factors,” “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects” and elsewhere in this Annual Report on Form 20-F constitute forward-looking statements. These include statements regarding management's expectations, beliefs and intentions regarding, among other things, the potential benefits of APHEXDA, the ongoing commercialization of APHEXDA and the plans and objectives of management for future operations and expectations and commercial potential of APHEXDA, as well as its potential investigational uses. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms including “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions, and are subject to risks and uncertainties. In addition, the section of this Annual Report on Form 20-F entitled “Item 4. Information on the Company” contains information obtained from independent industry and other sources that we have not independently verified. You should not put undue reliance on any forward-looking statements. Our actual results could differ materially from those discussed in the forward-looking statements. Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements. Readers are encouraged to consult the Company’s filings made on Form 6-K, which are periodically filed with or furnished to the SEC.

Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.  KEY INFORMATION

A. [Reserved]

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

You should carefully consider the risks we describe below, in addition to the other information set forth elsewhere in this Annual Report on Form 20-F, including our consolidated financial statements and the related notes beginning on page F-1, before deciding to invest in our ordinary shares and ADSs. These material risks could adversely impact our results of operations, possibly causing the trading price of our ordinary shares and ADSs to decline, and you could lose all or part of your investment.

Summary Risk Factors

Investing in our ordinary shares involves a high degree of risk, as fully described below. The principal factors and uncertainties that make investing in our ordinary shares risky, include, among others:

We have incurred significant losses since inception and expect to incur additional losses in the future and may never be profitable.

Since our incorporation, we have been mainly focused on research and development. We have incurred losses since inception, principally as a result of research and development and general administrative expenses and more recently sales and marketing in support of our operations. We recorded net losses of $27.1 million in 2021, $25.0 million in 2022 and $60.6 million in 2023. As of December 31, 2023, we had an accumulated deficit of $391 million. We expect to continue to incur significant expenses and sustain net losses for the foreseeable future as we commercialize APHEXDA in stem cell mobilization for autologous bone marrow transplantation in multiple myeloma patients in the United States and continue our planned development activities for motixafortide in other indications.

While we expect to continue to explore alternative financing sources, including the possibility of future securities offerings and government funding, we cannot be certain that in the future these liquidity sources will be available when needed on commercially reasonable terms or at all, or that our actual cash requirements will not be greater than anticipated. We expect to also continue to seek to finance our operations through other sources, including commercialization in the United States for APHEXDA, out-licensing arrangements for the development and commercialization of our therapeutic candidates or other partnerships or joint ventures, as well as grants from government agencies and foundations. If we are unable to obtain future financing through the methods we describe above or through other means, we may be unable to complete our business objectives and may be unable to continue operations, which would have a material adverse effect on our business and financial condition.

In September 2022, we entered into a secured loan agreement, or the Loan Agreement, with Kreos Capital VII Aggregator SCSP, or Kreos VII and together with Kreos V, Kreos Capital. Under the Loan Agreement, Kreos Capital will provide the Company with access to term loans in an aggregate principal amount of up to $40 million in three tranches as follows: (a) a loan in the aggregate principal amount of up to $10 million, (b) a loan in the aggregate principal amount of up to $20 million, available for drawdown upon achievement of certain milestones and until April 1, 2024, and (c) a loan in the aggregate principal amount of up to $10 million, available for drawdown upon achievement of certain milestones and until October 1, 2024. We drew down the initial tranche of $10 million following execution of the agreement in September 2022.

Our ability to make the scheduled payments under the Loan Agreement or to refinance our debt obligations with Kreos Capital depends on numerous factors including, but not limited to, the amount of our cash reserves, our capital requirements and our ability to raise additional capital. We may be unable to maintain a level of cash reserves sufficient to permit us to pay the principal and accrued interest on the loan. If our cash reserves, cash flows and capital resources are insufficient to fund our debt obligations to Kreos Capital, we may be required to seek additional capital, restructure or refinance our indebtedness, or delay or abandon our research and development projects or other capital expenditures, which could have a material adverse effect on our business, financial condition, prospects or results of operations. There is no assurance that we would be able to take any of such actions, or that such actions would permit us meet our scheduled debt obligations under the Kreos Capital loan agreements. If we default on the Loan Agreement and are unable to cure the default pursuant to the terms of the Loan Agreement or are unable to repay or refinance the loan when due, Kreos could take possession of any or all assets in which it holds a security interest, and dispose those assets to the extent necessary to pay off the debts, which would have a material adverse effect on our business, financial condition, prospects or results of operations.

We only recently launched APHEXDA in the U.S. following FDA approval in September 2023. Until then we were considered a clinical development biopharmaceutical company. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had more experience commercializing APHEXDA. To be profitable, we will need to successfully transition from a company with a research and development focus to a company capable of supporting commercial activities. Ultimately, we may not be successful in such a transition.

We are currently executing on an independent commercialization plan for APHEXDA in stem cell mobilization for autologous bone marrow transplantation in multiple myeloma patients in the U.S. We have established sales, marketing and distribution capabilities and are commercializing APHEXDA in the U.S. Successful commercialization of APHEXDA in the U.S. or elsewhere will require significant resources and time and, while our personnel are experienced with respect to marketing of healthcare products, the potential uptake of the product in distribution and the timing for growth in sales, if any, is unpredictable and we may not be successful in commercializing APHEXDA in the long term. In particular, successful commercialization of APHEXDA will require that we enter into and maintain contractual relationships with specialty distributors that supply to the transplantation centers and we are able to overcome competition from the established standard of care product and its generic versions, where average selling price reimbursement is currently favoring the generic market.

In addition, other factors that have and may continue to inhibit our efforts to successfully commercialize APHEXDA include our ability to access key health care decision makers, price APHEXDA at a sufficient price point to ensure an adequate and attractive level of profitability, and maintain sufficient financial resources to cover the costs and expenses associated with creating and sustaining a capable sales and marketing organization and related commercial infrastructure.

If we are not successful, we may be required to collaborate or partner APHEXDA with a third-party pharmaceutical or biotechnology company with existing products. To the extent we collaborate or partner, the financial value will be shared with another party and we will need to establish and maintain a successful collaboration arrangement, and we may not be able to enter into these arrangements on acceptable terms or in a timely manner in order to establish APHEXDA in the market. To the extent that we enter into co-promotion or other arrangements, any revenues we receive will depend upon the efforts of third parties, which may not be successful and are only partially in our control. In that event, our product revenues may be lower than if we marketed and sold our products directly with the highest priority, and we may be required to reduce or eliminate much of our commercial infrastructure and personnel as a result of such collaboration or partnership.

If we are not successful in setting our marketing, pricing and reimbursement strategies, recruiting and maintaining effective sales and marketing personnel or building and maintaining the infrastructure to support commercial operations in the U.S. and elsewhere, we will have difficulty successfully commercializing APHEXDA, which would adversely affect our business and financial condition.

APHEXDA, or any other therapeutic candidate that may be approved in the future by the appropriate regulatory authorities for marketing and sale, may fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. Physicians are often reluctant to switch their patients from existing therapies even when new and potentially more effective or convenient treatments enter the market. APHEXDA competes with the standard of care for stem cell mobilization and its generic versions.

Efforts to educate the medical community and third-party payors on the benefits of APHEXDA over its competition have required significant resources and may not ultimately be successful. If APHEXDA, or any other therapeutic candidate that may be approved in the future for marketing and sale in the future, does not achieve an adequate level of market acceptance, we may not generate significant revenues and we may not become profitable. The degree of market acceptance of APHEXDA, or any other therapeutic candidate that may be approved in the future, will depend on a number of factors, including:

•          the advantages of the treatment compared to competitive therapies;

•          the number of competitors approved for similar uses;

•          the relative promotional effort and marketing success of us as compared with our competitors;

•          how the product is positioned in physician treatment guidelines and pathways;

•          the prevalence and severity of any side effects;

•          the efficacy and safety of the product;

•          our ability to offer the product for sale at competitive prices;

•          the product’s tolerability, convenience and ease of administration compared to alternative treatments;

•          the willingness of the target patient population to try, and of physicians to prescribe, the product;

•          limitations or warnings, including use restrictions, contained in the product’s approved labeling;

•          the strength of sales, marketing and distribution support;

•          the timing of market introduction of our approved products as well as competitive products;

•          adverse publicity about the product or favorable publicity about competitive products;

•          potential product liability claims;

•          changes in the standard of care for the targeted indications of the product; and

•          availability and amount of coverage and reimbursement from government payors, managed care plans and other third-party payors.

In addition, the potential market opportunities for APHEXDA and any other therapeutic are difficult to estimate precisely. Our estimates of the potential market opportunities are predicated on many assumptions, including industry knowledge and publications, third-party research reports and other surveys. While we believe that our internal assumptions are reasonable, these assumptions involve the exercise of significant judgment on the part of our management, are inherently uncertain and the reasonableness of these assumptions has not been assessed by an independent source. If any of the assumptions prove to be inaccurate, the actual markets for our therapeutic candidate could be smaller than our estimates of the potential market opportunities.

If the commercial launch of APHEXDA for which we recruited a sales force and established marketing, market access and medical affairs teams and distribution capabilities is not successful for any reason, we could incur substantial costs and our investment would be lost if we cannot retain or reassign our sales, marketing, market access and medical affairs personnel.

To achieve commercial success for APHEXDA, we have expended and anticipate that we will continue to expend significant resources to support our sales force, marketing, market access and medical affairs teams and distribution capabilities. There are risks involved with establishing our own sales, marketing, distribution, training and support capabilities. For example, recruiting and training sales and marketing personnel is expensive and time consuming and could delay our ability to focus on other priorities. If the commercial launch of APHEXDA is not successful for any reason, this would be costly, and our investment would be lost if we cannot retain or reassign our sales, marketing, market access and medical affairs personnel or terminate on favorable terms any agreements entered into with third parties to support our commercialization efforts.

Factors that may inhibit or limit our efforts to commercialize APHEXDA on our own include:

•          our inability to train and retain adequate numbers of effective sales, marketing, training and support personnel;

•          the inability of sales personnel to obtain access to physicians, including key opinion leaders, or to educate an adequate number of physicians of the benefits of APHEXDA over alternative treatment options; and

•          unforeseen costs and expenses associated with establishing and maintaining an independent sales, marketing, training and support organization.

If our sales force, marketing, market access and medical affairs teams and distribution capabilities fail, or are otherwise unsuccessful, it would materially adversely impact the commercialization of APHEXDA, impact our ability to generate revenue and harm our business.

It is possible that our clinical trials may indicate an apparent positive effect of a therapeutic candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. For example, despite the recent FDA marketing approval of APHEXDA in the United States, we, or others, may discover that APHEXDA is less effective or tolerable than previously believed. If, we, or others, discover that a product is less effective than previously believed or causes undesirable side effects that were not previously identified, any of the following adverse events could occur:

•          regulatory authorities may withdraw their approval of the product or seize the product;

•          we, or any of our collaborators, may be required to recall the product, change the way the product is administered or conduct additional clinical trials;

•          additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular product;

•          we, or any of our collaborators, may be subject to fines, injunctions or the imposition of civil or criminal penalties;

•          regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication;

•          we, or any of our collaborators, may be required to create a Medication Guide outlining the risks of the previously unidentified side effects for distribution to patients;

•          we could be sued and held liable for harm caused to patients;

•          physicians and patients may stop using our product; and

•          our reputation may suffer.

Although the commercialization of APHEXDA in stem cell mobilization for autologous bone marrow transplantation in multiple myeloma patients in the U.S. is our primary focus, we continue to develop motixafortide in other geographies and indications. Motixafortide and any other therapeutic candidate we develop will require additional, time-consuming and costly development efforts, by us or by our collaborators, prior to commercial sale, including preclinical studies, clinical trials and approval by the FDA and/or applicable foreign regulatory authorities. All therapeutic candidates are prone to the risks of failure that are inherent in pharmaceutical product development, including the possibility that the therapeutic candidate will not be shown to be sufficiently safe and/or effective for approval by regulatory authorities. In addition, we cannot assure you that any such products that are approved will be manufactured or produced economically, successfully commercialized or widely accepted in the marketplace, or will be more effective than other commercially available alternatives.

In the United States, we are required to submit a New Drug Application, or NDA, to obtain FDA approval before marketing any of our current or future therapeutic candidates. An NDA must include extensive preclinical and clinical data and supporting information to establish the therapeutic candidate’s safety, purity and potency, or efficacy, for each desired indication. The NDA must also include information regarding the product’s pharmacology, toxicology, chemistry, manufacture and manufacturing controls. Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and approval may not be obtained. Upon submission of an NDA, the FDA must make an initial determination that the application is sufficiently complete to accept the submission for filing. We cannot be certain that any submissions will be accepted for filing and review by the FDA, or ultimately be approved. The FDA may require that we conduct additional clinical or preclinical trials, or take other actions before it will approve or reconsider any application we make. If the FDA requires additional studies or data, we would incur increased costs and delays in the marketing approval process, which may require us to expend more resources than we have available. In addition, the FDA may not consider any additional information to be complete or sufficient to support approval.

Any delay in obtaining, or the failure to obtain, required regulatory approvals will materially and adversely affect our ability to generate future revenues from a particular therapeutic candidate. Any regulatory approval to market a product may be subject to limitations on the indicated uses for which we may market the product or may impose restrictive conditions of use, including cautionary information, thereby limiting the size of the market for the product. We and our collaborators, as applicable, also are, and will be, subject to numerous foreign regulatory requirements that govern the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. The foreign regulatory approval process includes all the risks associated with the FDA approval process that we describe above, as well as risks attributable to the satisfaction of foreign requirements. Approval by the FDA does not ensure approval by regulatory authorities outside the United States. Foreign jurisdictions may have different approval processes than those required by the FDA and may impose additional testing requirements for our therapeutic candidates.

We may not obtain additional marketing approvals for motixafortide or any other therapeutic candidate that we may develop in the future. It is possible that the FDA or comparable foreign regulatory agencies may refuse to accept for substantive review any future application that we or a collaborator may submit to market and sell our therapeutic candidates, or that any such agency may conclude after review of our or our collaborator’s data that such application is insufficient to obtain marketing approval of our therapeutic candidate.

If the FDA or other comparable foreign regulatory agency does not accept or approve any future application to market and sell any therapeutic candidate, such regulators may require that we conduct additional clinical trials, preclinical studies or manufacturing validation studies and submit that data before they will reconsider our application. Depending on the extent of these or any other required trials or studies, approval of any application that we submit may be delayed by several years, or may require us or our collaborator to expend more resources than we or they have available. It is also possible that additional trials or studies, if performed and completed, may not be considered sufficient by the FDA or other foreign regulatory agency to approve our applications for marketing and commercialization.

Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us or our collaborators from commercializing motixafortide in other jurisdictions and indications or any other therapeutic candidate that we may develop in the future and generating revenues. If any of these outcomes occur, we would not be eligible for certain milestone and royalty revenue under our partnership agreements, our collaborators could terminate our partnership agreements and we may be forced to abandon our development efforts, any of which could significantly harm our business.

Clinical trials are expensive and complex, can take many years and have uncertain outcomes. We cannot necessarily predict whether we or any licensee will encounter problems with any of the completed, ongoing or planned clinical trials that will cause us, any licensee or regulatory authorities to delay or suspend clinical trials, or to delay the analysis of data from completed or ongoing clinical trials. In addition, because some of our clinical trials are investigator-initiated studies (i.e., we are not the study sponsor), we may have less control over these studies. We estimate that certain of our clinical trials will continue for several years, but they may take significantly longer to complete. Failure can occur at any stage of the testing, and we may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent commercialization of our current or future therapeutic candidates, including, but not limited to:

•          delays in securing clinical investigators or trial sites for the clinical trials;

•          delays in obtaining institutional review board and other regulatory approvals to commence a clinical trial;

•          slower-than-anticipated patient recruitment and enrollment;

•          negative or inconclusive results from clinical trials;

•          unforeseen safety issues;

•          uncertain dosing issues;

•          an inability to monitor patients adequately during or after treatment; and

•          problems with investigator or patient compliance with the trial protocols.

A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience than us, have suffered significant setbacks in advanced clinical trials, even after seeing promising results in earlier clinical trials. Despite the results reported in earlier clinical trials for our therapeutic candidates, we do not know whether any Phase 3 or other clinical trials we or our licensees may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market any therapeutic candidate. For example, we previously investigated the treatment of motixafortide for acute myeloid leukemia, AML, and following an interim analysis of a Phase 2b trial in which the investigational arm of motixafortide combined with cytarabine did not demonstrate a statistically significant effect in the study’s primary endpoint, we terminated the study. Nevertheless, we continue to believe in the relevance of CXCR4 as a viable target in other AML treatment lines, such as rr/AML and induction treatment.  If later-stage clinical trials of any therapeutic candidate do not produce favorable results, our ability to obtain regulatory approval for the therapeutic candidate may be adversely impacted, which will have a material adverse effect on our business, financial condition and results of operations.

Even if therapeutics we or any licensee develops receive regulatory approval, we or any licensee, as applicable, will be subject to ongoing reporting obligations, and any approved products and the manufacturing operations for such products will be subject to continuing regulatory review, including FDA inspections. The outcome of this ongoing review may result in the withdrawal of a product from the market, the interruption of the manufacturing operations and/or the imposition of labeling and/or marketing limitations. Since many more patients are exposed to a drug product following its marketing approval, serious but infrequent adverse reactions that were not observed in clinical trials may be observed during the commercial marketing of the product. In addition, the manufacturer and the manufacturing facilities we or our licensees, as applicable, will use to produce any therapeutic candidate will be subject to periodic review and inspection by the FDA and other, similar foreign regulators. Later discovery of previously unknown problems with any product, manufacturer or manufacturing process, or failure to comply with regulatory requirements, may result in actions such as:

•          restrictions on such product, manufacturer or manufacturing process;

•          warning letters from the FDA or other regulatory authorities;

•          withdrawal of the product from the market;

•          suspension or withdrawal of regulatory approvals;

•          refusal to approve pending applications or supplements to approved applications that we or our licensees submit;

•          voluntary or mandatory recall;

•          fines;

•          refusal to permit the import or export of our products;

•          product seizure or detentions;

•          injunctions or the imposition of civil or criminal penalties; or

•          adverse publicity.

If we, or any licensee, supplier, third-party contractor, partner or clinical investigator is slow to adapt, or are unable to adapt, to changes in existing regulatory requirements or the adoption of new regulatory requirements or policies, we or any licensee may lose marketing approval for any of our products, if any of our therapeutic products are approved, resulting in decreased or lost revenue from milestones, product sales or royalties.

We do not have the ability to conduct certain preclinical studies and clinical trials independently for motixafortide, and we rely on third parties, such as contract laboratories, contract research organizations, medical institutions, clinical investigators and other collaborators to conduct these studies and clinical trials. Our reliance on these third parties limits our control over these activities. The collaborators may not assign as great a priority to our clinical development programs or pursue them as diligently as we would if we were undertaking such programs directly. Accordingly, these collaborators may not complete activities on schedule, or may not conduct the studies or our clinical trials in accordance with regulatory requirements or with our trial design. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, or if their performance is substandard, we may be required to replace them or add more sites to the studies. Although we believe that there are a number of other third-parties that we could engage to continue these activities, replacement of these third parties will result in delays and/or additional costs. As a result, our efforts to obtain regulatory approvals for, and to commercialize, motixafortide and any other therapeutic candidate that we may develop in the future may be delayed. The collaborators may also have relationships with other commercial entities, some of whom may compete with us. If the collaborators assist our competitors, our competitive position may be harmed.

In addition, our ability to bring future products to market depends on the quality and integrity of data that we present to regulatory authorities in order to obtain marketing authorizations. Although we attempt to audit and control the quality of third-party data, we cannot guarantee the authenticity or accuracy of such data, nor can we be certain that such data has not been fraudulently generated. The failure of these third parties to carry out their obligations would materially adversely affect our ability to develop and market new products and implement our strategies.

Although we are executing on an independent commercialization plan for APHEXDA in stem cell mobilization for autologous bone marrow transplantation in multiple myeloma patients, we have in the past and may in the future rely on out-licensing arrangements for late-stage development, marketing and commercialization. Dependence on out-licensing arrangements subjects us to a number of risks, including the risk that:

•          we have limited control over the amount and timing of resources that a licensee devotes to our therapeutic candidate;

•          a licensee may experience financial difficulties;

•          a licensee may fail to secure adequate commercial supplies of our therapeutic candidate upon marketing approval, if at all;

•          our future revenues depend heavily on the efforts of a licensee;

•          business combinations or significant changes in a licensee’s business strategy may adversely affect the licensee’s willingness or ability to complete its obligations under any arrangement with us;

•          a licensee could move forward with a competing therapeutic candidate developed either independently or in collaboration with others, including our competitors; and

•         out-licensing arrangements are often terminated or allowed to expire, which would delay the development and may increase the development costs of our therapeutic candidates.

If we or any licensee breaches or terminates its agreement with us, or if any licensee otherwise fails to conduct its development and commercialization activities in a timely manner or there is a dispute about their obligations, we may need to seek other licensees, or we may have to develop our own internal sales and marketing capability. Our dependence on a licensee’s experience and the rights of a licensee will limit our flexibility in considering alternative out-licensing arrangements for any therapeutic candidate. Any failure to successfully develop these arrangements or failure by a licensee to successfully develop or commercialize any therapeutic candidate in a competitive and timely manner will have a material adverse effect on the commercialization of any therapeutic candidate.

We employ a number of methods to identify therapeutic candidates that we believe are likely to achieve commercial success. In certain instances, disease-specific third-party advisors evaluate therapeutic candidates as we deem necessary. However, there can be no assurance that our internal research efforts or our screening system will accurately or consistently select among various therapeutic candidates those that have the highest likelihood to achieve, and that ultimately achieve, commercial success. As a result, we may spend substantial resources developing therapeutic candidates that will not achieve commercial success, and we may not advance those therapeutic candidates with the greatest potential for commercial success. For example, we recently determined to terminate development of AGI-134 and provided notice of our intent to terminate the Agalimmune Development Agreement effective March 15, 2024.

An important element of our strategy is maintaining relationships with universities, medical institutions and biotechnology companies in order to in-license potential therapeutic candidates. We may not be able to maintain relationships with these entities, and they may elect not to enter into in-licensing agreements with us or to terminate existing agreements. The existence of global companies with significantly greater resources than we have may increase the competition with respect to the in-licensing of promising therapeutic candidates. We may not be able to acquire licenses on commercially reasonable terms or at all. Failure to license or otherwise acquire necessary technologies could materially and adversely affect our business, financial condition and results of operations.

The process of establishing and maintaining collaborative relationships is difficult, time-consuming and involves significant uncertainty, including:

•          a collaboration partner may shift its priorities and resources away from our therapeutic candidates due to a change in business strategies, or a merger, acquisition, sale or downsizing;

•          a collaboration partner may seek to renegotiate or terminate their relationships with us due to unsatisfactory clinical results, manufacturing issues, a change in business strategy, a change of control or other reasons;

•          a collaboration partner may cease development in therapeutic areas which are the subject of our strategic collaboration;

•          a collaboration partner may not devote sufficient capital or resources towards our therapeutic candidates;

•          a collaboration partner may change the success criteria for a therapeutic candidate thereby delaying or ceasing development of such candidate;

•          a significant delay in initiation of certain development activities by a collaboration partner will also delay payment of milestones tied to such activities, thereby impacting our ability to fund our own activities;

•          a collaboration partner could develop a product that competes, either directly or indirectly, with our therapeutic candidate;

•          a collaboration partner with commercialization obligations may not commit sufficient financial or human resources to the marketing, distribution or sale of a product;

•          a collaboration partner with manufacturing responsibilities may encounter regulatory, resource or quality issues and be unable to meet demand requirements;

•          a partner may exercise a contractual right to terminate a strategic alliance;

•         a dispute may arise between us and a partner concerning the research, development or commercialization of a therapeutic candidate resulting in a delay in milestones, royalty payments or termination of an alliance and possibly resulting in costly litigation or arbitration which may divert management attention and resources; and

•          a partner may use our products or technology in such a way as to invite litigation from a third party.

