Entera Bio Ltd. - 1638097

Entera Bio Ltd. - 1638097 - 2022

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-38556

ENTERA BIO LTD.

(Exact name of Registrant as specified in its charter)

Israel		Not applicable
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

Kiryat Hadassah Minrav Building – Fifth Floor
Jerusalem, Israel		9112002
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 972-2-532-7151

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Ordinary Shares, par value NIS 0.0000769 per share	ENTX	Nasdaq Capital Market
Warrants to purchase ordinary shares	ENTXW	Nasdaq Capital Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-Accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes ☐ No ☒

As of November 7, 2022, the registrant had 28,809,922 ordinary shares, par value NIS 0.0000769 per share (“Ordinary Shares”) outstanding.

Table of Contents

		Page


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		1
PART I – FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	4
	Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2022 and 2021	5
	Condensed Consolidated Statement of Changes in Shareholders’ Equity (unaudited) for the three and nine months ended September 30, 2022 and 2021	6
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2022 and 2021	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27

PART II – OTHER INFORMATION		28

Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28

SIGNATURES		29

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains “forward-looking statements,” as that term is defined under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Various statements in this Quarterly Report are “forward-looking statements” within the meaning of the PSLRA and other U.S. Federal securities laws. In addition, historic results of scientific research and clinical and preclinical trials do not guarantee that the conclusions of future research or trials would not be different, and historic results referred to in this Quarterly Report may be interpreted differently in light of additional research and clinical and preclinical trial results. We have based these forward-looking statements largely on our management’s current expectations and future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Forward-looking statements involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, projected costs, prospects, plans and objectives of management are forward-looking statements. These statements are subject to risks and uncertainties and are based on information currently available to our management. Words such as, but not limited to, “anticipate,” “believe,” “contemplates,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “likely,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “will,” “would,” “seek,” “should,” “target,” or the negative of these terms and similar expressions or words, identify forward-looking statements. The events and circumstances reflected in our forward-looking statements may not occur and actual results could differ materially from those projected in our forward-looking statements. These factors include those described in “Item 1A-Risk Factors” of this Quarterly Report and in “Item 1A-Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”). Meaningful factors which could cause actual results to differ include, but are not limited to:

•

the scope, progress and costs of developing our product candidates such as EB613 for osteoporosis and EB612 for hypoparathyroidism, including without limitation any changes to the design of the Phase 3 clinical trial of EB613;

•

the accuracy of our estimates regarding expenses, capital requirements, the sufficiency of our cash resources and the need for additional financing;

•

our ability to raise additional funds on commercially reasonable terms, including via our SVB ATM Program (as defined in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources” of this Quarterly Report);

•

our reliance on third parties to conduct our clinical trials and on third-party suppliers to supply or produce our product candidates;

•

our interpretation of U.S. Food and Drug Administration (the “FDA”) feedback and guidance and how such guidance may impact our clinical development plans, specifically our ability to utilize the 505(b)(2) pathway for the development and potential approval of EB613 and any other product candidates we may develop;

•

our expectations regarding licensing, business transactions and strategic collaborations, including our ongoing collaboration with Amgen;

•

our ability to use and expand our drug delivery technology to additional product candidates;

•

our operation as a development stage company with limited operating history and a history of operating losses and our ability to fund our operations going forward;

•

our ability to continue as a going concern absent access to sources of liquidity;

•

our ability to obtain and maintain regulatory approval for any of our product candidates;

•

our competitive position with respect to other products on the market or in development for the treatment of osteoporosis and hypoparathyroidism;

•

our ability to establish and maintain development and commercialization collaborations;

•

any potential commercial launch of current or future product candidates, and the timing, cost or other aspects of such commercialization;

•

our ability to manufacture and supply, in conjunction with our third-party supply chain partners, sufficient amounts of material to support our clinical trials and any potential future commercial requirements;

•

the safety and efficacy of therapeutics marketed by competitors that are targeted toward indications for which we are developing product candidates;

•

the size of any market we may target and the adoption of our product candidates, if approved, by physicians and patients;

•

our ability to obtain, maintain and protect our intellectual property and operate our business without infringing misappropriating or otherwise violating any intellectual property rights of others;

•

our ability to retain key personnel and recruit additional qualified personnel;

•

the possibility that competing products or technologies may make any product candidates we may develop and commercialize or our oral delivery technology obsolete;

•

the pricing and reimbursement of our product candidates, if approved;

•

our ability to develop a sales, marketing and distribution infrastructure, if any;

•

our ability to manage growth; and

•

the duration and severity of the coronavirus (COVID-19) pandemic, the actions that may be required to contain the coronavirus or treat its impact, and its impact on our operations and workforce, including our research and development and clinical trials.