Any collaborative partners may in the future shift their priorities and resources away from our therapeutic candidates or seek to renegotiate or terminate their relationships with us. If any collaborator fails to fulfill its responsibilities in a timely manner, or at all, our research, clinical development, manufacturing or commercialization efforts related to that collaboration could be delayed or terminated, or it may be necessary for us to assume responsibility for expenses or activities that would otherwise have been the responsibility of our collaborator. If we are unable to establish and maintain collaborative relationships on acceptable terms or to successfully transition terminated collaborative agreements, we may have to delay or discontinue further development of one or more of our therapeutic candidates, undertake development and commercialization activities at our own expense or find alternative sources of capital.

The life sciences industry is highly competitive, and we face significant competition from many pharmaceutical, biopharmaceutical and biotechnology companies that are researching and marketing products designed to address the indications for which we are currently developing motixafortide or for which we may develop therapeutic candidates in the future. Specifically, we are aware of other companies that currently market and/or are in the process of developing products that address stem cell mobilization, solid malignancies and skin lesions. In particular, during 2023, the last to expire patent for Mozobil and uses thereof, the standard of care for stem cell mobilization, expired and as a consequence there are several generic versions on the market. Successful commercialization of APHEXDA will in part require that we are able to overcome competition from Mozobil and its generic versions, where average selling price reimbursement is currently favoring the generic market.

Any therapeutic candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future. The key competitive factors affecting the success of each therapeutic candidate, if approved, is likely to be their safety, efficacy, convenience, price, the level of proprietary and generic competition, and the availability of coverage and reimbursement from government and other third‑party payors. Our APHEXDA sales will suffer or our commercial opportunity will be reduced or eliminated if our competitors develop and commercialize products that are safer or more effective, have fewer or less severe side effects, or are more convenient or less expensive than any products that we may develop. Our competitors may also obtain FDA or other regulatory approval for their therapeutic candidates more rapidly than we may be able to do so for any existing or new therapeutic candidates of ours, which could result in their establishing a strong market position before we are able to enter the market.

Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in favor of our competitors. Additionally, many competitors have greater experience in product discovery and development, obtaining FDA and other regulatory approvals and commercialization capabilities, which may provide them with a competitive advantage. If we are not able to compete effectively, our business will not grow and our financial condition and operations will suffer.

An important element of our strategy for identifying future products is maintaining relationships with universities, medical institutions and biotechnology companies in order to in-license potential therapeutic candidates, and we compete with respect to this in-licensing with a number of global pharmaceutical companies. The presence of these global companies with significantly greater resources than we have may increase the competition with respect to the in-licensing of promising therapeutic candidates. Our failure to license or otherwise acquire necessary technologies could materially and adversely affect our business, financial condition and results of operations.

The commercial success of APHEXDA and any other therapeutic candidate will depend substantially, both domestically and abroad, on the extent to which product costs will be paid by third-party payors, including government health care programs and private health insurers. There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we or our collaborators might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, which may negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our or their investment in one or more therapeutic candidates, even if our therapeutic candidates obtain marketing approval.

Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Therefore, our ability, and the ability of any collaborators, to successfully commercialize any of our therapeutic candidates will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from third-party payors. Third-party payors decide which medications they will cover and establish reimbursement levels. The healthcare industry is acutely focused on cost containment, both in the United States and elsewhere. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability to sell APHEXDA profitably. These payors may not view APHEXDA as cost-effective, and coverage and reimbursement may not be available to our customers or may not be sufficient to allow our products to be marketed on a competitive basis. Cost-control initiatives could cause us or our collaborators to decrease the price we might establish, which could result in lower than anticipated product revenues. If the prices for our products, if any, decrease or if governmental and other third-party payors do not provide coverage or adequate reimbursement, our prospects for revenue and profitability will suffer.

There may also be delays in obtaining coverage and reimbursement for newly approved drugs, such as APHEXDA, and coverage may be more limited for APHEXDA than for other drug products with similar indications approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for reimbursement does not imply that any therapeutic will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Reimbursement rates may vary, for example, according to the use of the product and the clinical setting in which it is used. Reimbursement rates may also be based on reimbursement levels already set for lower cost treatments or may be incorporated into existing payments for other services.

In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and are challenging the prices charged. We cannot be sure that coverage will be available for any therapeutic candidate that we, or third-parties, commercialize and, if available, that the reimbursement rates will be adequate. Further, the net reimbursement for products may be subject to additional reductions if there are changes to laws that presently restrict imports of products from countries where they may be sold at lower prices than in the United States. An inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for therapeutic candidate for which we obtain regulatory approval could significantly harm our operating results and our overall financial condition. 

We do not currently have laboratories that are compliant with cGMP and therefore cannot independently manufacture drug products for our current clinical trials or commercialization. We rely on third-party manufacturers to produce the therapeutic supplies that enable us to perform clinical trials and supply commercial scale product. We have limited personnel with experience in drug product manufacturing and we lack the resources and capabilities to manufacture any of our therapeutic candidates on a commercial scale. The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, particularly in scaling up initial production. These problems include difficulties with production costs and yields and quality control, including stability of the therapeutic candidate.

We do not currently have any long-term agreements with third-party manufacturers that guarantee the supply of product and we rely on single source suppliers. When we require additional supplies to complete our clinical trials or for commercialization, we may be unable to enter into agreements for clinical or commercial supply, as applicable, with third-party manufacturers, or may be unable to do so on acceptable terms.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured therapeutic candidates ourselves, including:

•          reliance on the third party for regulatory compliance and quality assurance;

•          limitations on supply availability resulting from capacity and scheduling constraints of the third parties;

•          impact on our reputation in the marketplace if manufacturers of our products, once commercialized, fail to meet customer demands;

•          the possible breach of the manufacturing agreement by the third party because of factors beyond our control; and

•          the possible termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us.

The failure of any of our contract manufacturers to maintain high manufacturing standards could result in injury or death of clinical trial participants or patients being treated with our products. Such failure could also result in product liability claims, product recalls, product seizures or withdrawals, delays or failures in testing or delivery, cost overruns or other problems, which would have a material adverse effect on our business, financial condition and results of operations.

Our contract manufacturers are, and will be, required to adhere to FDA regulations setting forth current good manufacturing practices, or cGMP, for drugs. These regulations cover all aspects of the manufacturing, testing, quality control and recordkeeping relating to our therapeutic candidates. Our manufacturers may not be able to comply with applicable regulations. Our manufacturers are and will be subject to unannounced inspections by the FDA, state regulators and similar regulators outside the United States. The failure of our third-party manufacturers to comply with applicable regulations could result in the imposition of sanctions on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our therapeutic candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of our candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect regulatory approval and supplies of our therapeutic candidates, and materially and adversely affect our business, financial condition and results of operations.

Our success depends upon the continued service and performance of our senior management and other key personnel. The loss of the services of these personnel could delay or prevent the successful completion of our planned clinical trials or the commercialization of our therapeutic candidates or otherwise affect our ability to manage our company effectively and to carry out our business plan. We do not maintain key-man life insurance. Although we have entered into employment agreements with all of the members of our senior management team, members of our senior management team may resign at any time subject to prior notice as applicable. High demand exists for senior management and other key personnel in the pharmaceutical industry. There can be no assurance that we will be able to continue to retain and attract such personnel.

Our growth and success also depend on our ability to attract and retain additional highly qualified scientific, technical, sales, managerial and finance personnel. We experience intense competition for qualified personnel, and the existence of non-competition agreements between prospective employees and their former employers may prevent us from hiring those individuals or subject us to suit from their former employers. In addition, since we are independently commercializing APHEXDA, we will need to expand our marketing and sales capabilities. While we attempt to provide competitive compensation packages to attract and retain key personnel, many of our competitors are likely to have greater resources and more experience than we have, making it difficult for us to compete successfully for key personnel. If we cannot attract and retain sufficiently qualified technical employees on acceptable terms, we may not be able to develop and commercialize competitive products. Further, any failure to effectively integrate new personnel could prevent us from successfully growing our company.

Public companies are facing increasing scrutiny related to ESG practices and disclosures from certain investors, capital providers, shareholder advocacy groups, other market participants and other stakeholder groups. With this increased focus, public reporting regarding ESG practices is becoming more broadly expected. Such increased scrutiny may result in increased costs, enhanced compliance or disclosure obligations, or other adverse impacts on our business, financial condition or results of operations. If our ESG practices and reporting do not meet investor or other stakeholder expectations, which continue to evolve, we may be subject to investor or regulator engagement regarding such matters. In addition, new sustainability rules and regulations have been adopted and may continue to be introduced in various states and other jurisdictions. For example, the SEC has adopted rules that would require companies to provide expanded climate-related disclosures in their periodic reporting, which may require us to incur significant additional costs to comply and impose increased oversight obligations on our management and board of directors. Our failure to comply with any applicable rules or regulations could lead to penalties and adversely impact our reputation, access to capital and employee retention. Such ESG matters may also impact our third-party contract manufacturers and other third parties on which we rely, which may augment or cause additional impacts on our business, financial condition, or results of operations.

The novel coronavirus outbreak, or COVID-19, has affected segments of the global economy. Due to clinical operating issues associated with the COVID-19 pandemic, during 2020, we temporarily suspended enrollment to the phase 1/2a study for AGI-134, our second lead compound. If there is a resurgence, COVID-19 could impact our future operations, including potential interruptions to supply chains, clinical trials, commercialization activities and regulatory reviews and approvals. Any resurgence of the COVID-19 pandemic may also affect our employees and employees and operations at suppliers that may result in delays or disruptions in supply. In addition, a recession or market correction resulting from any resurgence of COVID-19 could materially affect our business and the value of our shares. Additionally, if a resurgence of the COVID-19 pandemic has a significant impact on our business and financial results for an extended period of time, our liquidity and cash resources could be negatively impacted. Capital and credit markets may be disrupted by the crisis and exchanges have experienced increased volatility. As a result, access to additional financing may be challenging and is largely dependent upon evolving market conditions and other factors. We have in the past taken precautionary measures, including, for example, a company-wide salary reduction related to the COVID-19 pandemic carried out in the second and third quarters of 2020, and may take additional measures, intended to minimize the risk of COVID-19 to our employees and operations. The extent of the impact of any resurgence of COVID-19 or other pandemics on our operational and financial performance, including our ability to execute our business strategies in the expected time frame or at all, will depend on future developments, such as the duration and spread of any resurgence of the COVID-19 and other pandemics and related restrictions and implications and the effectiveness of actions taken to contain and treat the diseases, all of which are uncertain and cannot be predicted. The impact of any resurgence of the COVID-19 pandemic or another pandemic may also have the effect of heightening many of the other risks described in the “Risk Factors” section of this Annual Report on Form 20-F.

The continuing increase in expenditures for healthcare has been the subject of considerable government attention, particularly as public resources have been stretched by financial and economic crises in the United States, Western Europe and elsewhere. Both private health insurance funds and government health authorities continue to seek ways to reduce or contain healthcare costs, including by reducing or eliminating coverage for certain products and lowering reimbursement levels. In many countries and regions, including the United States, Western Europe, Israel, Russia, certain countries in Central and Eastern Europe and several countries in Latin America, pharmaceutical prices are subject to new government policies designed to reduce healthcare costs. These changes frequently adversely affect pricing and profitability and may cause delays in market entry. We cannot predict which additional measures may be adopted or the impact of current and additional measures on the marketing, pricing and demand for our approved products, if any of our therapeutic products are approved.

Significant developments that may adversely affect pricing in the United States include (i) the enactment of federal healthcare reform laws and regulations, including the Medicare Prescription Drug Improvement and Modernization Act of 2003 and the ACA, and (ii) trends in the practices of managed care groups and institutional and governmental purchasers, including the impact of consolidation of our customers. In 2022, the IRA, established the Medicare Drug Price Negotiation Program which permits the government to negotiate “maximum fair” drug prices for certain high expenditure, single source drugs and biologics.  It is estimated that over the next seven years, 60 drugs covered under Medicare B and D will have negotiated a “maximum fair price.”

Changes to the healthcare system enacted as part of healthcare reform in the United States, as well as the increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, may result in increased pricing pressure by influencing, for instance, the reimbursement policies of third-party payors. Healthcare reform legislation has increased the number of patients who would have insurance coverage for our approved products, if any of our therapeutic products are approved, but provisions such as the assessment of a branded pharmaceutical manufacturer fee and an increase in the amount of the rebates that manufacturers pay for coverage of their drugs by Medicaid programs may have an adverse effect on us. It is uncertain how current and future reforms in these areas will influence the future of our business operations and financial condition, as federal, state and foreign governmental authorities are likely to continue efforts to control the price of drugs and reduce overall healthcare costs. These efforts could have an adverse impact on our ability to market products and generate revenues in the United States and foreign countries.

Our revenues and profits will depend heavily upon the availability of adequate reimbursement for the use of our approved candidates, if any, from governmental or other third-party payors, both in the United States and in foreign markets. Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that the use of an approved product is:

•          a covered benefit under its health plan;

•          safe, effective and medically necessary;

•          appropriate for the specific patient;

•          cost-effective; and

•          neither experimental nor investigational.

Obtaining reimbursement approval for a product from each government or other third-party payor is a time-consuming and costly process that could require us or our licensees to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to each payor. Even when a payor determines that a product is eligible for reimbursement, the payor may impose coverage limitations that preclude payment for some uses that are approved by the FDA or comparable foreign regulatory authorities. Reimbursement rates may vary according to the use of the product and the clinical setting in which it used, may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments for other products or services, and may reflect budgetary constraints and/or imperfections in Medicare, Medicaid or other data used to calculate these rates.

Regardless of the impact of the ACA on us, the U.S. government, other governments and commercial payors have shown significant interest in pursuing healthcare reform and reducing healthcare costs. Any government-adopted reform measures, such as the IRA, could cause significant pressure on the pricing of healthcare products and services, including those biopharmaceuticals currently being developed by us or our licensees, in the United States and internationally, as well as the amount of reimbursement available from governmental agencies or other third-party payors. The continuing efforts of the U.S. and foreign governments, insurance companies, managed care organizations and other payors to contain or reduce healthcare costs may compromise our ability to set prices at commercially attractive levels for our products that we may develop, which in turn could adversely impact how much or under what circumstances healthcare providers will prescribe or administer our products, if approved. Changes in healthcare policy, such as the creation of broad limits for diagnostic products, could substantially diminish the sale of or inhibit the utilization of diagnostic tests, increase costs, divert management’s attention and adversely affect our ability to generate revenues and achieve consistent profitability. This could materially and adversely impact our business by reducing our ability to generate revenue, raise capital, obtain additional collaborators and market our products, if approved.

Further, the Centers for Medicare and Medicaid Services, or CMS, frequently change product descriptors, coverage policies, product and service codes, payment methodologies and reimbursement values. The IRA will modify 60 drugs and biologics through negotiation of a fair maximum pricing for CMS. Third-party payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and both CMS and other third-party payors may have sufficient market power to demand significant price reductions.

A significant invasion, interruption, destruction or breakdown of our information technology systems and/or infrastructure by persons with authorized or unauthorized access could negatively impact our business and operations. We could experience business interruption, information theft and/or reputational damage from cyber-attacks or cyber-intrusions over the Internet, computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, and attachments to emails. Any of the foregoing may compromise our systems and lead to data leakage either internally or at our third-party providers. The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Our systems have been, and are expected to continue to be, the target of malware and other cyber-attacks. Although we have invested in measures to reduce these risks, we cannot assure you that these measures will be successful in preventing compromise and/or disruption of our information technology systems and related data.

Our activities and those of our third-party manufacturers on our behalf involve the controlled storage, use and disposal of hazardous materials, including microbial agents, corrosive, explosive and flammable chemicals, as well as cytotoxic, biologic, radio-labeled and other hazardous compounds. We and our manufacturers are subject to U.S. federal, state, local, Israeli and other foreign laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental contamination or injury from these materials. In addition, if we develop a manufacturing capacity, we may incur substantial costs to comply with environmental regulations and would be subject to the risk of accidental contamination or injury from the use of hazardous materials in our manufacturing process.

In the event of an accident, government authorities may curtail our use of these materials and interrupt our business operations. In addition, we could be liable for any civil damages that result, which may exceed our financial resources and may seriously harm our business. Although our Israeli insurance program covers certain unforeseen sudden pollutions, we do not maintain a separate insurance policy for any of the foregoing types of risks. In addition, although the general liability section of our life sciences policy covers certain unforeseen, sudden environmental issues, pollution in the United States and Canada is excluded from the policy. In the event of environmental discharge or contamination or an accident, we may be held liable for any resulting damages, and any liability could exceed our resources. In addition, we may be subject to liability and may be required to comply with new or existing environmental laws regulating pharmaceuticals or other medical products in the environment.

We are currently party to, and may in the future, become subject to litigation or claims arising in or outside the ordinary course of business (other than intellectual property infringement actions) that could negatively affect our business operations and financial condition, including securities class actions which are typically expensive to defend. Such claims and litigation proceedings may be brought by third parties, including our competitors, advisors, service providers, partners or collaborators, employees, and governmental or regulatory bodies. For information on legal proceedings, please see “Item 8. Financial Information – A. Financial Statements and Other Financial Information – Legal Proceedings.” Any claims and lawsuits, and the disposition of such claims and lawsuits, could be time-consuming and expensive to resolve, divert management attention and resources, and lead to attempts on the part of other parties to pursue similar claims. We may not be able to determine the amount of any potential losses and other costs we may incur due to the inherent uncertainties of litigation and settlement negotiations. In the event we are required or decide to pay amounts in connection with any claims or lawsuits, such amounts could be significant and could have a material adverse impact on our liquidity, business, financial condition and results of operations. In addition, depending on the nature and timing of any such dispute, a resolution of a legal matter could materially affect our future operating results, our cash flows or both. Additionally, we may be unable to maintain our existing directors’ and officers’ liability insurance in the future at satisfactory rates or adequate coverage amounts and may incur significant increases in insurance costs.

We do not conduct our own initial research with respect to the identification of our therapeutic candidates. Instead, we rely upon research and development work conducted by third parties as the primary source of our therapeutic candidates. As such, we have obtained our rights to our therapeutic candidates through in-license agreements entered into with biotechnology companies and a university that invent and own the intellectual property underlying our candidates. There is no assurance that such in-licenses or rights will not be terminated or expire due to a material breach of the agreements, such as a failure on our part to achieve certain progress milestones set forth in the terms of the in-licenses or due to the loss of the rights to the underlying intellectual property by any of our licensors. There is no assurance that we will be able to renew or renegotiate an in-licensing agreement on acceptable terms if and when the agreement terminates. We cannot guarantee that any in-license is enforceable or will not be terminated or converted into a non-exclusive license in the future. The termination of any in-license or our inability to enforce our rights under any in-license would materially and adversely affect our ability to commercialize certain of our therapeutic candidates.

We currently have in-licensing agreements relating to our therapeutic candidates that are in development or being commercialized. In 2012, we in-licensed the rights to motixafortide under a license agreement from Biokine. Under the license agreement for motixafortide, we are obligated to make commercially reasonable, good faith efforts to sublicense or commercialize motixafortide for fair consideration. In 2007, we in-licensed the rights to BL-5010 under a license agreement with IPC. Under the BL-5010 license agreement, we are obligated to use commercially reasonable efforts to develop the licensed technology in accordance with a specified development plan, including meeting certain specified diligence goals.

Each of the foregoing in-licensing agreements, or the obligation to pay royalties thereunder, will generally remain in effect until the expiration, under the applicable agreement, of all the licensing, royalty and sublicense revenue obligations to the applicable licensors, determined on a product-by-product and country-by-country basis. We may terminate the motixafortide in-licensing agreement upon 90 days’ prior written notice to Biokine. We may terminate the BL-5010 in-licensing agreement upon 30 days’ prior written notice to IPC.

Any party to any of the foregoing in-licensing agreements may terminate the respective agreement for material breach by the other party if the breaching party is unable to cure the breach within an agreed-upon period, generally 30 days to 90 days, after receiving written notice of the breach from the non-breaching party.

Our success depends, in part, on our ability, and the ability of our licensees and licensors to obtain patent protection for any therapeutic candidate, maintain the confidentiality of our trade secrets and know-how, operate without infringing on the proprietary rights of others and prevent others from infringing our proprietary rights.

We try to protect our proprietary position by, among other things, filing U.S., European, Israeli and other patent applications related to our proprietary products, technologies, inventions and improvements that may be important to the continuing development of our therapeutic candidates. As of March 15, 2024, we owned or exclusively licensed for uses within our field of business 29 patent families that collectively contain 128 granted patents, 4 allowed patent applications and 73 pending patent applications relating to the three candidates listed below.

Because the patent position of biopharmaceutical companies involves complex legal and factual questions, we cannot predict the validity and enforceability of patents with certainty. Our issued patents and the issued patents of our licensees or licensors may not provide us with any competitive advantages or may be held invalid or unenforceable as a result of legal challenges by third parties. Thus, any patents that we own or license from others may not provide any protection against competitors. Our pending patent applications, those we may file in the future or those we may license from third parties may not result in patents being issued. If these patents are issued, they may not provide us with proprietary protection or competitive advantages against competitors with similar technology. The degree of future protection to be afforded by our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.

Patent rights are territorial; thus, the patent protection we do have will only extend to those countries in which we have issued patents. Even so, the laws of certain countries do not protect our intellectual property rights to the same extent as do the laws of the United States. For example, the patent laws of China and India are relatively new and are not as developed as are older, more established patent laws of other countries. Competitors may successfully challenge our patents, produce similar drugs or products that do not infringe our patents, or produce drugs in countries where we have not applied for patent protection or that do not respect our patents. Furthermore, it is not possible to know the scope of claims that will be allowed in published applications and it is also not possible to know which claims of granted patents, if any, will be deemed enforceable in a court of law.

Our technology may infringe the rights of third parties. The nature of claims contained in unpublished patent filings around the world is unknown to us and it is not possible to know which countries patent holders may choose for the extension of their filings under the Patent Cooperation Treaty, or other mechanisms. Any infringement by us of the proprietary rights of third parties may have a material adverse effect on our business, financial condition and results of operations.

We rely on a combination of patents, trade secrets, know-how, technology, trademarks and regulatory exclusivity to maintain our competitive position. We generally try to protect trade secrets, know-how and technology by entering into confidentiality or non-disclosure agreements with parties that have access to it, such as our licensees, employees, contractors and consultants. We also enter into agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees, advisors, research collaborators, contractors and consultants while we employ or engage them. However, these agreements can be difficult and costly to enforce or may not provide adequate remedies. Any of these parties may breach the confidentiality agreements and willfully or unintentionally disclose our confidential information, or our competitors might learn of the information in some other way. The disclosure to, or independent development by, a competitor of any trade secret, know-how or other technology not protected by a patent could materially adversely affect any competitive advantage we may have over any such competitor.

To the extent that any of our employees, advisors, research collaborators, contractors or consultants independently develop, or use independently developed, intellectual property in connection with any of our projects, disputes may arise as to the proprietary rights to this type of information. If a dispute arises with respect to any proprietary right, enforcement of our rights can be costly and unpredictable, and a court may determine that the right belongs to a third party.

The development, manufacture, use, offer for sale, sale or importation of therapeutic candidates may infringe on the claims of third-party patents. A party might file an infringement action against us. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation or defense of a patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time. Consequently, we are unable to guarantee that we will be able to manufacture, use, offer for sale, sell or import our therapeutic candidates in the event of an infringement action. At present, we are not aware of pending or threatened patent infringement actions against us.

In the event of patent infringement claims, or to avoid potential claims, we may choose or be required to seek a license from a third party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be non-exclusive, which could potentially limit our competitive advantage. Ultimately, we could be prevented from commercializing a therapeutic candidate or be forced to cease some aspect of our business operations if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms. This inability to enter into licenses could harm our business significantly. At present, we have not received any written demands from third parties that we take a license under their patents nor have we received any notice form a third party accusing us of patent infringement.

Our license agreements with our licensees contain, and any contract that we enter into with licensees in the future will likely contain, indemnity provisions that obligate us to indemnify the licensee against any losses arising from infringement of third-party intellectual property rights. In addition, our in-license agreements contain provisions that obligate us to indemnify the licensors against any damages arising from the development, manufacture and use of products developed on the basis of the in-licensed intellectual property.

In addition to infringement claims against us, we may in the future become a party to other patent litigation or proceedings, including interference or re-examination proceedings filed with the U.S. Patent and Trademark Office or opposition proceedings in other foreign patent offices regarding intellectual property rights with respect to our products and technology, as well as other disputes regarding intellectual property rights with licensees, licensors or others with whom we have contractual or other business relationships. Post-issuance oppositions are not uncommon and we, our licensee or our licensor will be required to defend these opposition procedures as a matter of course. Opposition procedures may be costly, and there is a risk that we may not prevail.

Many of our employees and contractors were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that we or any employee or contractor has inadvertently or otherwise used or disclosed trade secrets or other proprietary information of his or her former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper or prevent our ability to commercialize certain therapeutic candidates, which could severely harm our business, financial condition and results of operations. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

We will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (i) at least 75% of our gross income is “passive income” or (ii) on average at least 50% of our assets by value produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account. We believe that we are a PFIC for the year ended December 31, 2023. Although we have not determined whether we will be a PFIC for our taxable year ending December 31, 2024, or in any subsequent year, our operating results for any such years may cause us to be a PFIC. Because PFIC status is determined annually and is based on our income, assets and activities for the entire taxable year, it is not possible to determine with certainty whether we will be characterized as a PFIC for the 2024 taxable year until after the close of the year, and there can be no assurance that we will not be classified as a PFIC in any future year. If we are a PFIC for our taxable year ending December 31, 2023, or any subsequent year, and a U.S. Investor (as defined below) does not make an election to treat us as a “qualified electing fund,” or QEF, or make a “mark-to-market” election, then “excess distributions” to a U.S. Investor, and any gain realized on the sale or other disposition of our ordinary shares or ADSs will be subject to special rules. Under these rules: (i) the excess distribution or gain would be allocated ratably over the U.S. Investor’s holding period for the ordinary shares (or ADSs, as the case may be); (ii) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (iii) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, if the U.S. Internal Revenue Service, or the IRS, determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late for a U.S. Investor to make a timely QEF or mark-to-market election. U.S. Investors who hold our ordinary shares or ADSs during a period when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject to exceptions for U.S. Investors who made a timely QEF or mark-to-market election. A U.S. Investor can make a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. A QEF election generally may not be revoked without the consent of the IRS. Upon request, we intend to annually furnish U.S. Investors with information needed in order to complete IRS Form 8621 (which form would be required to be filed with the IRS on an annual basis by the U.S. Investor) and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. See also “Item 10. Additional Information—E. Taxation—U.S. Federal Income Tax Considerations.”

If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our shares, such person may be treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our group (if any).  A United States shareholder of a controlled foreign corporation may be required to annually report and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income” and investments in U.S. property by controlled foreign corporations, whether or not we make any distributions, and may be subject to tax reporting obligations. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation.  A failure to comply with these reporting obligations may subject you to significant monetary penalties and may prevent the statute of limitations with respect to your U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist any shareholder in determining whether such shareholder is treated as a United States shareholder with respect to any “controlled foreign corporation” in our group (if any) or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations.  A United States investor should consult its tax advisors regarding the potential application of these rules to its investment in the shares.

Our business depends on the economic health of the global economies. If the conditions in the global economies remain uncertain or continue to be volatile, or if they deteriorate, including as a result of the impact of military conflict, such as the war between Russia and Ukraine, terrorism or other geopolitical events, our business, operating results and financial condition may be materially adversely affected. Economic weakness, inflation and increases in interest rates, limited availability of credit, liquidity shortages and constrained capital spending have at times in the past resulted, and may in the future result, in challenging and delayed sales cycles, slower adoption of new technologies and increased price competition, and could negatively affect our ability to forecast future periods, which could result in an inability to satisfy demand for our products and a loss of market share.

In addition, increases in inflation raise our costs for commodities, labor, materials and services and other costs required to grow and operate our business, and failure to secure these on reasonable terms may adversely impact our financial condition. Additionally, increases in inflation, along with the uncertainties surrounding any resurgence of COVID-19, geopolitical developments and global supply chain disruptions, have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment, which may make it more difficult, costly or dilutive for us to secure additional financing. A failure to adequately respond to these risks could have a material adverse impact on our financial condition, results of operations or cash flows.

•          announcements of technological innovations or new products by us or others;

•          announcements by us of significant acquisitions, strategic partnerships, in-licensing, out-licensing, joint ventures or capital commitments;

•          expiration or terminations of licenses, research contracts or other collaboration agreements;

•          public concern as to the safety of drugs we, our licensees or others develop;

•          general market conditions;

•          the volatility of market prices for shares of biotechnology companies generally;

•          success of research and development projects;

•          departure of key personnel;

•          developments concerning intellectual property rights or regulatory approvals;

•          variations in our and our competitors’ results of operations;

•          changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or ADSs are covered by analysts;

•          statements about the Company made in the financial media or by bloggers on the Internet;

•          statements made about drug pricing and other industry-related issues by government officials;

•          changes in government regulations or patent decisions;

•          developments by our licensees; and

•          general market conditions and other factors, including factors unrelated to our operating performance.

These factors and any corresponding price fluctuations may materially and adversely affect the market price of our ordinary shares and ADSs, and result in substantial losses by our investors. See also Risk Factors—Risks Related to our Ordinary Shares and ADSs — “Our business, operating results and growth rates may be adversely affected by current or future unfavorable economic and market conditions and adverse developments with respect to financial institutions and associated liquidity risk.”

Additionally, market prices for securities of biotechnology and pharmaceutical companies historically have been very volatile. The market for these securities has from time to time experienced significant price and volume fluctuations for reasons unrelated to the operating performance of any one company. Following periods of market volatility, shareholders have often instituted securities class action litigation and we are currently party to two purported securities class action litigation. See “Item 8.A—Financial Information—Legal Proceedings” for additional information. Such securities litigation or any additional securities litigation could have a substantial cost and divert resources and attention of management from our business, even if we are successful.

Our ordinary shares are traded on the TASE and our ADSs are listed on Nasdaq. Trading in our securities on these markets takes place in different currencies (dollars on Nasdaq and NIS on the TASE), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and Israel). The trading prices of our securities on these two markets may differ due to these factors, the factors listed above, or other factors. Any decrease in the price of our securities on one of these markets could cause a decrease in the trading price of our securities on the other market.

Substantial sales of our ordinary shares or ADSs, either on the TASE or on Nasdaq, may cause the market price of our ordinary shares or ADSs to decline. Sales by us or our securityholders of substantial amounts of our ordinary shares or ADSs, or the perception that these sales may occur in the future, could cause a reduction in the market price of our ordinary shares or ADSs.

As of March 15, 2024, as a result of previous financings, we had warrants outstanding (i) for the purchase of 63,837 ADSs at an exercise price of $14.10 per ADS, (ii) for the purchase of 718,750 ADSs at an exercise price of $3.00 per ADS, (iii) for the purchase for the purchase of 11,090,910 ADSs at an exercise price of $1.15 per ADS and (iv) for the purchase of 681,818 ADSs at an exercise price of $1.375 per ADS.

On September 25, 2020, we entered into an offering agreement, or the Original HCW Offering Agreement, with HCW. Pursuant to Original HCW Offering Agreement, we were able to offer and sell, from time to time, at our option, up to $25.0 million of our ADSs through an “at-the-market” equity offering program under which HCW agreed to act as sales agent. From the effective date of the Original HCW Offering Agreement through September 3, 2021, we had sold an aggregate of 7,381,101 ADSs for an aggregate offering price of $24.5 million. On September 3, 2021, the Original HCW Offering Agreement was terminated.

On September 3, 2021, we entered into a new offering agreement, or the New HCW Offering Agreement, with HCW, pursuant to which we may offer and sell, at our option, up to $25.0 million of our ADSs through an “at-the-market” equity program under which HCW agreed to act as sales agent. As of March 15, 2024, we have sold 2,109,858 of our ADSs for total gross proceeds of approximately $4.4 million under the New HCW Offering Agreement.

The issuance of any additional ordinary shares, any additional ADSs, or any securities that are exercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares and ADSs and will have a dilutive effect on our shareholders.

We may need to raise substantial future capital to continue to complete clinical development and commercialize our products and therapeutic candidates and to conduct the research and development and clinical and regulatory activities necessary to bring our therapeutic candidates to market. Our future capital requirements will depend on many factors, including:

•          the failure to obtain regulatory approval, in a timely manner or at all, or achieve commercial success of our therapeutic candidates;

•          our success in effecting out-licensing arrangements with third parties;

•          our success in establishing other out-licensing or co-development arrangements;

•          the success of our licensees in selling products that utilize our technologies;

•          the results of our preclinical studies and clinical trials for our earlier stage therapeutic candidates, and any decisions to initiate clinical trials if supported by the preclinical results;

•          the costs, timing and outcome of regulatory review of our therapeutic candidates that progress to clinical trials;

•          the costs of establishing or acquiring specialty sales, marketing and distribution capabilities, if any of our therapeutic candidates are approved, and we decide to commercialize them ourselves;

•          the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our issued patents and defending intellectual property-related claims;

•          the extent to which we acquire or invest in businesses, products or technologies and other strategic relationships; and

•          the costs of financing unanticipated working capital requirements and responding to competitive pressures.

If we raise additional funds through licensing arrangements with third parties, we may have to relinquish valuable rights to our therapeutic candidates or grant licenses on terms that are not favorable to us. If we raise additional funds by issuing equity or convertible debt securities, we will reduce the percentage ownership of our then-existing shareholders, and these securities may have rights, preferences or privileges senior to those of our existing shareholders. See also “— Future sales of our ordinary shares or ADSs could reduce the market price of our ordinary shares and ADSs.”

As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise required under the Listing Rules of the Nasdaq Stock Market, or the Nasdaq Rules, for U.S. domestic issuers. For instance, we follow home country practice in Israel with regard to, among other things, director nomination procedure, approval of compensation of officers, and quorum at shareholders’ meetings. In addition, we will follow our home country law, instead of the Nasdaq Rules, which require that we obtain shareholder approval for certain dilutive events, such as for the establishment or amendment of certain equity-based compensation plans, an issuance that will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another company. Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on Nasdaq may provide less protection than is accorded to investors under the Nasdaq Rules applicable to U.S. domestic issuers. See “Item 16G — Corporate Governance — Nasdaq Listing Rules and Home Country Practices.”

In addition, as a foreign private issuer, we are exempt from the rules and regulations under the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act.

Our headquarters and principal executive offices, development, and some of our suppliers and third-party contractors are located in central Israel. In addition, a number of our key employees, the majority of our officers and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries, and between Israel and the Hamas (an Islamist militia and political group in the Gaza Strip) and Hezbollah (an Islamist militia and political group in Lebanon).

Since the war broke out on October 7, 2023, our operations have not been adversely affected by this situation, and we have not experienced disruptions to our clinical studies. We are the sponsor of just one clinical trial in Israel with one clinical site. Our commercial operations including the manufacturing operations and supply of APHEXDA take place in the United States and therefore remain unaffected by the war against Hamas. However, the intensity and duration of Israel’s current war against Hamas is difficult to predict at this stage, as are such war’s economic implications on the Company’s business and operations and on Israel’s economy in general. If the war extends for a long period of time or expands to other fronts, such as Lebanon, Syria and the West Bank, our operations may be adversely affected.

Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business, financial condition and results of operations. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.

Finally, political conditions within Israel may affect our operations. Israel has held five general elections between 2019 and 2022, and prior to October 2023, the Israeli government pursued extensive changes to Israel’s judicial system, which sparked extensive political debate and unrest. To date, these initiatives have been substantially put on hold. Actual or perceived political instability in Israel or any negative changes in the political environment, may individually or in the aggregate adversely affect the Israeli economy and, in turn, our business, financial condition, results of operations and growth prospects.

Our reporting and functional currency is the dollar. However, we pay a significant portion of our expenses in NIS and in Euro, and we expect this to continue. If the dollar weakens against the NIS or the Euro in the future, there may be a negative impact on our results of operations. Although we expect our revenues from future licensing arrangements to be denominated primarily in dollars, we are exposed to the currency fluctuation risks relating to the recording of our revenues in currencies other than dollars. For example, if the Euro strengthens against the dollar, our reported revenues in dollars may be lower than anticipated. From time to time, we engage in currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of the currencies mentioned above in relation to the dollar. These measures, however, may not adequately protect us from material adverse effects.

Our research and development efforts were previously financed, in part, through grants that we received from the Israel Innovation Authority, or the IIA (formerly the Office of the Chief Scientist of Israel’s Ministry of Economy and Industry, or the OCS). In addition, before we in-licensed motixafortide, Biokine had received funding for the project from the IIA, and as a condition to IIA consent to our in-licensing of motixafortide, we were required to agree to abide by any obligations resulting from such funding. We therefore must comply with the requirements of the Israeli Encouragement of Industrial Research, Development and Technological Innovation Law, 1984, and related regulations, as amended, or the Research Law, with respect to these projects. Through December 31, 2023, we had received approximately $22.0 million in funding from the IIA and paid the IIA approximately $7.6 million in royalties under our approved programs. As of December 31, 2023, we had no contingent obligation to the IIA other than for motixafortide as agreed when we in-licensed the project. The contingent liability to the IIA assumed by us in connection with our in-licensing of motixafortide (which liability has no relation to the IIA funding actually received by us) amounted to $3.2 million as of December 31, 2023. We have a full right of offset for amounts payable to the IIA for motixafortide from payments that we may owe to Biokine in the future.

The transfer or licensing to third parties outside of Israel of know-how or technologies developed under the IIA funded programs and derivatives thereof, or the transfer to third parties outside of Israel of manufacturing or rights to manufacture based on and/or incorporating such IIA funded know-how, requires, in certain circumstances, the consent of the IIA, and may require certain payments to the IIA. There is no assurance that we will be able to obtain such consent on terms acceptable to us, or at all. Although such restrictions do not apply to the export from Israel of our products developed with such IIA funded know-how, without receipt of the aforementioned consent, such restrictions may prevent or limit us from engaging in transactions with our affiliates, customers or other third parties outside Israel, involving the transfer or licensing of manufacturing rights or other know-how or assets outside of Israel that might otherwise be beneficial to us. Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel of technology or know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.  See Item 4.B. — Information on the Company — Business Overview - Israeli Government Programs — Israel Innovation Authority.”

   

Even following the full repayment of any IIA grants, we must nevertheless continue to comply with the requirements of the Research Law. If we fail to comply with any of the conditions and restrictions imposed by the Research Law and regulations and guidelines thereunder, or by the specific terms under which we received the grants, we may be required to refund any IIA grants previously received together with interest and penalties, and, in certain circumstances, may be subject to criminal charges.

 Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the Israel Registrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a tender offer for all of a company’s issued and outstanding shares can only be completed if the acquirer receives the approval of at least 95% of the issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, except that if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer).  Furthermore, the shareholders, including those who indicated their acceptance of such a tender offer, may, at any time within six months following the completion of the tender offer, claim that the consideration for the acquisition of the shares did not reflect their fair market value and petition an Israeli court to alter the consideration for the acquisition accordingly (unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek appraisal rights, and the acquirer or the company published all required information with respect to the tender offer prior to the date indicated for response to the tender offer).

Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders, such as for those whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfilment of numerous conditions, including, in some cases, a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies are subject to certain restriction. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable, even if no actual disposition of the shares has occurred.

Further, our Articles of Association, as amended at our annual general meeting of shareholder held in August 2023, provide that our directors (other than external directors, if any) are elected on a staggered basis, such that a potential acquirer cannot readily replace our entire board of directors at a single annual general shareholder meeting; rather, at least two annual meetings of shareholders will generally be required to effect a change in a majority of our board of directors.

These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition or merger would be beneficial to us or to our shareholders.

It may be difficult to enforce a U.S. judgment against us and our officers and directors in Israel or the United States, to assert U.S. securities laws claims in Israel or to serve process on our officers and directors.

We are incorporated in Israel. Most of our executive officers and the majority of our directors reside outside of the United States, and a significant portion of our assets and most of the assets of such executive officers and directors are located outside of the United States. Therefore, a judgment obtained against us or any of our executive officers and directors in the United States, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above.

We are incorporated under Israeli law. The rights and responsibilities of the holders of our ordinary shares are governed by our Articles of Association and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S.-based corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith toward the company and other shareholders, and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and acquisitions and interested party transactions requiring shareholder approval, as well as a general duty to refrain from discriminating against other shareholders. In addition, a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward the company. There is limited case law available to assist us in understanding the nature of these duties or the implications of these provisions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our ordinary shares that are not typically imposed on shareholders of U.S. corporations.

ITEM 4.  INFORMATION ON THE COMPANY

A. History and Development of the Company

Our legal and commercial name is BioLineRx Ltd. We are a company limited by shares organized under the laws of the State of Israel. Our principal executive offices are located at 2 HaMa’ayan Street, Modi’in 7177871, Israel, and our telephone number is +972 (8) 642-9100. Our wholly owned subsidiary, BioLineRx USA, Inc., was incorporated in Delaware on January 4, 2008, and is located at 77 Fourth Ave, Waltham, Massachusetts 02451, and its telephone number is (617) 859-6409.

We were founded in 2003 by leading institutions in the Israeli life sciences industry. We completed our initial public offering in Israel in February 2007 and our ordinary shares are traded on the TASE under the symbol “BLRX.” In July 2011, we listed our ADSs on Nasdaq and they are traded under the symbol “BLRX.”

In March 2017, we acquired Agalimmune Ltd., a private U.K.-based company.

The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers like BioLineRx that file electronically with the SEC. The address of that site is www.sec.gov. We maintain a corporate website at www.biolinerx.com. Information contained on or accessible through our website is not a part of this Annual Report on Form 20-F, and the inclusion of our website address herein is an inactive textual reference only.

We use our website (http://www.biolinerx.com) as a channel of distribution of Company information. The information we post through this channel may be deemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of our website are not, however, a part of this Annual Report on Form 20-F.

We have not had any material commitments for capital expenditures, including any anticipated material acquisition of plant and equipment or interests in other companies.

B. Business Overview

We are a commercial stage biopharmaceutical company pursuing life-changing therapies in oncology and rare diseases. Our primary commercialization pipeline consists of APHEXDA (motixafortide), a novel peptide for the treatment of stem-cell mobilization and solid tumors, which, on September 8, 2023, was approved by the FDA for use in combination with G-CSF, also known as filgrastim, to mobilize hematopoietic stem cells to the peripheral blood for collection and subsequent autologous transplantation in patients with multiple myeloma. We are also advancing the development of motixafortide for patients with sickle cell disease and pancreatic cancer.  In addition, we have an off-strategy, legacy therapeutic product called BL-5010 for the treatment of skin lesions.

We seek to develop and commercialize a pipeline of promising therapeutic candidates that exhibit distinct advantages over currently available therapies or address unmet medical needs. Our resources are focused on advancing our therapeutic candidates through development and toward commercialization. We have generated our pipeline by systematically identifying, rigorously validating and in-licensing therapeutic candidates that we believe exhibit a high probability of therapeutic and commercial success. Our strategy includes commercializing our therapeutic candidates by way of out-licensing arrangements with biotechnology and pharmaceutical companies and evaluating, on a case-by-case basis, the commercialization of our therapeutic candidates independently. In this regard, we are currently executing on an independent commercialization plan for APHEXDA in stem cell mobilization for autologous bone marrow transplantation in multiple myeloma patients.

With headquarters and development operations in Israel, and commercialization operations in the U.S., we are driving innovative therapeutics with end-to-end expertise in development and commercialization, ensuring life-changing discoveries move beyond the bench to the bedside.

We use “APHEXDA” when referring to our FDA approved drug and “motixafortide” when referring to our development of APHEXDA for additional indications.

In September 2023, the FDA approved motixafortide in combination with G-CSF to mobilize hematopoietic stem cells to the peripheral blood for collection and subsequent autologous transplantation in patients with multiple myeloma. Following this approval, we commenced commercialization of motixafortide in the U.S. independently, as planned, in order to accelerate its availability to patients and to maximize the value of this innovative therapeutic candidate.

The FDA approval of APHEXDA is based on results from the 2-part, Phase 3 GENESIS trial, a randomized, double-blind, placebo-controlled study evaluating the safety and efficacy of APHEXDA plus G-CSF compared to placebo plus G-CSF, for the mobilization of hematopoietic stem cells for autologous transplantation in multiple myeloma patients. Top-line results announced in May 2021 showed highly statistically significant evidence across all primary and secondary endpoints favoring motixafortide in combination with G-CSF (p<0.0001). In addition, the combination was found to be safe and well tolerated.

During 2023, we completed the build-out of the infrastructure for commercial operations in the U.S. designed to support the commercialization of APHEXDA. In addition, we completed the onboarding of customer-facing personnel on our sales, medical affairs, and national accounts teams, which have engaged with transplant centers, physicians, and payers. Patient-focused support has also been critical to our launch efforts with the creation of BioLineRx Connect, our internal patient support program, as well as the establishment of relationships with patient advocacy groups.

On August 27, 2023, we entered into a License Agreement, or the License Agreement, with Hong Seng Technology Limited, or HST, and Guangzhou Gloria Biosciences Co., Ltd., or Gloria, and/or with HST, the Licensee, pursuant to which we granted HST an exclusive, royalty-bearing, sublicensable license with respect to the intellectual property rights and know-how associated with motixafortide in order to develop and commercialize motixafortide in Asia (other than Israel and certain other countries), or the Territory, and to engage and authorize Gloria to perform services under the License Agreement in the Territory.

Pursuant to the terms of the License Agreement, the Licensee made a $15 million upfront payment in October 2023, upon the closing of the transaction. We are entitled to up to $49 million based on the achievement of certain development and regulatory milestones in China and Japan, and up to $197 million in sales milestones based on defined sales targets of motixafortide in the Territory. Additionally, we are eligible to receive tiered, double-digit royalties (ranging from 10-20%), on aggregate net sales of motixafortide in the Territory payable on a country-by-country basis until the longer of (i) fifteen years from the date of the first sale of motixafortide by Licensee, (ii) the last to expire valid claim of any licensed patents with respect to motixafortide in such country and (iii) the expiration of motixafortide’s orphan drug status in such country. The royalties payable by Licensee to us are to be reduced by 50% following the end of the initial royalty term and to also be reduced upon the occurrence of certain events, including, on a country-by-country basis, the entry of a generic product in such country.

In connection with the License Agreement, on August 27, 2023, we also entered into a securities purchase agreement with HST and Gloria pursuant to which we agreed to sell and issue in a private placement an aggregate of 6,829,137 of our ADSs at a price of $2.136 per ADS. Aggregate gross proceeds from the sale were approximately $14.6 million. The private placement closed in October 2023. No warrants were issued in the transaction.