All forward-looking statements contained in this Quarterly Report are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We caution investors not to rely too heavily on the forward-looking statements we make or that are made on our behalf. Except as required by applicable law, we are under no duty, and expressly disclaim any obligation, to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in any annual, quarterly or current reports that we may file with the Securities and Exchange Commission (“SEC”).

We encourage you to read Item 1A of this Quarterly Report and our 2021 Annual Report, entitled “Risk Factors,” and Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources” of this Quarterly Report for additional discussion of the risks and uncertainties associated with our business. There can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Therefore, no assurance can be given that the outcomes stated in such forward-looking statements and estimates will be achieved.

PART I.

ITEM 1. FINANCIAL STATEMENTS

ENTERA BIO LTD.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2022

TABLE OF CONTENTS

	Page
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets (unaudited)	4
Condensed Consolidated Statements of Operations (unaudited)	5
Condensed Consolidated Statements of Changes in Shareholders' Equity (unaudited)	6
Condensed Consolidated Statements of Cash Flows (unaudited)	7
Notes to the Consolidated Financial Statements (unaudited)	8

ENTERA BIO LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share data)
(Unaudited)

	September 30,			December 31,
	2022			2021
A s s e t s
CURRENT ASSETS:
Cash and cash equivalents		14,323			24,892
Accounts receivable		233			183
Other current assets		634			254
TOTAL CURRENT ASSETS		15,190			25,329
NON-CURRENT ASSETS:
Property and equipment, net		152			156
Operating lease right-of-use assets		126			239
Deferred income taxes		66			217
Funds in respect of employee rights upon retirement		6			46
TOTAL NON-CURRENT ASSETS		350			658
TOTAL ASSETS		15,540			25,987
Liabilities and shareholders' equity
CURRENT LIABILITIES:
Accounts payable		413			166
Accrued expenses and other payables		651			2,801
Current maturities of operating lease		129			179
Contract liabilities		-			15
TOTAL CURRENT LIABILITIES		1,193			3,161
NON-CURRENT LIABILITIES:
Operating lease liabilities		3			123
Liability for employee rights upon retirement		32			138
TOTAL NON-CURRENT LIABILITIES		35			261
TOTAL LIABILITIES		1,228			3,422
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Ordinary Shares, NIS 0.0000769 par value: Authorized - as of September 30, 2022 and December 31, 2021, 140,010,000 shares; issued and outstanding: - as of September 30, 2022 and December 31, 2021, 28,809,922 and 28,804,411 shares, respectively		*			*
Additional paid-in capital		106,733			104,950
Accumulated other comprehensive income		41			41
Accumulated deficit		(92,462	)		(82,426	)
TOTAL SHAREHOLDERS' EQUITY		14,312			22,565
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		15,540			25,987

* Represents an amount less than one thousand US dollars

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

ENTERA BIO LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except share and per share data)

(Unaudited)

	Nine Months Ended September 30,						Three Months Ended September 30,
	2022			2021			2022			2021

REVENUES		120			406			8			140
COST OF REVENUES		93			237			6			65
GROSS PROFIT		27			169			2			75
OPERATING EXPENSES:
Research and development		4,497			4,122			1,413			1,771
General and administrative		5,512			4,208			1,460			1,535
Other income		(33	)		(32	)		(6	)		(11	)
TOTAL OPERATING EXPENSES		9,976			8,298			2,867			3,295
OPERATING LOSS		9,949			8,129			2,865			3,220

FINANCIAL (INCOME) LOSS, NET		(96	)		2			8			7
LOSS BEFORE INCOME TAX		9,853			8,131			2,873			3,227
INCOME TAX BENEFIT (EXPENSES)		183			(44	)		194			(13	)
NET LOSS		10,036			8,087			3,067			3,214

LOSS PER SHARE BASIC AND DILUTED		0.35			0.32			0.11			0.11

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTATION OF BASIC AND DILUTED LOSS PER SHARE		28,807,470			25,203,221			28,809,922			28,680,833

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

ENTERA BIO LTD

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(U.S. dollars in thousands, except share and per share data)
(Unaudited)

	Ordinary shares
	Number of shares issued		Amounts		Additional paid-in capital		Accumulated other Comprehensive income		Accumulated deficit			Total

BALANCE AT JANUARY 1, 2022		28,804,411		*		104,950		41		(82,426	)		22,565
Net loss		-		-		-		-		(10,036	)		(10,036	)
Exercise of options to ordinary shares		5,511		*		13		-		-			13
Share-based compensation		-		-		1,770