The License Agreement includes various development obligations for the Licensee pursuant to an agreed-upon development plan, including the execution of a registrational study in stem-cell mobilization and the execution of a randomized Phase 2b study in first-line pancreatic adenocarcinoma.

On August 29, 2023, following the entry into of the License Agreement, we and GenFleet Therapeutics, an immuno-oncology focused biopharmaceutical company based in China, mutually agreed to terminate our collaboration agreement originally entered into in June 2022.

Our Product Pipeline

The table below summarizes key information about our products and our clinical programs:

Motixafortide, is a novel, short peptide that functions as a high-affinity antagonist for CXCR4, which we are developing for the treatment of stem cell mobilization and solid tumors. CXCR4 is expressed by normal hematopoietic cells and overexpressed in various human cancers where its expression correlates with disease severity. CXCR4 is a chemokine receptor that mediates the homing and retention of hematopoietic stem cells, or HSCs, in the bone marrow, and also mediates tumor progression, angiogenesis (growth of new blood vessels in the tumor), metastasis (spread of tumor to other organs) and survival. Before “motixafortide” was approved by the World Health Organization, or WHO, in 2019 as an International Nonproprietary Name, this therapeutic candidate was known as “BL-8040”. In October 2021, we received WHO approval of the United States Adopted Name, or USAN, “motixafortide”. The FDA-approved trade or brand name of motixafortide is APHEXDA.

Motixafortide also mobilizes cancer cells from the bone marrow, detaching them from their survival signals and sensitizing them to chemotherapy. In addition, motixafortide has demonstrated a direct anti-cancer effect by inducing apoptosis (cell death) and inhibiting proliferation in various cancer cell models (multiple myeloma, non-Hodgkin’s lymphoma, leukemia, non-small-cell lung carcinoma, neuroblastoma and melanoma).

In the field of immuno-oncology, motixafortide mediates infiltration of T-cells while reducing immune regulatory cells in the tumor microenvironment, or TME. In clinical studies, the combination of motixafortide with immune checkpoint inhibitors, such as anti PD-1, has shown T-cell activation and a reduction in tumor cell numbers.

The following is a summary of the motixafortide clinical trials.

High-dose chemotherapy followed by stem cell transplantation is an established treatment modality for a variety of hematologic malignancies, including multiple myeloma (MM), as well as various forms of lymphoma and leukemia. Stem cells are mobilized from the bone marrow of the patient (i.e., autologous transplant) or donor (i.e., allogeneic transplant) using granulocyte-colony stimulating factor (G-CSF), harvested from the peripheral blood by apheresis, and infused to the patient after intensive myeloablation (chemo/radiotherapy).

Multiple myeloma is the second most-common hematologic malignancy. Multiple myeloma is an incurable blood cancer that affects certain white blood cells called plasma cells, which are found in the bone marrow. When damaged, these plasma cells rapidly spread and replace normal cells in the bone marrow. According to the American Cancer Society, in 2024, it is estimated that more than 36,000 people will be diagnosed with multiple myeloma, and nearly 13,000 people will die from the disease in the U.S. While some people diagnosed with multiple myeloma initially have no symptoms, most patients are diagnosed due to symptoms that can include bone fracture or pain, low red blood cell counts, tiredness, high calcium levels, kidney problems, or infections.

ASCT is part of the standard treatment paradigm for a number of blood cancers, including multiple myeloma. In the U.S., as many as 8,000 ASCTs are performed each year in patients with multiple myeloma. The success of ASCT depends on adequate mobilization of stem cells during the treatment process. The American Society for Transplantation and Cellular Therapy (ASTCT) guidelines recommend a collection target of 3-5 x 10⁶CD34+ cells/kg and a higher target of double the recommended target if multiple transplants are planned. The International Myeloma Working Group (IMWG) guidelines recommend a collection of 4-6 x 10⁶CD34+ cells/kg with a higher target of 8-10 x 10⁶ CD34+ cells/kg to allow for two transplants if needed. Historically, depending on induction regimens and mobilization strategies, up to 47% of patients have had challenges collecting target numbers of hematopoietic stem cells for ASCT after one apheresis session. Increased age, as well as exposure to lenalidomide-containing induction regimens, including 3-4 drug combination regimens, have been associated with impaired stem cell mobilization.

To begin the stem cell mobilization process, a patient will receive a daily dose of G-CSF for four days. Daily doses of G-CSF will continue until the target collection goal is met with the addition of up to four daily doses of plerixafor as needed. For patients unable to mobilize sufficient numbers of cells for harvesting during this primary mobilization phase, rescue therapy may be carried out followed by an additional number of apheresis sessions as necessary.

In March 2015, we reported successful top-line results from a Phase 1 safety and efficacy trial for the use of motixafortide as a novel stem cell mobilization treatment for allogeneic bone marrow transplantation at Hadassah Medical Center in Jerusalem.

In March 2016, we initiated a Phase 2 trial for motixafortide in allogeneic stem cell transplantation, conducted in collaboration with the Washington University School of Medicine, Division of Oncology and Hematology. In May 2018, we announced positive top-line results of this study showing, among other things, that a single injection of motixafortide mobilized sufficient amounts of CD34+ cells required for transplantation at a level of efficacy similar to that achieved by using 4-6 injections of granulocyte colony-stimulating factor, or G-CSF, the current standard of care.

In December 2017, we commenced a randomized, placebo-controlled Phase 3 registrational trial for motixafortide, known as the GENESIS trial, for the mobilization of HSCs for autologous transplantation in patients with multiple myeloma. The trial began with a lead-in period for dose confirmation, which was to include 10-30 patients and then progress to the placebo-controlled main part, which was designed to include 177 patients in more than 25 centers. Following review of the positive results from treatment of the first 11 patients, the Data Monitoring Committee, or DMC, recommended that the lead-in part of the study be stopped and that we should move immediately to the second part. Additional positive results from the lead-in period were reported at the annual meeting of the European Society for Blood and Marrow Transplantation held in March 2019, where it was announced that HSCs mobilized by motixafortide in combination with G-CSF were successfully engrafted in all 11 patients.

In August 2020, we announced a decision to perform an interim analysis on approximately 65% of the original study sample size, primarily based on a significantly lower-than-anticipated patient-dropout rate in the study. In October 2020, we announced positive results from the interim analysis. Based on the statistically significant evidence favoring treatment with motixafortide, the study’s independent DMC issued a recommendation to us that patient enrollment may be ceased immediately, without the need to recruit all 177 patients originally planned for the study. In accordance with the DMC’s recommendation, study enrollment was completed at 122 patients. In May 2021, we announced positive top-line results from the Phase 3 trial. Based on an analysis of data on all 122 enrolled patients (the intent to treat population) we found highly statistically significant evidence across all primary and secondary endpoints favoring motixafortide in addition to G-CSF, as compared to placebo plus G-CSF (p<0.0001). The addition of motixafortide to G-CSF also allowed 88.3% of patients to undergo transplantation after only one apheresis session, compared to 10.8% in the G-CSF arm – an 8.2-fold increase. The combination was also found to be generally well tolerated with a favorable safety profile. In GENESIS, the safety was evaluated in 92 patients with multiple myeloma who received motixafortide 1.25 mg/kg subcutaneously plus G-CSF, and 42 patients who received placebo plus G-CSF. Serious adverse reactions occurred in 5.4% of patients receiving motixafortide plus G-CSF. These reactions included vomiting, injection site reaction, hypersensitivity reaction, injection site cellulitis, hypokalemia and hypoxia. The most common adverse reactions occurring in GENESIS (incidence >20%) were injection site reactions (pain, erythema and pruritus), pruritus, flushing, and back pain. We continue to follow-up on the GENESIS study patients for relapse-free and overall survival, according to the statistical analysis plan agreed upon with the FDA.

In October 2021, we announced positive results from a pharmacoeconomic study evaluating the cost-effectiveness of using motixafortide as a primary stem cell mobilization agent on top of G-CSF, versus G-CSF alone, in multiple myeloma patients undergoing autologous stem-cell transplantation (ASCT). The study was performed by the Global Health Economics and Outcomes Research (HEOR) team of IQVIA, and was a pre-planned study conducted in parallel with the GENESIS Phase 3 trial. The study concluded that the addition of motixafortide to G-CSF (the current standard of care) was associated with a statistically significant decrease in health resource utilization (HRU) during the ASCT process, compared to G-CSF alone. Based on the significantly higher number of mobilized cells and the lower number of apheresis sessions, lifetime estimates showed quality-adjusted-life-year (QALY) benefits and net cost savings of approximately $19,000 (not including the cost of motixafortide), versus G-CSF alone.

In March 2022, we announced results from a follow-on pharmacoeconomic study performed by the HEOR team of IQVIA. This study indirectly evaluated the cost-effectiveness of using motixafortide as a primary stem cell mobilization agent in combination with G-CSF, against plerixafor in combination with G-CSF, in multiple myeloma patients undergoing ASCT. The additional study results showed that motixafortide in combination with G-CSF, versus plerixafor in combination with G-CSF, demonstrated a statistically significant decrease in HRU during the ASCT process. Based on the significantly higher number of mobilized cells and the lower number of apheresis sessions, lifetime estimates showed QALY benefits and net cost savings of approximately $30,000 (not including the cost of motixafortide), versus plerixafor plus G-CSF. The study findings strengthened the assessment that the use of motixafortide in combination with G-CSF, as the potential new standard of care in mobilization for ASCT, would be a cost-effective option in the United States, based on accepted willingness-to-pay (WTP) values for healthcare payers.

In September 2022, we submitted an NDA to the FDA for motixafortide in stem cell mobilization for autologous bone marrow transplantation for multiple myeloma patients and as noted above in September 2023, the FDA approved motixafortide in combination with G-CSF to mobilize hematopoietic stem cells to the peripheral blood for collection and subsequent autologous transplantation in patients with multiple myeloma.

Sickle cell disease, or SCD, is one of the most common genetic diseases globally, affecting millions of people throughout the world and disproportionately impacting persons of color. It is estimated that 5% of the world’s population carries trait genes for hemoglobin disorders (including SCD) and in the U.S. it is estimated that 100,000 Americans are affected by SCD Sickle cell disease arises from mutations in the hemoglobin gene, ultimately leading to the production of abnormally shaped (sickle) red blood cells that tend to stick within blood vessels causing their occlusion. The clinical manifestations of SCD include anemia and blood vessel occlusion which can lead to both acute and chronic pain, as well as tissue ischemia across multiple organ systems (e.g., stroke, heart attack, respiratory failure), ultimately compromising end organ function. The cumulative impact of these complications significantly impacts morbidity and mortality for patients with SCD.

Effective HSC-based gene therapies depend upon the collection of significant quantities of stem cells to engineer the treatments that enable the potential genetic treatment of SCD. Currently available mobilization regimens can carry serious risk and side effects for patients with SCD or may not reliably yield optimal numbers of HSCs for gene therapy. Peripheral blood mobilization of stem cells using the mobilization agent plerixafor is the current strategy to collect HSCs for SCD gene therapies.

In March 2023, we entered into a clinical collaboration with Washington University School of Medicine in St. Louis to advance a Phase 1 clinical trial in which motixafortide will be evaluated as a monotherapy and in combination with natalizumab (VLA-4 inhibitor), as novel regimens to mobilize CD34+ hematopoietic stem cells (HSC) for gene therapies in Sickle Cell Disease. The proof-of-concept investigator-initiated study plans to enroll five adults with a diagnosis of SCD who are receiving automated red blood cell exchanges via apheresis. The trial’s primary objective is to assess the safety and tolerability of motixafortide alone and in combination with natalizumab in SCD patients, defined by dose-limiting toxicities. Secondary objectives include determining the number of CD34+ hematopoietic stem and progenitor cells (HSPCs) mobilized via leukapheresis; and determining the pharmacokinetics of CD34+ HSPCs mobilization to peripheral blood in response to motixafortide alone and motixafortide plus natalizumab in SCD patients. As anticipated, the study began enrolling in 2023, with first patient dosed in December 2023, and is ongoing (timelines, as well as other study related decisions, are ultimately controlled by the independent investigator-sponsor and are, therefore, subject to change). Initial data from this study is expected in the second half of 2024. 

Novel, emerging therapeutic approaches for targeting solid tumors in oncology are being developed and tested. Combinational therapies of immune checkpoint inhibitors with immuno-oncology supporting agents, with or without chemotherapy, are among the most promising experimental treatments for solid malignancies.

Pancreatic cancer has a low rate of early diagnosis, a high mortality rate and a poor five-year survival prognosis. Symptoms are usually non-specific and as a result, pancreatic cancer is often not diagnosed until it reaches an advanced stage. Once the disease has metastasized, or spread to other organs, it becomes especially hard to treat. In the United States in 2024, an estimated 66,000 adults will be diagnosed with the disease, which accounts for approximately 3% of all cancers in the U.S. and about 7% of all cancer deaths.  Worldwide, an estimated 495,000 people were diagnosed with the disease in 2020.  In the U.S., if the cancer is detected at an early stage when surgical removal of the tumor is possible, the 5-year relative survival rate is 44%. About 12% of people are initially diagnosed at this stage. If the cancer has spread to surrounding tissues or organs, the 5-year relative survival rate is 15%.  For the 52% of patients who are initially diagnosed with metastatic cancer, the 5-year relative survival rate is 3%. In particular, hepatic (liver) metastases are a critical risk factor driving poor prognoses for patients with metastatic pancreatic adenocarcinoma, or PDAC.

Furthermore, second-line patients that were diagnosed already with metastatic disease have very few therapeutic options. The only approved regimen for second-line patients is Onivyde® in combination with 5FU and LV. For these Stage IV at diagnosis patients reaching second-line therapy, median overall survival is only 4.7 months (Macarulla et al, Pancreas 2020).

In January 2016, we entered into a clinical collaboration with MSD (a tradename of Merck & Co., Inc., Kenilworth, New Jersey) in the field of cancer immunotherapy. Based on this collaboration, in September 2016 we initiated a Phase 2a study, known as the COMBAT/KEYNOTE-202 study, focusing on evaluating the mechanism of action and safety of motixafortide in combination with KEYTRUDA® (pembrolizumab), MSD’s anti-PD-1 therapy, in 37 patients with metastatic PDAC. The study was an open-label, multicenter, single-arm trial designed to evaluate the mechanism of action, safety and tolerability, and clinical response of the combination of these therapies. The mechanistic evaluation consisted of multiple pharmacodynamic parameters, including the ability to improve infiltration of T-cells into the tumor and their reactivity. Top-line results showed that the dual combination demonstrated encouraging disease control and overall survival in patients with metastatic pancreatic cancer. In addition, assessment of patient biopsies supported motixafortide’s ability to induce infiltration of tumor-reactive T-cells into the tumor, while reducing the number of immune regulatory cells.

In July 2018, we announced the expansion of the COMBAT/KEYNOTE-202 study under the collaboration to include a triple combination arm investigating the safety, tolerability and efficacy of motixafortide, KEYTRUDA ® and chemotherapy. We initiated this arm of the trial in December 2018. In December 2019, we announced that preliminary data from the study indicated that the triple combination therapy showed a high level of disease control, including seven partial responders and 10 patients with stable disease out of 22 evaluable patients. In February 2020, we completed the recruiting of a total of 43 patients for the study and in December 2020, we announced the final results of the study. The results of the study showed substantial improvement as compared to comparable historical results of other pancreatic cancer studies across all study endpoints. Of the 38 evaluable patients, median overall survival was 6.5 months, median progression free survival was 4.0 months, confirmed overall response rate was 13.2%, overall response rate was 21.2% and disease control rate was 63.2%. The combination was generally well tolerated, with a safety profile consistent with the individual safety profile of each component alone; adverse event and severe adverse event profiles were as expected with chemotherapy-based treatment regimens.

In August 2016, in the framework of an agreement with MD Anderson Cancer Center, or MD Anderson, we entered into an additional collaboration for the investigation of motixafortide in combination with KEYTRUDA in pancreatic cancer. The focus of this study, in addition to assessing clinical response, was the mechanism of action by which both drugs might synergize, as well as multiple assessments to evaluate the biological anti-tumor effects induced by the combination. We supplied motixafortide for this Phase 2b study, which commenced in January 2017. Final results from this study (based on a cut-off in July 2019 from 20 enrolled patients out of which 15 were evaluable) showed that the dual combination demonstrated clinical activity and encouraging overall survival in patients with metastatic pancreatic cancer. In addition, assessment of patient biopsies supported motixafortide’s ability to induce infiltration of tumor-reactive T-cells into the tumor.

In October 2020, we announced that motixafortide will be tested in combination with the anti-PD-1 cemiplimab (LIBTAYO®) and standard-of-care chemotherapy (gemcitabine and nab-paclitaxel) in first-line PDAC. This investigator-initiated Phase 2b, single-arm study (CheMo4METPANC), led by Columbia University, initially enrolled 11 PDAC patients in a pilot phase. In September 2023, we reported data from the pilot phase of the study. As of July 2023, of those 11 patients, seven patients (64%) experienced a partial response (PR), of which five (45%) were confirmed PRs at the time of the data cut, with one patient experiencing resolution of the hepatic (liver) metastatic lesion.  Three patients (27%) experienced stable disease, resulting in a disease control rate of 91%.  These findings compare favorably to historic partial response and disease control rates of 23% and 48%, respectively, reported with the chemotherapy combination of gemcitabine and nab-paclitaxel.

Based on this data, the planned single-arm study was amended to a significantly larger, randomized study, based on preliminary pre-defined data from the single-arm pilot phase, with a new planned total of 108 patients. The multi-center CheMo4METPANC Phase 2b clinical trial is a randomized, investigator-initiated clinical trial in first line metastatic pancreatic cancer. Sponsored by Columbia University, and supported equally by BioLineRx and Regeneron, the study is evaluating the combination of motixafortide, PD-1 inhibitor cemiplimab, and standard of care chemotherapies gemcitabine and nab-paclitaxel, versus gemcitabine and nab-paclitaxel, alone in 108 patients. The trial's primary endpoint is progression free survival. Secondary objectives include safety, response rate, disease control rate, duration of clinical benefit and overall survival. In February 2024, the first patient was dosed.

During the first half of 2020, we initiated the evaluation of motixafortide as a potential therapy for acute respiratory distress syndrome, or ARDS, resulting from COVID-19 and other viral infections In this regard, substantial data is emerging regarding the involvement of neutrophils, neutrophil extracellular traps (NETs), monocytes and macrophages in the development of ARDS secondary to COVID-19 and other viral infections; as well as the key involvement of CXCR4 as a mediator of those cells in the inflamed pulmonary tissue. Based on the scientific data indicating the importance of blocking the CXCR4/CXCL12 axis during ARDS, we believe that motixafortide may be of potential benefit for patients with ARDS. Following our initial evaluation, in November 2020, we announced initiation of a Phase 1b study in patients with ARDS secondary to COVID-19 and other respiratory viral infections. The study is an investigator-initiated study, led by Wolfson Medical Center, in Israel, to evaluate motixafortide in patients hospitalized with ARDS. The primary endpoint of the study is to assess the safety of motixafortide in these patients; respiratory parameters and inflammatory biomarkers will be assessed as exploratory endpoints. Up to 25 patients will be enrolled in the study, with a preliminary analysis planned after ten patients have completed the initial treatment period. Results of the preliminary analysis are now expected in 2024 (although timelines are ultimately controlled by the independent investigator and are therefore subject to change). 

In addition to the above, from time to time a number of Company-sponsored and investigator-initiated studies may be conducted in a variety of indications, to support the interest of the scientific and medical communities in exploring additional uses for motixafortide. These studies serve to potentially further elucidate the mechanism of action for motixafortide, generate data about motixafortide’s potential use in other indications, and inform the life-cycle management process of motixafortide. The results of studies such as these are presented from time to time at relevant professional conferences. 

Orphan Drug Designations

Motixafortide has been granted three Orphan Drug Designations by the FDA: for use to mobilize HSCs from the bone marrow to peripheral blood for collection in autologous or allogeneic transplantation (granted in July 2012); for the treatment of AML (granted in September 2013); and for the treatment of pancreatic cancer (granted in February 2019). Orphan Drug Designation is granted to therapeutics intended to treat rare diseases or conditions that affect not more than 200,000 people in the United States (or diseases or conditions that affect more than 200,000 people but where there is no reasonable expectation that the product development cost will be recovered from product sales in the United States). If an Orphan Drug-Designated product subsequently receives FDA approval for the disease or condition for which it was designated,, the product is entitled to a seven-year marketing exclusivity period, which means that the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances (such as a showing of clinical superiority to the product with orphan exclusivity by means of greater effectiveness, greater safety or providing a major contribution to patient care or in instances of drug supply issues), for seven years. In addition, Orphan Drug Designation enables sponsors to apply for certain federal grants and tax credits for clinical trials and provides an exemption from the Prescription Drug User Fee so long, as the sponsor’s annual revenue is below $50,000,000.

In January 2020, the EMA granted an Orphan Drug Designation to motixafortide for the treatment of pancreatic cancer. In addition, in December 2023, the EMA granted Orphan Drug Designation to motixafortide for treatment of patients undergoing hematopoietic stem cell transplantation. The EMA grants orphan medicinal product designation to investigational drugs intended to treat, prevent or diagnose a life-threatening or chronically debilitating disease affecting fewer than five in 10,000 people in the EU and for which no satisfactory treatment is available or, if such treatment exists, the medicine must be of significant benefit to those affected by the condition. Orphan medicinal product designation provides regulatory and financial incentives for companies to develop and market therapies, including ten years of market exclusivity, protocol assistance, fee reductions and EU-funded research.

Our commercialized, legacy therapeutic product, BL-5010, is a customized, proprietary pen-like applicator containing a novel, acidic, aqueous solution for the non-surgical removal of skin lesions. It offers an alternative to painful, invasive and expensive removal treatments including cryotherapy, laser treatment and surgery. Since the treatment is non-invasive, it poses minimal infection risk and eliminates the need for anesthesia, antiseptic precautions and bandaging. The pre-filled device controls and standardizes the volume of solution applied to a lesion, ensuring accurate administration directly on the lesion and preventing both accidental exposure of the healthy surrounding tissue and unintentional dripping. It has an ergonomic design, making it easy to handle, and has been designed with a childproof cap. BL-5010 is applied topically on a skin lesion in a treatment lasting a few minutes with the pen-like applicator and causes the lesion to gradually dry out and fall off within one to four weeks.

In December 2014, we entered into an exclusive out-licensing arrangement with Perrigo Company plc, or Perrigo, for the rights to BL-5010 for over-the-counter, or OTC, indications in Europe, Australia and additional selected countries. In March 2016, Perrigo received CE Mark approval for BL-5010 as a novel OTC treatment for the non-surgical removal of warts. The commercial launch of products for treatment of this first OTC indication (warts/verrucas) commenced in Europe in the second quarter of 2016. Since then, Perrigo has invested in improving the product and during 2019 launched an improved version of the product in several European countries. In March 2020, we agreed that Perrigo could relinquish its license rights for certain countries that had been included in its territory according to the original license agreement, and was also no longer obligated to develop, obtain regulatory approval for, and commercialize products for a second OTC indication. In turn, in March 2020, we agreed with our licensor of the rights to BL-5010, Innovative Pharmaceutical Concepts (IPC) Inc., or IPC, to return to IPC those license rights no longer out-licensed to Perrigo as a result of the agreement described in the preceding sentence, in consideration of the payment to us of royalties or fees on sublicense receipts.

Collaboration and Out-Licensing Agreements

See “—Out Licensing of Motixafortide in Asia” for details regarding our out-licensing agreement with Gloria.

See “—In-Licensing Agreements— BL-5010” for details regarding our out-licensing agreement with Perrigo.

In-Licensing Agreements

We have in-licensed and intend to continue to in-license development, production and marketing rights from selected research and academic institutions in order to capitalize on the capabilities and technology developed by these entities. We also seek to obtain technologies that complement and expand our existing technology base and leverage our U.S. sales and marketing capabilities by entering into license agreements with pharmaceutical and biotechnology companies. When entering into in-license agreements, we generally seek to obtain unrestricted sublicense rights consistent with our primarily partner-driven strategy. We are generally obligated under these agreements to diligently pursue product development, make development milestone payments, pay royalties on any product sales and make payments upon the grant of sublicense rights. We generally insist on the right to terminate any in-license for convenience upon prior written notice to the licensor.

The scope of payments we are required to make under our in-licensing agreements is comprised of various components that are paid commensurate with the progressive development and commercialization of our drug products.

Our in-licensing agreements generally provide for the following types of payments:

The following are descriptions of our in-licensing agreements associated with our therapeutic candidates. In addition to the in-licensing agreements discussed herein, we have entered into other in-licensing arrangements in connection with our therapeutic candidates in clinical, advanced preclinical and feasibility stages.

In September 2012, we in-licensed the rights to motixafortide under a license agreement with Biokine. Pursuant to the agreement, Biokine granted us an exclusive, worldwide, sublicensable license to develop, manufacture, market and sell certain technology relating to a short peptide that functions as a high-affinity antagonist for CXCR4 and the uses thereof.

There were no upfront payments due under the agreement. We are obligated to pay a monthly development fee of $27,500 for certain development services that Biokine has committed to provide to us under the agreement. The payment of this monthly fee is required to continue until March 2029.

We are responsible for paying all development costs incurred by the parties in carrying out the development plan.

The agreement also grants us the right to grant sublicenses for the licensed technology. In the case of a sublicense, we were initially required to pay Biokine a payment of 40% of the amounts we receive as consideration in connection with a sublicense, including royalties, license fees, milestone payments, license maintenance fees and equity, or the Sublicense Receipts. In October 2018, the agreement was amended to reduce the payments associated with sublicensing to 20% of Sublicense Receipts, in return for the payment by us of $10 million in cash plus $5 million in our restricted ADSs. Biokine is also eligible to receive up to a total of $2.5 million in future milestone payments. In the case of self-commercialization, we are obligated to make royalty payments of 10% of net sales, subject to certain limitations.

Before we in-licensed motixafortide, Biokine had received funding for the project from the IIA, and as a condition to IIA giving its consent to our in-licensing of motixafortide, we were required to agree to abide by any obligations resulting from such funding. However, if we become legally required to make payments to the IIA in respect of grants made to Biokine, we have the right to offset the full amount of such payments from any payments otherwise due to Biokine as sublicensing royalties as described above.

We are obligated under the agreement with Biokine to make commercially reasonable, good faith efforts to sublicense or commercialize motixafortide for fair consideration. If we do not fulfill this obligation within 24 months after completion of the development plan, all of the rights and responsibilities with respect to commercialization of the licensed technology will revert to Biokine, and our obligation to pay royalties for sales of any licensed products or sublicensing as described above will revert to Biokine.

We have the first right to prepare, file, prosecute and maintain any patent applications and patents, in respect of the licensed technology and any part thereof, at our expense, provided that we are required to consult with Biokine regarding patent prosecution and patent maintenance. In addition, we have the right to take action in the prosecution, prevention, or termination of any patent infringement of the licensed technology. We are responsible for all the expenses of any patent infringement suit that we bring, including any expenses incurred by Biokine in connection with such suits, with such expenses reimbursable from any sums recovered in such suit or in the settlement thereof for. After such reimbursement, if any funds remain, both we and Biokine are each entitled to a certain percentage of any remaining sums.

The agreement will remain in effect until the expiration of all of our royalty and sublicense revenue obligations to Biokine, determined on a product-by-product and country-by-country basis. We may terminate the agreement for any reason on 90 days’ prior written notice to Biokine. Either party may terminate the agreement for a material breach by the other party if the breaching party is unable to cure the breach within 30 days after receiving written notice of the breach from the non-breaching party. With respect to any termination for a material breach, if the breach is not susceptible to cure within the stated period and the breaching party uses diligent, good faith efforts to cure such breach, the stated period will be extended by an additional 30 days. In addition, either party may terminate the agreement upon the occurrence of certain bankruptcy events.

Termination of the agreement will result in a loss of all of our rights to the drug and the licensed technology, which will revert to Biokine. In addition, any sublicense of ours will terminate provided that, upon such termination and at the request of the sublicensee, Biokine will be required to enter into a separate license agreement with the sublicensee on substantially the same terms as those contained in the applicable sublicense agreement.

In November 2007, we in-licensed the rights to develop and commercialize BL-5010 under a license agreement with IPC. Under the agreement, IPC granted us an exclusive, worldwide, sublicensable license to develop, manufacture, market and sell certain technology relating to an acid-based formulation for the non-surgical removal of skin lesions and the uses thereof. We are obligated to use commercially reasonable efforts to develop the licensed technology in accordance with a specified development plan, including meeting certain specified diligence goals. We are required to make low, single-digit royalty payments on the net sales of the licensed technology if we manufacture and sell it on our own, subject to certain limitations. Our royalty payment obligations are payable on a product-by-product and country-by-country basis, until the last to expire of any patent included within the licensed technology in such country. We also have the right to grant sublicenses for the licensed technology and are required to pay IPC a payment, within our standard range of sublicense receipt consideration, based on the revenues we receive as consideration in connection with any sublicensing, development, manufacture, marketing, distribution or sale of the licensed technology.

The license agreement remains in effect until the expiration of all of our license, royalty and sublicense revenue obligations to IPC, determined on a product-by-product and country-by-country basis, unless we terminate the license agreement earlier. We may terminate the license agreement for any reason on 30 days’ prior written notice. Either party may terminate the agreement for material breach if the breach is not cured within 30 days after written notice from the non-breaching party. If the breach is not susceptible to cure within the stated period and the breaching party uses diligent, good faith efforts to cure such breach, the stated period will be extended by an additional 30 days. In addition, either party may terminate the agreement upon the occurrence of certain bankruptcy events.

Termination of the agreement will result in a loss of all of our rights to the licensed technology, which would revert to IPC. In addition, any sublicense of the licensed technology will terminate provided that, upon termination, at the request of the sublicensee, IPC is required to enter into a license agreement with the sublicensee on substantially the same terms as those contained in the sublicense agreement.

In March 2017, we acquired substantially all of the outstanding shares of Agalimmune and entered into the Agalimmune Development Agreement with the selling shareholders. The compound is a synthetic alpha-gal immunotherapy in development for solid tumors. AGI-134 harnesses the body’s pre-existing, highly abundant, anti-alpha-gal, or anti-Gal, antibodies to induce a systemic, specific anti-tumor response to the patient’s own tumor neo-antigens. This response is designed to not only kill the tumor cells at the site of injection, but also to bring about a durable, follow-on, anti-metastatic immune response. We recently determined to terminate development of AGI-134 and provided notice of our intent to terminate the Agalimmune Development Agreement effective March 15, 2024.

The Agalimmune Development Agreement provides the selling shareholders with a reversionary option, in the event of certain triggering events, including termination by us, that permits the selling shareholders to re-acquire our equity interests in Agalimmune for nominal consideration. We are currently awaiting Agalimmune’s founders’ decision whether to exercise its reversionary option right.

Intellectual Property

Our success depends in part on our ability to obtain and maintain proprietary protection for our therapeutic candidates, technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business. We also rely on trade secrets, know-how and continuing technological innovation, as well as on regulatory exclusivity, such as Orphan Drug designation or new chemical entity, or NCE, protection to develop and maintain our proprietary position.

As of March 15, 2024, we owned or exclusively licensed for uses within our field of business 29 patent families that collectively contain 128 granted patents, 4 allowed patent applications and 73 pending patent applications relating to the three candidates listed below. We are also pursuing patent protection for other drug candidates in our pipeline. Patents related to our therapeutic candidates may provide future competitive advantages by providing exclusivity related to the composition of matter, formulation, and method of administration of the applicable compounds and could materially improve the value of our therapeutic candidates. The patent positions for our three therapeutic candidates are described below and include both issued patents and pending patent applications we exclusively license. We vigorously defend our intellectual property to preserve our rights and gain the benefit of our investment.

The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain and solidify our proprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any of our patent applications or those patent applications that we license will result in the issuance of any patents. Our issued patents and those that may issue in the future, or those licensed to us, may be challenged, narrowed, circumvented or found to be invalid or unenforceable, which could limit our ability to stop competitors from marketing related products or the length of term of patent protection that we may have for our products. Neither we nor our licensors can be certain that we were the first to invent the inventions claimed in our owned or licensed patents or patent applications. In addition, our competitors may independently develop similar technologies or duplicate any technology developed by us, and the rights granted under any issued patents may not provide us with any meaningful competitive advantages against these competitors. Furthermore, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any of our products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent.

We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements and assignment of invention agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, such agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors.

We also rely on protection available under trademark laws. As of March 15, 2024, we have registered textual trademarks for “APHEXDA” in Israel, Australia, Brazil, China, EU, UK, Japan and USA, as well as registered logo marks for “APHEXDA” in Israel, Australia, Brazil, China, EU, UK and Japan. We also have the same pending logo trademarks in Canada, Korea and the USA and the same pending textual trademarks in Canada and Korea. We further have pending textual and logo marks for “BioLineRx” in Israel and the USA. We also claim common law protections for other marks we use in our business. Competitors and other companies could adopt similar marks or try to prevent us from using our marks, consequently impeding our ability to build brand identity and possibly leading to customer confusion.

Manufacturing

We rely on contract manufacturers to produce motixafortide for clinical trials and for commercial sale. We have contracted with third-party manufacturers for the manufacture of the API for motixafortide, the supply of finished product for both commercial use and our clinical programs, and for labeling and packaging. In addition, under the License Agreement with HST and Gloria, we expect the Licensee will in the future serve as an additional source for the manufacture of the API for motixafortide. To the extent possible and commercially practicable, we plan to develop back-up strategies for raw materials, manufacturing and testing services for our commercial products. Given the long lead times and cost of establishing additional commercial manufacturing sites, we expect that we will rely on single contract manufacturers to produce motixafortide for the foreseeable future. Our manufacturing partners have a limited number of facilities in which our therapeutic candidates can be produced.

Our current and any future third-party manufacturers, their facilities and all lots of drug substance and drug products used in our clinical trials and commercial sales are required to be in compliance with cGMPs. The cGMP regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports, and returned or salvaged products. The manufacturing facilities for our products must meet cGMP requirements and FDA satisfaction before any product is approved and we can manufacture commercial products. Our current and any future third-party manufacturers are also subject to periodic inspections of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of our products to assess our compliance with applicable regulations.

Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, imposition of a clinical hold or termination of clinical trials, warning letters, untitled letters, cyber letters, modification of promotional materials or labeling, product recalls, product seizures or detentions, refusal to allow imports or exports, total or partial suspension of production or distribution, debarment, injunctions, fines, consent decrees, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreements to resolve allegations of non-compliance with these laws, refusals of government contracts and new orders under existing contracts, exclusion from participation in federal and state healthcare programs, restitution, disgorgement or civil or criminal penalties, including fines and individual imprisonments.

Contract Research Organizations

We outsource certain preclinical and clinical development activities to CROs, which meet FDA or European Medicines Agency regulatory standards. We create and implement the drug development plans and, during the preclinical and clinical phases of development, manage the CROs according to the specific requirements of the therapeutic candidate under development.

Competition

The life science industry is intensely competitive. We face potential competition from both large and small pharmaceutical and biotechnology companies, academic institutions, governmental and public and private research institutions. Many of these organizations have substantially greater financial, technical, manufacturing and marketing resources than we do. In certain cases, our competitors may also be able to use alternative technologies that do not infringe upon our patents to formulate the active materials in our therapeutic candidates. They may, therefore, bring to market products that are able to compete with our candidates, or other products that we may develop in the future.

Any therapeutic candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future. The key competitive factors affecting the success of each therapeutic candidate, if approved, is likely to be their safety, efficacy, convenience, price, the level of proprietary and generic competition, and the availability of coverage and reimbursement from government and other third‑party payors. Our competitors may also obtain FDA or other regulatory approval for their therapeutic candidates more rapidly than we may be able to do so for any existing or new product candidates of ours, which could result in their establishing a strong market position before we are able to enter the market.

Motixafortide competes directly with Mozobil® (plerixafor), which is marketed by Sanofi Genzyme as a stem cell mobilizer for autologous stem cell transplantation. During the third quarter of 2023, Mozobil’s last to expire patent expired. As a result, several companies have launched generic formulations of plerixafor at a substantially reduced price to Mozobil including Dr. Reddy’s Laboratories Ltd, Teva Pharmaceuticals USA Inc, Zydus Pharmaceuticals USA Inc, MSN Laboratories Private Ltd, Eugia Pharma Specialities Ltd, Amneal EU Ltd and Kindos Pharmaceuticals Co Ltd.

We are aware of other CXCR4 inhibitors in various stages of development including burixafor developed by GPCR Therapeutics; X4P-001 (mavorixafor) developed by X4 Pharmaceuticals Inc for WHIM syndrome, AD-214 developed by AdAlta for idiopathic pulmonary fibrosis (IPF), CXCR-4 developed by Alpha 9 Theranostics Inc for unspecified cancer and Balixafortide developed by Spexis AG for the treatment of PDAC and TNBC.

Immuno-oncology is an area of great interest in the pharmaceutical market, specifically, immuno-oncology combination therapies. Currently there are thousands of immuno-oncology combination treatments being tested in clinical trials that aim to transform scientific innovation into practice-changing cancer drugs.

In the field of pancreatic cancer, motixafortide competes indirectly with the few, currently approved treatments for PDAC. Motixafortide is believed to modulate the effector/suppressor cell ratio toward a proinflammatory profile, which may act synergistically with checkpoint inhibitor agents to enhance the anti-tumor activity of infiltrated T cells. In the first line setting, Gemcitabine in combination with Abraxane^®or FOLFIRINOX regimen are the current standard of care. In February 2024, Ipsen’s Onivyde® obtained approval in first line PDAC in the NALIRIFOX regimen based on phase III NAPOLI -3.

Oncologists have limited options of existing therapies for second-line metastatic patients. The only FDA-approved second-line treatment is Onivyde^®in combination with 5FU and LV for gemcitabine-treated patients.

In addition to chemotherapy, Merck’s KEYTRUDA® was approved for MSI-H cancers (approximately 1% of all cases) and Lynparza® is approved for maintenance of BRCA mutated pancreatic cancer (approximately 7% of all cases).

In the last several years we have seen a number of late-stage clinical failures of compounds for advanced PDAC, most notably Apexigen’s APX005, Erytech’s Eryspase and Rafael Pharmaceuticals’ devimistat in the last year. Most of these failed trials have been based on a single promising endpoint. Despite a busy early-stage clinical pipeline, there are only a few phase III and approved assets, demonstrating a high attrition rate in PDAC.

BL-5010 competes with a variety of approved destructive and non-destructive treatments for skin lesions. Both Endwarts^® (Meda Health) and Eskata^® (Aclaris therapeutics) are medical device-based treatments marketed for removal of warts.

Government Regulation

We operate in a highly controlled regulatory environment. Stringent regulations establish requirements relating to analytical, toxicological and clinical standards and protocols in respect of the testing of pharmaceuticals and medical devices. Regulations also cover research, development, manufacturing and reporting procedures, both pre- and post-approval. In many markets, especially in Europe, marketing and pricing strategies are subject to national legislation or administrative practices that include requirements to demonstrate not only the quality, safety and efficacy of a new product, but also its cost-effectiveness relating to other treatment options. Failure to comply with regulations can result in stringent sanctions, including product recalls, withdrawal of approvals, seizure of products and criminal prosecution.

Before obtaining regulatory approvals for the commercial sale of our therapeutic candidates, we or our licensees must demonstrate through preclinical studies and clinical trials that our therapeutic candidates are safe and effective. Historically, the results from nonclinical studies and early clinical trials often have not accurately predicted results of later clinical trials. In addition, a number of pharmaceutical products have shown promising results in early clinical trials but subsequently failed to establish sufficient safety and efficacy results to obtain necessary regulatory approvals. We have incurred and will continue to incur substantial expense for, and devote a significant amount of time to, preclinical studies and clinical trials. Many factors can delay the commencement and rate of completion of clinical trials, including the inability to recruit patients at the expected rate, the inability to follow patients adequately after treatment, the failure to manufacture sufficient quantities of materials used for clinical trials, and the emergence of unforeseen safety issues and governmental and regulatory delays. If a therapeutic candidate fails to demonstrate safety and efficacy in clinical trials, this failure may delay development of other therapeutic candidates and hinder our ability to conduct related preclinical studies and clinical trials. Additionally, as a result of these failures, we may also be unable to find additional licensees or obtain additional financing.

Governmental authorities in all major markets require that a new pharmaceutical product or medical device be approved or exempted from approval before it is marketed, and have established high standards for technical appraisal, which can result in an expensive and lengthy approval process. The time to obtain approval varies by country. In the past, it generally took from six months to four years from the application date, depending upon the quality of the results produced, the degree of control exercised by the regulatory authority, the efficiency of the review procedure and the nature of the product. Some products are never approved. In recent years, there has been a trend towards shorter regulatory review times in the United States as well as certain European countries, despite increased regulation and higher quality, safety and efficacy standards.

Historically, different requirements by different countries’ regulatory authorities have influenced the submission of applications. However, a trend toward harmonization of drug and medical device approval standards, starting in individual countries in Europe and then in the EU as a whole, in Japan, the United Kingdom and in the United States under the aegis of what is now known as the International Council on Harmonisation, or ICH (created as the International Conference on Harmonisation in 1990), is gradually narrowing these differences. In many cases, compliance with ICH standards can help avoid duplication of non-clinical and clinical trials and enable companies to use the same basis for submissions to each of the respective regulatory authorities. The adoption of the Common Technical Document format by the ICH has greatly facilitated use of a single regulatory submission for seeking approval in the ICH regions and many other countries worldwide.

Summaries of the United States, EU, United Kingdom and Israeli regulatory processes follow below.

In the United States, drugs are subject to rigorous regulation by the FDA. The U.S. Federal Food, Drug and Cosmetic Act, or FDCA, and other federal and state statutes and regulations govern, among other things, the research, development, testing, manufacture, storage, record-keeping, packaging, labeling, adverse event reporting, advertising, promotion, marketing, distribution and import and export of pharmaceutical products. Failure to comply with the applicable U.S. requirements may subject us to stringent administrative or judicial sanctions, such as agency refusal to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions or criminal prosecution.

Unless a drug is exempt from the NDA process or the Biologics License Application, or BLA, process or subject to another regulatory procedure, the steps required before a drug may be marketed in the United States include:

Preclinical studies include laboratory evaluation of product chemistry, toxicity, formulation and stability, as well as animal studies. For preclinical studies conducted in the United States, and certain studies carried out outside the United States, we submit the results of the nonclinical studies, together with manufacturing information and analytical results, to the FDA as part of an IND, which must become effective before we may commence human clinical trials.

Clinical trials involve the administration of the investigational drug to people under the supervision of qualified investigators in accordance with the principles of good clinical practice, or GCP. We conduct clinical trials under protocols detailing the trial objectives, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. We must submit each U.S. study protocol to the FDA as part of an IND. An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about issues such as the conduct of the trials as outlined in the IND. In such a case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. Submission of an IND does not always result in the FDA allowing clinical trials to commence and the FDA may halt a clinical trial if unexpected safety issues surface or the study is not being conducted in compliance with applicable requirements.

The FDA may refuse to accept an IND for review if applicable regulatory requirements are not met. Moreover, the FDA may delay or prevent the start of clinical trials if the manufacturing of the study drug fails to meet cGMP requirements or the clinical trials are not adequately designed. Such government regulation may delay or prevent the study and marketing of potential products for a considerable time period and may impose costly procedures upon a manufacturer’s activities. In addition, the FDA may, at any time, impose a clinical hold on ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials cannot continue without FDA authorization and then only under terms authorized by the FDA.

Success in early-stage clinical trials does not assure success in later-stage clinical trials. Results obtained from clinical activities are not always conclusive and may be susceptible to varying interpretations that could delay, limit or prevent regulatory approval. Even if a therapeutic candidate receives regulatory approval, later discovery of previously unknown problems with a product may result in restrictions on the product or even withdrawal of marketing approval for the product.

Foreign clinical trials may or may not be conducted under an IND. However, their safety assessments should be submitted annually.

We conduct clinical trials typically in three sequential phases (1-3), but the phases may overlap or be combined. An institutional review board, or IRB, must review and approve each trial before it can begin. Phase 1 includes the initial administration of a tested drug to a small number of humans. These trials are closely monitored and may be conducted in patients but are usually conducted in healthy volunteer subjects. These trials are designed to determine the metabolic and pharmacologic actions of the drug in humans and the side effects associated with increasing doses as well as, if possible, to gain early evidence of effectiveness. Phase 2 usually involves trials in a limited patient population to evaluate dosage tolerance and appropriate dosage, identify possible adverse effects and safety risks and preliminarily evaluate the efficacy of the drug for specific indications. Phase 3 trials are large trials used to further evaluate clinical efficacy and test further for safety by using the drug in its final form in an expanded patient population. There can be no assurance that we or our licensees will successfully complete Phase 1, Phase 2 or Phase 3 testing with respect to any therapeutic candidate within any specified period of time, if at all. Furthermore, clinical trials may be suspended at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. We and our licensees perform some of our nonclinical and clinical testing outside of the United States. The acceptability of the results of our preclinical and clinical testing by the FDA will be dependent upon adherence to applicable U.S. and foreign standards and requirements, including GLP, GCP and the Declaration of Helsinki for protection of human subjects.

After successful completion of the required clinical testing, an NDA, or in the case of certain biological products a BLA, is prepared and submitted to the FDA. FDA approval of the NDA or BLA is required before product marketing may begin in the United States. The NDA/BLA must include the preclinical and clinical testing results and a compilation of detailed information relating to the product’s pharmacology, toxicology, chemistry, manufacture and manufacturing controls. The cost of preparing and submitting an NDA may be substantial. Under U.S. federal law, the submission of NDAs is generally subject to substantial application user fees, and the manufacturer and/or sponsor under an NDA approved by the FDA is also subject to annual product and establishment user fees. These fees are typically increased annually.

The FDA has 60 days from its receipt of an NDA/BLA to determine whether the application will be accepted for filing based on the FDA threshold determination that the application is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review of the submitted application. Under U.S. federal law, the FDA has agreed to certain performance goals in the review of NDAs/BLAs. Most such applications for non-priority drug products are to be reviewed within 10 months following acceptance of the application for filing. The review process may be significantly extended by FDA requests for additional information or clarification or if the applicant submits a major amendment during the review. The FDA may also refer applications to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. This often, but not exclusively, occurs for novel drug products or drug products that present difficult questions of safety or efficacy. The FDA is not bound by the recommendation of an advisory committee.

Before approving an application, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve the application unless the FDA determines that the product is manufactured in substantial compliance with cGMP. If the FDA determines that the NDA or BLA is supported by adequate data and information, the FDA may issue an approval letter. During review, the FDA may request additional information via an information request, or IR letter, or state deficiencies via a deficiency letter, or DR letter. Upon compliance with the conditions stated, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of approval, the FDA may require additional trials or post-approval testing and surveillance to monitor the drug’s safety or efficacy, the adoption of risk evaluation and mitigation strategies, and may impose other conditions, including labeling and marketing restrictions on the use of the drug, which can materially affect its potential market and profitability. Once granted, product approvals may be withdrawn if compliance with regulatory standards for manufacturing and quality control are not maintained or if additional safety problems are identified following initial marketing.

If the FDA’s evaluation of the NDA or BLA submission or manufacturing processes and facilities is not favorable, the FDA may refuse to approve the NDA or BLA and may issue a complete response letter. The complete response letter, or CRL, indicates that the review cycle for an application is complete and that the application is not ready for approval. The complete response letter will describe specific deficiencies and, when possible, will outline recommended actions the applicant might take in order to place the application in condition for approval. Following receipt of a CRL, the company may submit additional information and start a new review cycle, withdraw the application or request a hearing. Failure to take any of the above actions may result in the FDA considering the application withdrawn following one year from issuance of the CRL. In such cases, the FDA will notify the company and the company will have 30 days to respond and request an extension of time in which to resubmit the application. The FDA may grant reasonable requests for extension. If the company does not respond within 30 days of the FDA’s notification, the application will be considered withdrawn. Even with submission of additional information for a new review cycle, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

The Pediatric Research Equity Act, or PREA, requires NDAs and BLAs (or supplements) for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration to contain results assessing the safety and efficacy for the claimed indication in all relevant pediatric subpopulations. Data to support dosing and administration also must be provided for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant deferrals for the submission of results or full or partial waivers from the PREA requirements (for example, if the product is ready for approval in adults before pediatric studies are complete, if additional safety data is needed, among others). In addition, under the Best Pharmaceuticals for Children Act, or BPCA, the FDA may issue a written request to the company to conduct clinical trials in the pediatric population that are related to the moiety and expand on the claimed indication. The studies are voluntary but may award the company with 6 months of marketing exclusivity if conducted according to good scientific principles and address the written request. Finally, a sponsor can request that a product that must be studied under PREA to be studied also under the BPCA to allow the sponsor to be eligible for six-months of pediatric exclusivity. The pediatric studies requested under BPCA are usually more extensive and would generally also fulfill the PREA requirement; however, even if the sponsor does not complete the studies outlined in the BPCA written request, it is still required to complete any studies required under PREA.

Once an NDA or BLA is approved, the drug sponsor will be subject to certain post-approval requirements, including requirements for adverse event reporting, submission of periodic reports, manufacturing, labeling, packaging, advertising, promotion, distribution, record-keeping and other requirements. For example, the approval may be subject to limitations on the uses for which the product may be marketed or conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product or require the adoption of risk evaluation and mitigation strategies. In addition, the FDA requires the reporting of any adverse effects observed after the approval or marketing of a therapeutic candidate and such events could result in limitations on the use of such approved product or its withdrawal from the marketplace. Also, some types of changes to the approved product, such as manufacturing changes and labeling claims, are subject to further FDA review and approval. Additionally, the FDA strictly regulates the promotional claims that may be made about prescription drug products. In particular, the FDA requires substantiation of any claims of superiority of one product over another including, in many cases, requirements that such claims be proven by adequate and well controlled head-to-head clinical trials. To the extent that market acceptance of our therapeutic candidates may depend on their superiority over existing products, any restriction on our ability to advertise or otherwise promote claims of superiority, or any requirements to conduct additional expensive clinical trials to provide proof of such claims, could negatively affect the sales of our therapeutic candidates and our costs.

The Orphan Drug Act, or ODA, provides for granting special status to a drug or biological product to treat a rare disease or condition (i.e., a disease or condition that affects fewer than 200,000 individuals in the United States), or a disease or condition that affects more than 200,000 individuals in the United States but where there is no reasonable expectation that the product development cost will be recovered from product sales in the United States, upon request of a sponsor. This status is referred to as orphan designation (or sometimes “orphan status”). For a therapeutic candidate to qualify for orphan designation, both the candidate and the disease or condition must meet certain criteria specified in the ODA’s implementing regulations (set forth at 21 CFR Part 316). Orphan designation qualifies the sponsor of the candidate for various development incentives of the ODA, including tax credits for qualified clinical testing, waiver of NDA/BLA user fees and eligibility for seven-year marketing exclusivity, referred to as orphan exclusivity upon marketing approval. The granting of an orphan designation request does not alter the standard regulatory requirements and process for obtaining marketing approval. Safety and effectiveness of a candidate must still be established through adequate and well-controlled studies.

The FDA has put in place four programs intended to facilitate and expedite development and review of a new drug intended to address an unmet medical need in the treatment of a serious or life-threatening condition: fast track designation, breakthrough therapy designation, accelerated approval and priority review designation. Each program offers the sponsor a defined set of opportunities such as expedited development and review, intensive FDA guidance during development, marketing approval based on an effect on a surrogate endpoint or an intermediate clinical endpoint that is reasonably likely to predict the drug’s clinical benefit, and a shorter time for review of marketing application. Fast Track and Breakthrough Therapy designations may be requested during development, while Accelerated Approval and Priority Review relate to the marketing approval stage.

Within the European Union (EU) and the European Economic Area (EEA), which is composed of the 27 member states of the EU plus Norway, Iceland and Liechtenstein, the authorization of clinical trials occurs at member state level. The European Medicines Agency, or EMA, plays a key role in ensuring that GCP standards are applied across the European Economic Area, or EEA in cooperation with the member states. It also manages a database of clinical trials carried out in the EU.

Clinical trials in the EU are regulated under Regulation (EU) 536/2014 (CTR). As opposed to the previous Directive 2001/20/EC (CTD), which as an EU directive was not directly applicable in the member states, the CTR has immediate effect for the whole EU and did not have to be transposed into national law. While national laws implementing the CTD varied to a great extent, the CTR provides for a significant further harmonization of the law governing clinical trials in the EU. After significant delay, the CTR became applicable on January 31, 2022. The CTR now harmonizes the assessment and supervision processes for clinical trials throughout the EU via the Clinical Trials Information System (CTIS), which includes a centralized EU portal and database for clinical trials. From 31 January 2023 onwards, clinical trial sponsors need to apply to start a clinical trial via CTIS. From 31 January 2025, any trials previously approved under the CTD that continue to run after such date, will need to comply with CTR and their sponsors must have recorded the required information on such trials in CTIS. The CTR provides inter alia:

The authorization of a clinical trial (Phase 1-3) in an EU member state requires the submission of a clinical trial application (CTA) via the EU Portal. The application will be reviewed by the competent authorities of the member states where the trial is supposed to take place. The application and approval process is conducted by the member states under the cooperation system set forth in the CTR. Particularities under member states’ national law still apply to some extent. In general, the CTA should include, among other documents, the study protocol, results of the nonclinical studies and manufacturing information and analytical results. Also, the sponsor has to suggest one of the concerned member states as reporting member state. The CTR aims at speeding up the validation and review of clinical trial applications and therefore provides strict deadlines.

A medicinal product may only be placed on the market in the EEA if it has obtained a marketing authorization according to the applicable EU and/or member state law. A marketing authorization may either be granted in a national procedure, or in a coordinated procedure of several member states pursuant to Directive 2001/83/EC, as amended, or under the centralized EU procedure in accordance with Regulation (EC) No. 726/2004, as amended, or its predecessor, Regulation 2309/93. Depending on the nature of the medicinal product, several different legal frameworks of the EU and the member states may be relevant for the market clearance.

The Centralized Procedure according to Regulation 726/2004/EC allows a marketing authorization holder to market the medicine and make it available to patients and healthcare professionals throughout the entire EEA on the basis of a single marketing authorization, granted by the European Commission, acting in its capacity as the European Licensing Authority on the advice of the EMA. The EMA is the administrative body responsible for coordinating the existing scientific resources available in the member states for evaluation, supervision and pharmacovigilance of medicinal products. Certain medicinal products (e.g., products derived from biotechnology, orphan medicinal products and medicinal products for human use, which contain an active substance authorized in the Union after 20 May 2004 and which are intended for the treatment of AIDS, cancer, neurodegenerative disorders or diabetes) must be authorized centrally. For each application submitted to the EMA for scientific assessment, the EMA is required to ensure that the opinion of the Committee for Medicinal Products for Human Use, or CHMP, is given within 210 days after receipt of a valid application or within 150 days by means of an accelerated procedure (excluding clock stops); the review period can be extended. If the opinion is positive, the EMA is required to send the opinion to the European Commission, which is responsible for preparing the decision granting a marketing authorization. If the initial opinion of the CHMP is negative, the applicant is afforded an opportunity to seek a re-examination of the opinion. The CHMP is required to re-examine its opinion within 60 days following receipt of the request by the applicant. A refusal of a centralized marketing authorization constitutes a prohibition on placing the given medicinal product on the market in the EU.

The EMA’s Committee for Advanced Therapies (CAT) is responsible for assessing the quality, safety and efficacy of advanced therapy medicinal products (ATMP). ATMP include gene therapy medicinal products, somatic cell therapy medicinal products and tissue engineered products. The role of the CAT is to prepare a draft opinion on an application for marketing authorization for an ATMP candidate that is submitted to the EMA. The EMA then provides a final opinion regarding the application for marketing authorization. The European Commission grants or refuses marketing authorization after the EMA has delivered its opinion. ATMP are further regulated under Regulation (EC) No 1394/2007 on advanced therapy medicinal products.

A National Authorization Procedure is used when applying for a marketing authorization in one individual EEA state. The national procedure can only be used if the medicinal product does not already have a marketing authorization in another EEA state.

The mutual recognition procedure (Art. 28 et seq. Directive 2001/83/EC) should be used if a medicinal product already has a marketing authorization in one EEA member state, and the authorization holder would like to extend the authorization to other member states. An application for mutual recognition may be addressed to one or more EEA countries. The country in which the national marketing authorization has been granted acts as the Reference Member State, and the other countries concerned (Concerned Member States) can, upon successful completion of the procedure, recognize the marketing authorization. The assessment time is 180 days plus 30 days.

The decentralized procedure (introduced by Directive 2004/27/EU) is used in cases where the medicinal product has not received a marketing authorization in the EU at the time of application. It allows the common assessment of an application submitted simultaneously to several member states. One of the member states will take the lead in evaluating the application as Reference Member State. The Reference Member State should prepare an assessment report that is then used to facilitate agreement with the Concerned Member States and the grant of a national marketing authorization in all of these member states. The assessment time is 210 days + 30 days.

Any medicinal product placed on the market in the EEA must be manufactured in accordance with the principles of good manufacturing practice as set out in Directive EC2017/1572 supplementing Directive 2001/83/EC of the European Parliament and of the Council as regards the principles and guidelines of good manufacturing practice for medicinal products for human use for human use and Volume 4 of the “Rules Governing Medicinal Products in the European Community”.  Directive 2017/1572/EU has replaced Directive 2003/94/EC. Directive 2003/94/EC will still be applicable to clinical trials conducted in accordance with the former regime under transitional provisions. Furthermore, distribution of medicinal products in the EU is subject to Directive 2001/83/EC, 92/25/EEC and current guidance on good distribution practice, or GDP. Moreover, EU law requires the clinical results in support of clinical safety and efficacy to be based upon clinical trials conducted in the EU in compliance with the requirements of the CTR and Directive 2005/28/EC, which implement good clinical practice in the conduct of clinical trials on medicinal products for human use. Clinical trials conducted outside the EU and used to support applications for marketing within the EU must have been conducted in a way consistent with the principles set out in the CTR or if conducted prior to 31 January 2022, its predecessor  Directive 2001/20/EC. The conduct of a clinical trial in the EU requires, pursuant to the CTR, authorization by the relevant national competent authority where a trial takes place, and an ethics committee to have issued a favorable opinion in relation to the arrangements for the trial. It also requires that the sponsor of the trial, or a person authorized to act on his behalf in relation to the trial, be established in the EU.

Regulation (EC) 1901/2006 (as amended by Regulation (EC) 1902/2006 and Regulation (EU) 2019/5), or the Pediatric Regulation, was adopted on December 12, 2006. This Regulation governs the development of medicinal products for human use in order to meet the specific therapeutic needs of the pediatric population (children aged 0 to 17 years). It requires any application for marketing authorization made after July 26, 2008 in respect of a medicinal product not authorized in the EU on January 26, 2007, the time the Regulation entered into force, to include studies in children conducted in accordance with a pediatric investigation plan agreed to by the relevant European authorities. This does not apply if the product is subject to an agreed waiver or deferral or if the product is excluded from the scope of Regulation 1901/2006, which is the case for inter alia generics, homeopathic and traditional (herbal) medicinal products. Waivers can be granted in certain circumstances where pediatric studies are not required or desirable. Deferrals can be granted in certain circumstances where the initiation or completion of pediatric studies should be deferred until appropriate studies in adults have been performed. Moreover, this regulation imposes the same obligation from January 26, 2009 on an applicant seeking approval of a new indication, pharmaceutical form or route of administration for a product already authorized and still protected by a supplementary protection certificate granted under Regulation (EC) no. 469/2009 or its precursor Regulation (EEC) 1768/92 by a patent that qualifies for the granting of such a supplementary protection certificate. The pediatric Regulation 1901/2006 also provides, subject to certain conditions, a reward for performing such pediatric studies, regardless of whether the pediatric results provided resulted in the grant of a pediatric indication. This reward comes in the form of an extension of six months to the supplementary protection certificate granted in respect of the product, unless the product is subject to Orphan Drug designation, in which case the 10-year market exclusivity period for such orphan products is extended to 12 years. If any of the non-centralized procedures for marketing authorization have been used, the six-month extension of the supplementary protection certificate is only granted if the medicinal product is authorized in all member states. Where the product is no longer covered by a patent or supplementary protection certificate, the applicant may make a separate application for a Pediatric Use Marketing Authorization, or PUMA, which, on approval, will provide eight years’ protection for data and 10 years’ marketing protection for the pediatric results.

An authorization to market a medicinal product in the EU carries with it an obligation to comply with many post-authorization regulations relating to the marketing and other activities of authorization holders. These include requirements relating to provision of a risk management plan and provision of annual periodic safety update reports, carrying out of post-authorization efficacy studies and/or post-authorization safety studies, maintenance of a pharmacovigilance system master file, adverse event reporting, signal detection and management and other pharmacovigilance activities conducted under an established quality system, advertising, packaging and labelling, patient package leaflets, and distribution. The regulations frequently operate within a criminal law framework, and failure to comply with the requirements may not only affect the authorization, but also can lead to financial and other sanctions levied on the company in question and responsible officers. EU pharmacovigilance legislation has been significantly modified by the Pharmacovigilance Directive, Directive 2010/84/EU which amended the legal framework of pharmacovigilance for medicines marketed within the EU provided in Regulation (EC) No 726/2004 with respect to EU authorized medicinal products and in Directive 2001/83/EC with respect to nationally authorized medicinal products (including those authorized through the mutual recognition and decentralized systems). Furthermore, EU good pharmacovigilance practice (GVP) rules apply. With the amended pharmacovigilance requirements, the financial and organizational burden on market authorization holders increased significantly, such as the obligation to maintain a pharmacovigilance system master file that applies to all holders of marketing authorizations granted in accordance with Directive 2001/83/EC or Regulation (EC) No 726/2004. Marketing authorization holders must furthermore collect data on adverse events associated with use of the authorized product outside the scope of the authorization. Pharmacovigilance for biological products and medicines with a new active substance is strengthened by subjecting their authorization to additional monitoring activities.

Another relevant aspect in the EU regulatory framework is the “sunset clause”: a provision leading to the cessation of the validity of any marketing authorization if it is not followed by marketing within three years or, if marketing is interrupted for a period of three consecutive years.

The EU has a strict regime on data privacy under the General Regulation on Data Protection, Regulation 2016/679 (GDPR) that has become applicable on May 25, 2018. The GDPR as an EU regulation does not have to be implemented into member states’ national law but applies directly in all member states. It applies to companies with an establishment in the European Economic Area (EEA) that includes the 27 member states of the EU and Norway, Iceland and Liechtenstein. Furthermore, the GDPR applies to companies not located in the EEA but processing personal data of individuals located in the EEA (e.g., through online business). The GDPR implements stringent operational requirements for controllers of personal data, including, for example, obligations to justify the collection, use and other processing of personal data (e.g., based on the individual’s consent), to notify the individuals concerned about data processing activities, to protect all processed personal data through appropriate technical and organizational measures, and to implement a data protection compliance management. Furthermore, the GDPR defines high data security and compliance standards for the transfer of personal data to third countries, including the U.S. The operational requirements under the GDPR are even stricter in case of sensitive personal data, such as health or genetic data, that typically have to be stored in a pseudonymized (i.e., key-coded) manner. The GDPR provides that EU member states may in certain areas deviate from GDPR standards which results in varying laws and regulations at member states level. The applicable data protection laws in the EEA may limit our ability to share and otherwise process personal data. If our business falls below the GDPR standards, we may be subject to severe administrative fines (under the GDPR, in the amount of up to 4 % of the total worldwide annual turnover of our preceding financial year) and suffer significant loss of reputation.

In accordance with the Israeli Dangerous Substances Law - 1993, the Israeli Ministry of the Environment is required to grant a permit in order to use toxic materials. Because we utilize toxic materials in the course of operation of our laboratories, we were required to apply for a permit to use these materials. Our current toxin permit will remain in effect until February 2025.

In order to conduct clinical testing on humans in Israel, special authorization must first be obtained from the ethics committee and the head of the medical center in which the clinical studies are planned to be conducted, as required under the Guidelines for Clinical Trials in Human Subjects implemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation. These regulations require authorization by the institutional ethics committee and the head of the medical center.  Israeli Ministry of Health, except for certain circumstances, is required to approve each trial as well. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project to determine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for the rights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion of the clinical studies on certain of our therapeutic candidates in Israel, we will be required to obtain authorization from the ethics committee and head of medical center of each institution in which we intend to conduct our clinical trials, and in most cases, from the Israeli Ministry of Health.

 In addition to regulations in the United States, the EU and Israel, we and our collaborators are subject to numerous and a variety of regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy governing, among other things, clinical trials, marketing authorization, manufacturing, commercial sales and distribution of drugs in other countries. Whether or not our products receive approval from the FDA, approval of such products must be obtained by the comparable regulatory authorities of countries other than the United States before we or our collaborators can commence clinical trials, manufacturing or marketing of the product in those countries. The approval process varies from country to country and may involve additional product testing and additional administrative review periods. As a result, the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials and product licensing vary greatly from country to country. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.

Related Matters

From time to time, legislation is drafted, introduced and passed in governmental bodies that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA or EMA and other applicable regulatory bodies to which we are subject. In addition, regulations and guidance are often revised or reinterpreted by the national agency in ways that may significantly affect our business and our therapeutic candidates. It is impossible to predict whether such legislative changes will be enacted, whether FDA or EMA regulations, guidance or interpretations will change, or what the impact of such changes, if any, may be. We may need to adapt our business and therapeutic candidates and products to changes that occur in the future.

Pharmaceutical Coverage, Pricing and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities. Sales of products will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage, and establish adequate reimbursement levels for, such products. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged, examining the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the approved products for a particular indication.

In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic, health outcome studies in order to demonstrate the medical necessity, quality of life benefits, and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals. Nonetheless, product candidates may not be considered medically necessary or cost effective in light of cost-benefit analysis. Additionally, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug product does not assure that other payors will also provide coverage for the drug product. Third-party reimbursement may not be sufficient to maintain price levels high enough to realize an appropriate return on investment in product development.

The containment of healthcare costs also has become a priority of federal, state and foreign governments and the prices of drugs have been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which a company or its collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Outside the United States, ensuring adequate coverage and payment for our therapeutic candidates will face challenges. Pricing of prescription pharmaceuticals is subject to governmental control in many countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory marketing approval for a product and may require us to conduct studies that compare the cost effectiveness of our product candidates or products to other available therapies. The conduct of such studies could be expensive and result in delays in our commercialization efforts.

Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular drug candidate to currently available therapies in order to obtain reimbursement. For example, the European Union provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve a specific price for a drug product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug product on the market. Other member states allow companies to fix their own prices for drug products but monitor and control company profits and issue guidance to prescribers. The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, reference pricing and cross-border imports from low-priced markets exert competitive pressure that may reduce pricing within a country. Any country that has price controls or reimbursement limitations for drug products may not allow favorable reimbursement and pricing arrangements.

Other Healthcare Laws and Regulation

Healthcare providers and third-party payors play a primary role in the recommendation and prescription of drug products that are granted regulatory approval. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain our business and/or financial arrangements. Such restrictions under applicable federal and state healthcare laws and regulations, include the following:

Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

U.S. Healthcare Reform

 

A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medical products. For example, in March 2010, the ACA was enacted, which, among other things, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; introduced a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care plans; imposed mandatory discounts for certain Medicare Part D beneficiaries as a condition for manufacturers’ outpatient drugs coverage under Medicare Part D; subjected drug manufacturers to new annual fees based on pharmaceutical companies’ share of sales to federal healthcare programs; created a new Patient Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research; and established the Center for Medicare & Medicaid Innovation at the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending.

 

We expect that future changes or additions to the ACA, the Medicare and Medicaid programs, and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect on the healthcare industry in the United States. For example, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, beginning January 1, 2024.  

Additionally, on December 20, 2019, the Further Consolidated Appropriations Act for 2020 was signed into law (P.L. 116-94) and includes a piece of bipartisan legislation called the Creating and Restoring Equal Access to Equivalent Samples Act of 2019, or the CREATES Act. The CREATES Act aims to address the concern articulated by both the FDA and others in the industry that some brand manufacturers have improperly restricted the distribution of their products, including by invoking the existence of a REMS for certain products, to deny generic product developers access to samples of brand products. Because generic product developers need samples of an RLD to conduct certain comparative testing required by the FDA, some have attributed the inability to timely obtain samples as a cause of delay in the entry of generic products. To remedy this concern, the CREATES Act establishes a private cause of action that permits a generic product developer to sue the brand manufacturer to compel it to furnish the necessary samples on “commercially reasonable, market-based terms.” Whether and how generic product developments will use this new pathway, as well as the likely outcome of any legal challenges to provisions of the CREATES Act, remain highly uncertain and its potential effects on any of our future commercial products are unknown.

More recently, in August 2022, President Biden signed into the law the Inflation Reduction Act of 2022, or the IRA. The IRA has multiple provisions that may impact the prices of drug products that are both sold into the Medicare program and throughout the United States. Starting in 2023, a manufacturer of a drug or biological product covered by Medicare Parts B or D must pay a rebate to the federal government if the drug product’s price increases faster than the rate of inflation. This calculation is made on a drug product by drug product basis and the amount of the rebate owed to the federal government is directly dependent on the volume of a drug product that is paid for by Medicare Parts B or D. Additionally, starting in payment year 2026, CMS will negotiate drug prices annually for a select number of single source Part D drugs without generic or biosimilar competition. CMS will also negotiate drug prices for a select number of Part B drugs starting for payment year 2028. If a drug product is selected by CMS for negotiation, it is expected that the revenue generated from such drug will decrease. CMS has begun to implement these new authorities and entered into the first set of agreements with pharmaceutical manufacturers to conduct price negotiations in October 2023. However, the IRA’s impact on the pharmaceutical industry in the United States remains uncertain, in part because multiple large pharmaceutical companies and other stakeholders (e.g., the U.S. Chamber of Commerce) have initiated federal lawsuits against CMS arguing the program is unconstitutional for a variety of reasons, among other complaints. Those lawsuits are currently ongoing.

Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. For example, in recent years, several states have formed prescription drug affordability boards (PDABs). Much like the IRA’s drug price negotiation program, these PDABs have attempted to implement upper payment limits (UPLs) on drugs sold in their respective states in both public and commercial health plans. In August 2023, Colorado’s PDAB announced a list of five prescription drugs that would undergo an affordability review. The effects of these efforts remain uncertain pending the outcomes of several federal lawsuits challenging state authority to regulate prescription drug payment limits. In December 2020, the U.S. Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate pharmaceutical benefit managers (“PBMs”) and other members of the healthcare and pharmaceutical supply chain, an important decision that may lead to further and more aggressive efforts by states in this area. The Federal Trade Commission (FTC) in mid-2022 also launched sweeping investigations into the practices of the PBM industry that could lead to additional federal and state legislative or regulatory proposals targeting such entities’ operations, pharmacy networks, or financial arrangements. Significant efforts to change the PBM industry as it currently exists in the U.S. may affect the entire pharmaceutical supply chain and the business of other stakeholders, including pharmaceutical product developers like us.

 

We expect that additional foreign, federal and state healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement and reduced demand for our products, once approved, or additional pricing pressures.

Israeli Government Programs

A number of our therapeutic products have been financed, in part, through funding from the IIA in accordance with Research Law. Through December 31, 2023, we have received approximately $22.0 million in aggregate funding from the IIA and have paid the IIA approximately $7.0 million in royalties under our approved programs. As of December 31, 2023, we had no contingent obligation to the IIA other than for motixafortide. In connection with the in-licensing of motixafortide from Biokine, and as a condition to IIA consent to the transaction, we agreed to abide by any obligations resulting from funds previously received by Biokine from the IIA. The contingent liability to the IIA assumed by us in connection with our in-licensing of motixafortide (which liability has no relation to the funding actually received by us) amounted to $3.2 million as of December 31, 2023. We have a full right of offset for amounts payable to the IIA for motixafortide from payments that we may owe to Biokine in the future.

Under the Research Law and the terms of the grants, royalties on the revenues derived from sales of products (and associated services) developed with the support of the IIA are payable to the Israeli government, generally at the rate of 3% (and at an increased rate under certain circumstances, as described below). The obligation to make these payments terminates upon repayment of the amount of the received grants as adjusted for fluctuation in the dollar/shekel exchange rate, plus interest and any additional amounts as described below. Until October 25, 2023, the interest was calculated at a rate based on the last published 12-month LIBOR applicable to U.S. dollar deposits. On October 25, 2023, the IIA published a directive concerning changes in royalties to address the expiration of the LIBOR, according to which, (a) for IIA grants approved between January 1, 1999 and June 30, 2017 – the annual interest will be the interest in effect at the time of the grant approval; (b) for IIA grants approved between July 1, 2017 and December 31, 2023 – for the period prior to December 31, 2023, the interest shall be calculated based on the 12-month LIBOR applicable to U.S. dollar deposits, as published on the first trading day of each year or in an alternative publication of the Bank of Israel; and for periods as of January 1, 2024, the annual interest shall be calculated at a rate based on the 12-month secured overnight financing rate (SOFR), or at an alternative rate published by the Bank of Israel plus 0.71513%; and (c) for IIA grants approved on or following January 1, 2024, the annual interest shall be the higher of (i) the 12 months SOFR interest rate, plus 1%, and (ii) a fixed annual interest rate of 4%.

 

Pursuant to the Research Law and the tracks published by the IIA, recipients of funding from the IIA are restricted from manufacturing outside of Israel products developed using IIA grants or derived from technology developed with IIA grants (except to the extent that the IIA approved grant program includes a pre-determined portion of manufacturing that may be performed outside Israel) and from transferring rights to manufacture such products outside of Israel, without the prior IIA approval (except for the transfer of up to 10% of the manufacturing capacity in the aggregate, which requires only a notice to the IIA). The IIA may, in special cases, approve the transfer outside of Israel of manufacture or of manufacturing rights of a product developed in an approved program or which resulted therefrom (in excess of any pre-determined percentage included in the IIA grant approval, if any). If we were to receive such IIA approval to manufacture or to transfer the rights to manufacture our products developed with IIA grants outside of Israel, we would be required to pay an increased total amount of royalties (up to 150% of the grant amounts plus interest), depending on the portion of total manufacturing to be performed outside of Israel. In addition, the royalty repayment rate applicable to us could possibly increase in such event.

 

In addition, under the Research Law and the tracks published by the IIA, we are prohibited from transferring or licensing our IIA-financed technologies, technologies derived therefrom and related intellectual property rights and know-how outside of Israel except under limited circumstances and only with the approval of the IIA, which we may not receive.  Generally, such IIA approval would be subject to making a payment to the IIA of a redemption fee, calculated in accordance with the applicable formula set out in the tracks published by the IIA, which may be in the amount of up to six times the amount of the grants received (less paid royalties, if any, and depreciation, but no less than the total grants received), plus accrued interest. The scope of the support received, the royalties that we already paid to the IIA, the amount of time that elapsed between the date on which the technology was transferred and the date on which the applicable project performance period for the IIA grants was completed, and the sale price and the form of transaction are to be taken into account in order to calculate the amount of the payment to the IIA.

 

Approval of the transfer or license of technology to residents of Israel is also required and could be granted in specific circumstances, but only if the recipient agrees to abide by the provisions of applicable laws, including the restrictions on the transfer of know-how and the obligation to pay royalties. Additionally, a royalty payment is generally required to be made from the consideration paid for such transfer.

The State of Israel does not own intellectual property rights in technology developed with IIA funding and there is no restriction on the export of products manufactured using technology and know-how developed with IIA funding.

 

Even following the full repayment of any IIA grants, we must nevertheless continue to comply with the requirements of the Research Law. If we fail to comply with any of the conditions and restrictions imposed by the Research Law and regulations and guidelines thereunder, or by the specific terms under which we received the grants, we may be required to refund any IIA grants previously received together with interest and penalties, and, in certain circumstances, may be subject to criminal charges.

Environmental Matters

We are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewater discharges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites. We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safety laws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect on us. The operation of our facilities, however, entails risks in these areas. Significant expenditures could be required in the future if we are required to comply with new or more stringent environmental or health and safety laws, regulations or requirements. See “Business — Government Regulation and Funding — Israel Ministry of Environment — Toxin Permit.”

C. Organizational Structure

Our corporate structure consists of BioLineRx Ltd., one wholly owned subsidiary, BioLineRx USA, Inc., and a substantially wholly owned U.K. subsidiary, Agalimmune Ltd.

D. Property, Plant and Equipment

We are headquartered in Modi’in, Israel. We entered into a lease agreement in August 2014, for an aggregate of 1,663 square meters (approximately 17,900 square feet) of space. Monthly rent is NIS 123,800 (approximately $33,000), including maintenance fees and parking. The initial term of the lease expired in June 2020, and we exercised our option to extend the lease through June 30, 2025. We have the option to extend the lease for two additional lease periods totaling up to an additional 5 years, each option at a 5% increase to the preceding lease payment amount.

This facility houses both our administrative and research operations and our central laboratory. The central laboratory consists of approximately 380 square meters (approximately 4,200 square feet) and includes a bioanalytical laboratory, a formulation laboratory and a tissue culture laboratory. Our bioanalytical laboratory has received GLP certification.

In addition, in October, 2022, we entered into a lease agreement for our office in Waltham, Massachusetts for an aggregate of 4,880 square feet of space. Monthly rent is $23,600. The term of the lease expires in December 2024.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

We are a commercial stage biopharmaceutical company pursuing life-changing therapies in oncology and rare diseases. Our primary commercialization pipeline consists of APHEXDA (motixafortide), a novel peptide for the treatment of stem-cell mobilization and solid tumors, which on September 8, 2023, was approved by the FDA, for use in combination with filgrastim (G-CSF) to mobilize hematopoietic stem cells to the peripheral blood for collection and subsequent autologous transplantation in patients with multiple myeloma. We are also advancing the development of motixafortide for patients with sickle cell disease, pancreatic cancer and other solid tumors.  In addition, we have an off-strategy, legacy therapeutic product called BL-5010 for the treatment of skin lesions.

We seek to develop and commercialize a pipeline of promising therapeutic candidates that exhibit distinct advantages over currently available therapies or address unmet medical needs. Our resources are focused on advancing our therapeutic candidates through development and toward commercialization. We have generated our pipeline by systematically identifying, rigorously validating and in-licensing therapeutic candidates that we believe exhibit a high probability of therapeutic and commercial success. Our strategy includes commercializing our therapeutic candidates by way of out-licensing arrangements with biotechnology and pharmaceutical companies and evaluating, on a case-by-case basis, the commercialization of our therapeutic candidates independently. In this regard, we are currently executing on an independent commercialization plan for APHEXDA in stem cell mobilization for autologous bone marrow transplantation in multiple myeloma patients.

A. Operating Results

History of Losses

  

Since our inception in 2003, we have generated significant losses in connection with our research and development, and more recently, our commercialization activities. As of December 31, 2023, we had an accumulated deficit of $391 million. We expect to continue to generate losses in connection with our research and development activities relating to our pipeline of therapeutic candidates and commercialization of APHEXDA until we reach commercial profitability, if ever. Such research and development and commercialization activities are budgeted to expand over time and will require further resources if we are to be successful. As a result, we expect to continue to incur operating losses and we expect to need to obtain additional funds to further pursue our research and development programs and commercialization plans.

We have funded our operations primarily through the sale of equity securities (both in public and private offerings), payments received under our strategic licensing and collaboration arrangements, funding received from the IIA, and interest earned on investments. We expect to continue to fund our operations over the next several years through our existing cash resources, the commercialization of APHEXDA, potential future milestone and royalty payments that we may receive from our existing out-licensing agreement, potential future upfront, milestone or royalty payments that we may receive from any other out-licensing transaction, interest earned on our investments, and additional capital to be raised through public or private equity offerings or debt financings. As of December 31, 2023, we held $43.0 million of cash, cash equivalents and short-term bank deposits.

Revenues

Research and Development

Our research and development expenses consist primarily of salaries and related personnel expenses, fees paid to external service providers, up-front and milestone payments under our license agreements, patent-related legal fees, costs of preclinical studies and clinical trials, drug and laboratory supplies and costs for facilities and equipment. We primarily use external service providers to manufacture our therapeutic candidates for clinical trials and for the majority of our preclinical and clinical development work. We charge all research and development expenses to operations as they are incurred. We expect our research and development expenses to remain one of our primary expenses in the near future as we continue to develop motixafortide. 

The following table identifies our current major research and development projects:

*These studies are investigator-initiated studies; therefore, the timelines are ultimately controlled by the independent investigators and are subject to change.

Sales and Marketing Expenses

General and Administrative Expenses

Non-Operating Expense and Income

Financial Expense and Income

Critical Accounting Policies and Estimates

Revenue Recognition

We account for contract revenues in accordance with International Financial Reporting Standards No. 15, or IFRS 15. IFRS 15, “Revenue from Contracts with Customers”.

IFRS 15 introduces a five-step model for recognizing revenue from contracts with customers, as follows:

Accrued Expenses

We are required to estimate accrued expenses as part of our process of preparing financial statements. This process involves estimating the level of service performed on our behalf and the associated cost incurred in instances where we have not been invoiced or otherwise notified of actual costs. Examples of areas in which subjective judgments may be required include costs associated with services provided by contract organizations for commercialization, clinical trials, and preclinical development. We account for expenses associated with these external services by determining the total cost of a given study based on the terms of the related contract. We accrue for costs incurred as the services are being provided by monitoring the status of the trials and the invoices received from our external service providers. In the case of clinical trials, the estimated cost normally relates to the projected costs of treating the patients in our trials, which we recognize over the estimated term of the trial according to the number of patients enrolled in the trial on an ongoing basis, beginning with patient enrollment. As actual costs become known to us, we adjust our accruals.

Investments in Financial Assets

The primary objective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing risk and loss. Our investments are exposed to market risk due to fluctuations in interest rates, which may affect our interest income and the fair market value of our investments. We manage this exposure by performing ongoing evaluations of our investments. Due to the short-term maturities of our investments to date, their carrying value has always approximated their fair value.

A financial asset is classified in this category if our management has designated it as a financial asset upon initial recognition, because it is managed, and its performance is evaluated, on a fair-value basis in accordance with a documented risk management or investment strategy. Our investment policy with regard to excess cash, as adopted by our board of directors, is composed of the following objectives: (i) preserving investment principal; (ii) providing liquidity; and (iii) providing optimum yields pursuant to the policy guidelines and market conditions. The policy provides detailed guidelines as to the securities and other financial instruments in which we are allowed to invest. In addition, in order to maintain liquidity, investments are structured to provide flexibility to liquidate at least 50% of all investments within 15 business days. Information about these assets, including details of the portfolio and income earned, is provided internally on a quarterly basis to our key management personnel and on a semi-annual basis to the Investment Monitoring Committee of our board of directors. Any divergence from this investment policy requires approval from our board of directors.

Warrants

In connection with a loan transaction entered into with Kreos Capital in October 2018, we issued a warrant to purchase 63,837 ADSs at an exercise price of $14.10 per ADS. The warrant is exercisable for a period of ten years from the date of issuance. Since the exercise price was not deemed to be fixed, the warrant is not qualified for classification as an equity instrument and has therefore been classified as a non-current financial liability.

In connection with a public offering we completed in February 2019, we issued warrants to purchase 1,866,667 ADSs at an exercise price of $11.25 per ADS. The warrants were exercisable for a period of five years from the date of issuance. Since the exercise price was not deemed to be fixed, the warrant is not qualified for classification as an equity instrument and has therefore been classified as a non-current financial liability. The warrants expired in February 2024.

In connection with a registered direct offering we completed in May 2020, we issued warrants to purchase 5,142,859 ADSs at an exercise price of $2.25 per ADS and also issued warrants to purchase 257,143 ADSs at an exercise price of $2.1875 per ADS. The warrants were exercisable for a period of two and one-half years from the date of issuance. Since the exercise price was not deemed to be fixed, the warrant is not qualified for classification as an equity instrument and has therefore been classified as a non-current financial liability. The warrants expired in November 2022.

In connection with a registered direct offering we completed in June 2020, we issued warrants to purchase 2,510,286 ADSs at an exercise price of $2.25 per ADS and also issued warrants to purchase 125,514 ADSs at an exercise price of $2.1875 per ADS. The warrants were exercisable for a period of two and one-half  years from the date of issuance. Since the exercise price was not deemed to be fixed, the warrant is not qualified for classification as an equity instrument and has therefore been classified as a non-current financial liability. The warrants expired in November 2022.

In connection with an underwritten public offering we completed in January 2021, we issued warrants to purchase 718,750 ADSs at an exercise price of $3.00 per ADS. The warrants are exercisable for a period of five years from the date of issuance. The warrants have been classified as shareholder’s equity.

In connection with a registered direct offering we completed in September 2022, we issued warrants to purchase 13,636,365 ADSs at an exercise price of $1.15 per ADS, of which warrants to purchase 2,545,455 have been exercised. The warrants were exercisable for a period of five years from the date of issuance. Since the exercise price of those warrants were not deemed to be fixed, the warrants are not qualified for classification as an equity instrument and have therefore been classified as a non-current financial liability. We also issued warrants to purchase 681,818 ADSs at an exercise price of $1.375 per ADS. The warrants are exercisable for a period of five years from the date of issuance and have been classified as shareholder’s equity.

Results of Operations – Overview

Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022

Revenues for the year ended December 31, 2023 were $4.8 million. We did not record any revenues for the year ended December 31, 2022. The revenues in 2023 (all of which were recorded in the fourth quarter of 2023) primarily reflect a portion of the up-front payment received by us for the License Agreement, of which $4.6 million was recognized in 2023, as well as $0.2 million of revenues from product sales of APHEXDA in the U.S.

Cost of revenues for the year ended December 31, 2023 was $3.7 million. We did not record any cost of revenues for the year ended December 31, 2022. The cost of revenues in 2023 primarily reflects Biokine’s share of the up-front payment received by us for the License Agreement and of the net sales.

Research and development expenses for the year ended December 31, 2023 were $12.5 million a decrease of $5.1 million, or 29.0% compared to $17.6 million for the year ended December 31, 2022. The decrease resulted primarily from lower expenses related to NDA supporting activities related to motixafortide, as well as lower expenses associated with the completion of the AGI-134 study.

Sales and marketing expenses for the year ended December 31, 2023 were $25.3 million, an increase of $18.8 million, or 291.1% compared to $6.5 million for the year ended December 31, 2022. The increase resulted primarily from the ramp-up of pre-commercialization and commercialization activities related to motixafortide.

General and administrative expenses for the year ended December 31, 2023 were $6.3 million, an increase of $1.2 million, or 24.6% compared to $5.1 million for the year ended December 31, 2022. The increase resulted primarily from an increase in payroll and related expenses associated with a small head-count increase during the 2022 period, as well as an increase in professional services and legal expenses.

Impairment of intangible assets expenses for the year ended December 31, 2023 were $6.7 million. We did not record any impairment of intangible assets for the year ended December 31, 2022. This non-cash expense in 2023 reflects the impairment of the intellectual property related to AGI-134 resulting from our decision to terminate its development.

We recognized net non-operating expenses of $10.8 million for the year ended December 31, 2023 compared to net non-operating income of $5.7 million for the year ended December 31, 2022. Non-operating expenses for the year ended December 31, 2023 primarily relates to non-cash, fair-value adjustments of warrant liabilities on our balance sheet. Non-operating income for the year ended December 31, 2022 primarily relates to non-cash, fair-value adjustments of warrant liabilities on our balance sheet, offset by warrant offering expenses.

We recognized net financial expenses of $0.1 million for the year ended December 31, 2023 compared to net financial expenses of $1.5 million for the year ended December 31, 2022. Net financial expenses for both periods primarily relate to interest paid on loans, offset by investment income earned on our bank deposits.

B. Liquidity and Capital Resources

Net cash used in operating activities was $22.6 million for the year ended December 31, 2023, compared with net cash used in operating activities of $26.2 million for the year ended December 31, 2022. The $3.6 million decrease in net cash used in operating activities in 2023 was primarily the result of increases in contract liabilities as well as accounts payable and accruals, partially offset by an increase in sales and marketing expenses.

Net cash provided by investing activities was $1.4 million for the year ended December 31, 2023, compared to net cash provided by investing activities of $4.0 million for the year ended December 31, 2022. The changes in cash flows from investing activities relate primarily to investments in, and maturities of short-term bank deposits.

Net cash provided by financing activities was $15.1 million for the year ended December 31, 2023, compared to net cash provided by financing activities of $20.4 million for the year ended December 31, 2022. The cash flows in 2023 primarily reflect the private placement of ADSs to HST and Gloria, warrant exercises and net proceeds from the ATM facility, offset by repayments of the loan from Kreos Capital and the repayments of lease liabilities. The cash flows in 2022 primarily reflect the underwritten public offering of our ADSs in September 2022 and the net proceeds of a loan from Kreos Capital, offset by repayment of a previous loan from Kreos Capital.

The following table summarizes our significant contractual obligations at December 31, 2023:

The premises leasing obligations in the foregoing table include our commitments under the lease agreement for our facility in Modi’in, Israel and our facility in Waltham, Massachusetts. See “Item 4. Information on the Company — Property, Plant and Equipment.” As for our facility in Israel, the initial term of the lease began on June 15, 2015 and expired June 2020. We have exercised an option to extend the lease through June 30, 2025 and have the option to extend the lease for two additional lease periods totaling up to an additional 5 years, each option at a 5% increase to the preceding lease payment amount. The monthly lease fee is $25,000. In addition, we pay building maintenance charges of $8,000 per month. As for our facility in the United States we entered into a lease agreement in October 2022. The monthly lease fee is $23,600. The term of the lease expires in December 2024.

C. Research and Development, Patents and Licenses

D. Trend Information

We are a commercial stage biopharmaceutical company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development or commercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information to not necessarily be indicative of future operating results or financial conditions. However, to the extent possible, certain trends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”

E. Critical Accounting Estimates

Our consolidated financial statements are prepared in conformity with IFRS, as issued by the IASB. In preparing our consolidated financial statements, we make judgements, estimates and assumptions about the application of our accounting policies which affect the reported amounts of assets, liabilities, revenue and expenses. Our critical accounting judgements and sources of estimation uncertainty are described in Note 4 to our consolidated financial statements, which are included elsewhere in this Annual Report.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Executive Officers and directors

Philip A. Serlin, CPA, MBA,has served as our Chief Executive Officer since October 2016. From May 2009 to October 2016, Mr. Serlin served as our Chief Financial and Operating Officer. From January 2008 to August 2008, Mr. Serlin served as the Chief Financial Officer and Chief Operating Officer of Kayote Networks Inc. From January 2006 to December 2007, Mr. Serlin served as the Chief Financial Officer of Tescom Software Systems Testing Ltd., an IT services company publicly traded in both Tel Aviv and London. Mr. Serlin’s background also includes senior positions at Chiaro Networks Ltd. and at Deloitte, where he was head of the SEC and U.S. Accounting Department at the National Office in Tel Aviv, as well as seven years at the SEC at its Washington, D.C., headquarters. Mr. Serlin is a certified public accountant and holds a B.Sc. degree in accounting from Yeshiva University and a Master’s degree in economics and public policy from The George Washington University.

Mali Zeevi, CPA, has served as our Chief Financial Officer since October 2016. Prior to becoming Chief Financial Officer, Ms. Zeevi served as our Senior Director of Finance and Reporting beginning in 2011 and as our Director of Finance and Reporting beginning in 2009. Before joining BioLineRx, Ms. Zeevi was employed by Tescom Software Systems Testing Ltd., her last position there being Vice President Finance. Ms. Zeevi also served as a certified public accountant at Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International Limited. Ms. Zeevi is a certified public accountant and holds a B.A. degree in business and accountancy from the College of Management Academic Studies in Israel.

Ella Sorani, Ph.D., has served as our Chief Development Officer since January 2021. From February 2017 to December 2020, Dr. Sorani served as our Vice President Research and Development. Before joining BioLineRx, from 2000 through 2016, Dr. Sorani served in a number of management positions in the global R&D division at Teva Pharmaceutical Industries Ltd.  In her most recent position as Senior Director and Global Project Leader, Dr. Sorani led the development of one of Teva’s leading innovative late stage compounds. Dr. Sorani holds a B.Sc. degree in chemistry and an M.Sc. degree and Ph.D. in pharmacology, all from Tel Aviv University.

Aharon Schwartz, Ph.D.,has served as the Chairman of our board of directors since 2004. Dr. Schwartz served in a number of positions at Teva from 1975 through 2011, the most recent being Vice President, Head of Teva Innovative Ventures from 2008. Dr. Schwartz is currently a member of the board of directors of Protalix Ltd. (NYSE American:PLX). Dr. Schwartz also works as an independent consultant. Dr. Schwartz received his Ph.D. in organic chemistry from the Weizmann Institute of Science, an M.Sc. degree in organic chemistry from the Technion – Institute of Technology and a B.Sc. degree in chemistry and physics from the Hebrew University of Jerusalem. In addition, Dr. Schwartz holds a Ph.D. from the Hebrew University of Jerusalem in the history and philosophy of science.

BJ Bormann, Ph.D., has served on our board of directors since August 2013 and on our Compensation Committee since 2022. Dr. Bormann previously served as the Vice President of Translational Science and Network Alliances at The Jackson Laboratory, a non-profit organization focused on the genetic basis of disease. Dr. Bormann was previously the Chief Executive Officer of Supportive Therapeutics, LLC, a Boston-based company that is developing two molecules for use in the supportive care of oncology patients. In the past several years Dr. Bormann has held executive positions in several biotechnology companies including NanoMedical Systems (Austin, Texas), Harbour Antibodies (Rotterdam, The Netherlands) and Pivot Pharmaceuticals (PVTF: OTC listed). Prior to these engagements, Dr. Bormann was Senior Vice President responsible for world-wide alliances, licensing and business development at Boehringer Ingelheim Pharmaceuticals, Inc. from 2007 to 2013. From 1996 to 2007, Dr. Bormann served in a number of positions at Pfizer, Inc., the last one being Vice President of Pfizer Global Research and Development and world-wide Head of Strategic Alliances. Dr. Bormann serves on the board of directors of various companies, including Xeris BioPharma, Inc (Nasdaq:XERS) and NanoMedical Systems (private). Dr. Bormann received her Ph.D. in biomedical science from the University of Connecticut Health Center and her B.Sc. degree from Fairfield University in biology. Dr. Bormann completed postdoctoral training at Yale Medical School in the department of pathology.

Raphael Hofstein, Ph.D.,has served on our board of directors since 2003, our Audit Committee since 2007 and our Compensation Committee since 2012. Dr. Hofstein has served as the President and Chief Executive Officer of MaRS Innovation (a commercialization company for 15 of Toronto’s universities, institutions and research institutes plus the MaRS Discovery District) from June 2009 to March 2020. From 2000 through June 2009, Dr. Hofstein was the President and Chief Executive Officer of Hadasit Medical Research Services and Development Ltd., or Hadasit, the technology transfer company of Hadassah University Hospitals. Dr. Hofstein has served as chairman of the board of directors of Hadasit since 2006. Prior to joining Hadasit, Dr. Hofstein was the President of Mindsense Biosystems Ltd. and the Business Unit Director of Ecogen Inc. and has held a variety of other positions, including manager of R&D and chief of immunochemistry at the International Genetic Science Partnership. Dr. Hofstein serves on the board of directors of numerous companies. Dr. Hofstein received his Ph.D. and M.Sc. degree from the Weizmann Institute of Science, and his B.Sc. degree in chemistry and physics from the Hebrew University of Jerusalem. Dr. Hofstein completed postdoctoral training at Harvard Medical School in both the departments of biological chemistry and neurobiology.

Shaoyu Yan, Ph.D., has served on our board of directors since November 2023. Dr. Yan has over 30 years’ experience in drug research and development, manufacturing, and management, including more than 15 years working with pharmaceutical companies, contract research organizations and marketing authorization holders under regulation of National Medical Products Administration of China (NMPA). Since March 2020, Dr. Yan has served as an executive vice president and head of R&D and manufacturing at Gloria Biosciences Co. Ltd. From February 2014 to December 2019, Dr. Yan served as the senior director and senior research fellow of the oncology and immunology business unit at WuXi AppTec (Shanghai) Co., Ltd. (SHA: 603259). Prior to these roles, Dr. Yan held positions, including at various academic institutions, including: senior research scientist at the department of thoracic and cardio surgery and pharmaceutical development center of the University of Texas’s MD Anderson Cancer Center from June 2006 to December 2013; visiting scholar and research scientist of the faculty of pharmaceutical sciences at Kyushu University from August 2001 to August 2002; deputy director in the institute of medical raw materials at Tianjin Pharmaceutical Group Corp. and director and co-founder at the Shenyang Huiming Institute of Chinese Traditional Medicine from May 1995 to August 1998. Dr. Yan received a Ph.D in pharmaceutical science and M.Sc. degree in pharmaceutics from Shenyang Pharmaceutical University, and a B.Sc. degree from Jilin University in polymer chemistry. Dr. Yan completed his postdoctoral training in the field of pharmacology and biochemistry from Michael E. DeBakey Department of Surgery at Baylor College of Medicine from February 2003 to June 2006. Dr. Yan was appointed to serve as a Class III director by our board of directors pursuant to the securities purchase agreement that we entered into with HST and Gloria in August 2023 See “Item 7B. Major Shareholders and Related Party Transactions - Related Party Transactions - Gloria License Agreement and Securities Purchase Agreement.”

B. Compensation

Employment Agreements

In addition, we have entered into agreements with each executive officer and director exculpating them, to the fullest extent permitted by law, from liability to us for damages caused to us as a result of a breach of duty of care, and undertaking to indemnify each of them to the fullest extent permitted by law, to the extent that these liabilities are not covered by directors’ and officers’ liability insurance. The terms of these agreements and of our directors’ and officers’ liability insurance are consistent with the provisions of the Compensation Policy.  See “Item 6.C — Directors, Senior Management and Employees — Board Practices — Exculpation, insurance and indemnification of office holders.”

The following table presents in the aggregate all compensation we paid to all of our directors and senior management as a group for the year ended December 31, 2023. The table does not include any amounts we paid to reimburse any of such persons for costs incurred in providing us with services during this period.

There are currently no arrangements or understandings between us, on the one hand, and any of our directors, on the other hand, providing for benefits upon termination of their service as directors of our Company.

C. Board Practices

According to the Companies Law, the management of our business is vested in our board of directors. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders. Our executive officers are responsible for our day-to-day management and have individual responsibilities established by our board of directors. Executive officers are appointed by and serve at the discretion of our board of directors, subject to any applicable employment agreements we have entered into with the executive officers.

Under our Articles of Association, as amended at our annual general meeting of shareholders held in August 2023, our directors (other than external directors, if any) are divided into three classes with staggered three-year terms.  Each class of directors consists, as nearly as possible, of one-third of the total number of directors constituting the entire board of directors.  At each annual general meeting of our shareholders beginning in 2024, the election or re-election of directors following the expiration of the term of office of the directors of that class of directors will be for a term of office that expires on the third annual general meeting following such election or re-election.  Each director (other than external directors, if any) holds office until the third annual general meeting of our shareholders and until his or her successor is duly appointed, unless the tenure of such director expires earlier pursuant to the Companies Law, or unless removed from office as described below.

In accordance with the exemption available to foreign private issuers under applicable Nasdaq Rules, we do not follow the requirements of the Nasdaq Rules with regard to the process of nominating directors, and instead follow Israeli law and practice, in accordance with which our board of directors is authorized to recommend to our shareholders director nominees for election, and, in some circumstances, our shareholders may nominate candidates for election as directors by the shareholders’ general meeting.

In addition, under our board of directors may appoint directors (other than external directors) to fill vacancies on our board of directors, including if the number of directors is below the maximum number of directors who may serve as provided in our Articles of Association, for a term of office equal to the remaining period of the term of office of the director(s) whose office(s) has been vacated, or in case of a vacancy due to the number of directors serving being less than the maximum number stated in our Articles of Association, until the next annual general meeting of our shareholders for the class he or she has been assigned by our board of directors.

Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have financial and accounting expertise. Under applicable regulations, a director with financial and accounting expertise is a director who, by reason of his or her education, professional experience and skill, has a high level of proficiency in and understanding of business accounting matters and financial statements. He or she must be able to thoroughly comprehend the financial statements of the listed company and initiate debate regarding the manner in which financial information is presented. In determining the number of directors required to have such expertise, a company’s board of directors must consider, among other things, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that we require at least one director with the requisite financial and accounting expertise.  Our board of directors has determined that Rami Dar has such financial and accounting expertise.

Chairperson of the Board.Under the Companies Law, a person cannot hold the role of both chairperson of the board of directors and chief executive officer of a company, without shareholder approval by special majority and for periods of time not exceeding three years each.  Furthermore, a person who is directly or indirectly subordinate to a chief executive officer of a company may not serve as the chairperson of the board of directors of that company and the chairperson of the board of directors may not otherwise serve in any other capacity in a company or in a subsidiary of that company other than as a director or the chairperson of the board of directors of such a subsidiary.

External directors

Under the Companies Law, the boards of directors of companies whose shares are publicly traded, including companies with shares listed on the Nasdaq Capital Market, are required to include at least two members who qualify as external directors.  Pursuant to the Israeli Companies Regulations (Relief for Companies the Shares of which are Registered for Trading Outside of Israel) – 2000, or the Relief Regulations, companies that do not have a controlling shareholder (within the meaning of the Companies Law) with shares traded on certain U.S. stock exchanges, including the Nasdaq Capital Market, may, subject to certain conditions, “opt out” from the Companies Law requirements to appoint external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of the board of directors (other than the gender diversification rule under the Companies Law, which requires the appointment of a director from the other gender if at the time of appointment of a director all members of the board of directors are of the same gender).

Audit Committee

Our Audit Committee is currently comprised of Mr. Rami Dar, Dr. Avraham Molcho and Dr. Raphael Hofstein.  Mr. Rami Dar serves as the Chairperson of the Audit Committee. Our board of directors has determined that Mr. Rami Dar (Chairperson) qualifies as an audit committee financial expert as defined by the rules of the SEC and Nasdaq. Our board of directors has determined that each member of our audit committee is “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, which is different from the test for independence of board and committee members under the Nasdaq Rules.

Our board of directors adopted an audit committee charter that added to the responsibilities of our Audit Committee under the Companies Law, setting forth the responsibilities of the audit committee consistent with the rules of the SEC and the Nasdaq Rules, including the following:

Our Audit Committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control and legal compliance functions by pre-approving the services performed by our independent accountants and reviewing their reports regarding our accounting practices and systems of internal control over financial reporting.  Our Audit Committee also oversees the audit efforts of our independent accountants and takes those actions it deems necessary to satisfy itself that the accountants are independent of management.  Pursuant to the Companies Law, the audit committee of a company shall be responsible for: (i) determining whether there are delinquencies in the business management practices of a company, including in consultation with an internal auditor or independent auditor, and making recommendations to the company’s board of directors to improve such practices; (ii) determining whether to approve certain related party transactions (including compensation of office holders or transactions in which an office holder has a personal interest and whether such transaction is material or otherwise an extraordinary transaction); (iii) where the company’s board of directors approves the work plan of the internal auditor, examining such work plan before its submission to the board of directors and proposing amendments thereto; (iv) examining internal controls and the internal auditor’s performance, including whether the internal auditor has sufficient resources and tools to dispose of its responsibilities (taking into consideration the special needs and size of a company); (v) examining the scope of the auditor’s work and compensation and submitting its recommendation with respect thereto to the corporate body considering the appointment thereof (either the board of directors or the general meeting of shareholders); and (vi) establishing procedures for the handling of employees’ complaints as to the management of the business and the protection to be provided to such employees. The responsibilities of the audit committee under the Companies Law also include the following matters: (i) the establishment of procedures to be followed in respect of related party transactions with a controlling shareholder (whether or not it is an extraordinary transaction), which may include, where applicable, the establishment of a competitive process for such transaction, under the supervision of the audit committee, or individual, or other committee or body selected by the audit committee, in accordance with criteria determined by the audit committee; and (ii) to determine procedures for approving certain related party transactions with a controlling shareholder, which having been determined by the audit committee not to be extraordinary transactions, were also determined by the audit committee not to be negligible transactions. Under the Companies Law, the approval of the audit committee is required for specified actions and transactions with office holders and controlling shareholders. See “— Approval of Related Party Transactions under Israeli Law.”

Compensation Committee

Under the Nasdaq Rules, we are required to maintain a compensation committee consisting of at least two directors, each of whom is an independent director within the meaning of the Nasdaq Rules.

Our Compensation Committee is currently comprised of Mr. Rami Dar, Dr. Avraham Molcho, Dr. Raphael Hofstein and Dr. B.J Bormann.  Dr. Avraham Molcho serves as the Chairperson of our Compensation Committee. Our board of directors has determined that each member of our compensation committee is independent under the Nasdaq Rules, including the additional independence requirements applicable to the members of a compensation committee.

The responsibilities of the compensation committee include the following:

Under the Companies Law, the board of directors of a publicly traded company is required, after considering the recommendations of the compensation committee, to adopt a compensation policy according to which the compensation of the company’s office holders will be determined. The final adoption of the compensation policy is subject to the approval of the shareholders of the company by a majority vote of the shares present and voting at a shareholders meeting on the matter, subject to a certain special majority requirement, as set forth in the Companies Law, pursuant to which one of the following must be met:

Nonetheless, even if the shareholders of the company do not approve the compensation policy, the board of directors of a company may still approve the compensation policy, provided that the compensation committee and, thereafter, the board of directors determine, based on detailed, documented, reasons and after further discussion of the compensation policy, that the approval of the compensation policy in the best interest of the company.

Our current Compensation Policy was approved at the annual general meeting of our shareholders held in 2022.  Below is a summary discussion of the main provisions of our Compensation Policy:

The Compensation Policy includes (among other things) a framework for establishing the terms of office and employment of our office holders, a recoupment policy and guidelines with respect to the structure of the variable pay of our office holders.

Compensation is considered performance-based to the extent that a direct link is maintained between compensation and performance and that rewards are consistent with long-term stakeholder value creation. At the company level, we analyze the overall compensation trends of the market in order to make informed decisions about our compensation approach.

According to the Compensation Policy, the fixed components of our office holder compensation will be examined at least every two years and compared to the market. Our board of directors may change the amount of the fixed components for one or more of our executives after receiving a recommendation for such from our Compensation Committee, provided such change is within the limits determined by the Compensation Policy. The change may be made if our board of directors concludes that such a change would promote our goals, operating plans and objectives and after taking into account the business and legal implications of the proposed change and its impact on our internal labor relations. Any such changes are subject to formal approval by the relevant parties. Under Israeli law, our board of directors has the authority to approve a change in the incentive structure of all executive officers, including the chief executive officer, up to an immaterial amount. The fixed component of compensation remunerates the specific role covered and scope of responsibilities and reflects the experience and skills required for each position, as well as the level of excellence demonstrated and the overall quality of the office holder’s contribution to our business. The weighting of fixed compensation within the overall package is designed to reduce the risk of excessively risk-oriented behavior, to discourage initiatives focused on short-term results which might jeopardize our mid and long-term business sustainability and value creation, and to allow us a flexible compensation approach. We offer our employees benefit plans based on common practice in the local labor market of the office holder.

Variable components of compensation are determined with an aim at creating maximum alignment between the Compensation Policy and our operating plan and objectives. Variable components of compensation are primarily based on measurable long-term criteria, except that a non-material portion of variable compensation may be based on qualitative non-measurable criteria which focus on the office holder’s contribution to the Company. Our variable compensation aims to remunerate for achievements by directly linking pay to performance outcomes in the short and long term. To strengthen the alignment of shareholder interests and the interests of management and employees, performance measurements reflect our actual results overall, as well as that of the individual office holder. To support the aforementioned principles, we provide two types of variable compensation: short-term - annual bonuses; and long-term - equity compensation.

Annual bonuses are based on achievement of the business goals set out in our annual operating plan approved by the board of directors at the beginning of each year. The operating plan encompasses all aspects of our activities and as such sets the business targets for each member of the management team. Consequently, our Compensation Committee and board of directors should be able to judge the suitability of a bonus payment by deliberating retrospectively at year end and comparing actual performance and target achievements against the forecasted operating plan. The annual bonus mechanism will be directly tied to meeting objectives - both our business objectives and the office holder’s personal objectives. The board of directors’ satisfaction with the officer’s performance will also affect the bonus amount. Annual bonus payments are subject to the limitations set out in the Compensation Policy and also subject to the discretion of our Compensation Committee and approval by the board of directors. In order to maintain some measure of flexibility, after calculating the compensation amount, the board of directors may exercise discretion about the final amount of the bonus but may not increase the recommended bonus amount by more than 25%.

Equity-based compensation may be granted in any form permitted under our share incentive plan in effect from time to time and shall be made in accordance with the terms of such share incentive plan. Equity-based compensation to office holders shall be granted from time to time and be individually determined and awarded according to the performance, prior business experience, qualifications, role and the personal responsibilities of each officer. The vesting period will generally be four years, with the vesting schedule to be determined in accordance with market compensation trends. Our policy is to grant equity-based compensation with exercise prices at market value. Furthermore, in order to create a ceiling for the variable compensation: (1) the aggregate value of annual grants to any one office holder (based on the Black Scholes calculation as of the date of grant) will be no more than the higher of 2% of our market capitalization at the end of the measurement period or $1.5 million; and (2) it is our intention that the maximum outstanding equity awards under its share incentive plan will not exceed 12% of our total fully-diluted share capital. Our board of directors may, following approval by our Compensation Committee, make provisions with respect to the acceleration of the vesting period of any office holder’s awards, including, without limitation, in connection with a corporate transaction involving a change of control (subject to any other approvals required by applicable law).

We have also established a defined ratio between the variable and the fixed components of compensation, as well as a maximum amount for all variable components as of the date on which they are paid (or as of the grant date for non-cash variable equity components), and subject to the limitations on variable compensation components which are set out in the Compensation Policy. In all events, the weight of all the variable components (out of the total compensation amount which is to be granted for any year) will not be greater than 80% for each office holder and may vary from one office holder to the other.

According to the Companies Law, our Compensation Policy provides that in the event of an accounting restatement, we shall be entitled to recover from office holders’ bonus compensation granted, earned or vested based on a pre-accounting restatement of our financial results in the amount of the excess over what would have been paid under the accounting restatement, with a three-year look-back period. However, the compensation recovery will not be triggered in the event of a financial restatement required due to changes in applicable financial reporting standards.  In addition, in November 2023 we adopted an Executive Officer Clawback Policy in accordance with the rules of the SEC and Nasdaq.

All compensation arrangements of office holders are to be approved in the manner prescribed by applicable law. Our Compensation Committee will review the Compensation Policy on an annual basis, and monitor its implementation, and recommend to our board of directors and shareholders to amend the Compensation Policy as it deems necessary from time to time.

Investment Monitoring Committee

Internal Auditor

Under the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor recommended by the audit committee and nominated by the board of directors. An internal auditor may not be:

The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committee is required to oversee the activities and to assess the performance of the internal auditor as well as to approve the internal auditor’s work plan. Our internal auditor is Tali Yaron Adv. (LLB, LLM), a director at Deloitte Israel.

Approval of Related Party Transactions under Israeli Law

The Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company. The duty of care of an office holder is based on the duty of care set forth in connection with the tort of negligence under the Israeli Torts Ordinance (New Version) 5728-1968. This duty of care requires an office holder to act with the degree of care with which a reasonable office holder in the same position would have acted under the same circumstances.

The duty of care includes a duty to use reasonable means, in light of the circumstances, to obtain:

The duty of loyalty requires an office holder to act in good faith and for the benefit of the company, and includes the duty to:

We may approve an act performed in breach of the duty of loyalty of an office holder provided that the office holder acted in good faith, the act or its approval does not harm the company, and the office holder discloses his or her personal interest, as described below.

The Companies Law requires that an office holder promptly disclose to the company any personal interest that he or she may have and all related material information or documents relating to any existing or proposed transaction by the company,  and in any event no later than the first meeting of the board of directors at which the transaction is considered. An office holder is not, however, obliged to disclose a personal interest and related information if the personal interest of the office holder derives solely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction (as defined in the Companies Law).

The term personal interest is defined under the Companies Law to include the personal interest of a person in an action or transaction of a company, including the personal interest of such person’s relative or the interest of any entity in which the person or any of his/her relatives serves as a director or the chief executive officer, owns at least 5% of its issued share capital or its voting rights or has the right to appoint a director or the chief executive officer, but excluding a personal interest stemming solely from the ownership of shares in such entity. A personal interest includes the personal interest of a person for whom the office holder holds a voting proxy and the personal interest of the office holder voting as a proxy, even if the shareholder granting the proxy has no personal interest in the approval of the matter.

Under the Companies Law, an extraordinary transaction is defined as any of the following:

Under the Companies Law, once an office holder has complied with the disclosure requirement described above, a company may approve a transaction between the company and the office holder or a third party in which the office holder has a personal interest, or approve an action by the office holder that would otherwise be deemed a breach of duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed by the office holder in good faith.

Under the Companies Law, unless the articles of association of a company provide otherwise, a transaction with an office holder or with a third party in which the office holder has a personal interest that is not an extraordinary transaction and an action of an office holder that would otherwise be deemed a breach of duty of loyalty that may have a material impact on a company’s profitability, assets or liabilities requires approval by the board of directors. Our Articles of Association do not provide otherwise. If the transaction or action considered is (i) an extraordinary transaction or (ii) an action of an office holder that would otherwise be deemed a breach of duty of loyalty and may have a material impact on a company’s profitability, assets or liabilities, then audit committee approval is required prior to approval by the board of directors.

Under the Companies Law, a transaction with an office holder in a public company regarding his or her terms of office and employment should be determined in accordance with the company’s compensation policy. Nonetheless, a company may, under special circumstances, approve the terms of office and employment that are not consistent with the approved compensation policy. The following are required for the approval of the terms of office or employment of the officers of a public company:

A director who has a personal interest in a matter that is considered at a meeting of the board of directors or the audit committee may generally not be present at the meeting or vote on the matter unless a majority of the directors or members of the audit committee have a personal interest in the matter, or, unless the chairman of the audit committee or board of directors (as applicable) determines that he or she should be present to present the transaction that is subject to approval. If a majority of the directors have a personal interest in the matter, such matter also requires approval of the shareholders of the company by the Special Majority Requirements.

Under the Companies Law, the disclosure requirements that apply to an office holder also apply to a controlling shareholder of a public company. See “— Audit Committee” for the general definition of “controlling shareholder” under the Companies Law. In connection with matters governing: (i) extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, (ii) certain private placements in which the controlling shareholder has a personal interest, (iii) certain transactions with a controlling shareholder or relative thereof with respect to services provided to or employment by the company, (iv) the terms of employment and compensation of the general manager, and (v) the terms of employment and compensation of office holders of the company when such terms deviate from the compensation policy previously approved by the company’s shareholders, the definition of “controlling shareholder” also includes shareholders that hold 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights in the company (and the holdings of two or more shareholders which each have a personal interest in such matter will be aggregated for the purposes of determining such threshold).

Under the Companies Law, extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, including a private placement in which a controlling shareholder has a personal interest, as well as transactions for the provision of services, whether directly or indirectly, by a controlling shareholder or his or her relative, or a company such controlling shareholder controls, require the approval of the audit committee, the board of directors and the shareholders, in that order. Transactions concerning the terms of engagement of a controlling shareholder or a controlling shareholder’s relative, whether as an office holder or an employee, require the approval of the compensation committee, the board of directors and the shareholders, in that order. The shareholder approval must meet one of the following requirements:

If such transaction concerns the terms of office and employment of such controlling shareholder, in his capacity as an office holder or an employee of the company, such terms of office and employment approved by the compensation committee and board of directors shall be in accordance with the compensation policy of the company. Nonetheless, the compensation committee and the board of directors may, in special circumstances, approve terms of office and compensation of a controlling shareholder that do not comply with the company’s compensation policy, provided that the compensation committee and, thereafter, the board of directors approve such terms, based on, among other things, the considerations and mandatory requirements with respect to a compensation policy set forth in the Companies Law. Following such approval by the compensation committee and board of directors, shareholder approval would be required by the special majority described above.

To the extent that any such transaction with a controlling shareholder is for a period extending beyond three years, approval, in the same manner described above, is required once every three years, unless, with respect to extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, the audit committee determines that the duration of the transaction is reasonable given the related circumstances related.

Duties of shareholders

Under the Companies Law, a shareholder has a duty to act in good faith and in an acceptable manner in exercising its rights and performing its obligations to the company and other shareholders, and must refrain from abusing its power in the company, including, among other things, voting at general meetings of shareholders on the following matters:

A shareholder also has a general duty to refrain from discriminating against other shareholders.

The remedies generally available upon a breach of contract will also apply to a breach of the above-mentioned duties, and in the event of discrimination against other shareholders, additional remedies are available to the injured shareholder.

In addition, a controlling shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any shareholder that, under a company’s articles of association, has the power to appoint or prevent the appointment of an office holder, or has another power with respect to a company, is under a duty to act with fairness towards the company. The Companies Law does not describe the substance of this duty of fairness except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness, taking the shareholder’s position in the company into account.

Exculpation, insurance and indemnification of office holders

Under the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care, but only if a provision authorizing such exculpation is included in its articles of association. Our Articles of Association include such a provision. An Israeli company may not exculpate a director from liability arising out of a prohibited dividend or distribution to shareholders.

An Israeli company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed as an office holder, either pursuant to an undertaking given by the company in advance of an event or following an event, provided a provision authorizing such indemnification is contained in its articles of association:

An Israeli company may insure an office holder against the following liabilities incurred for acts performed as an office holder if and to the extent provided in the company’s articles of association: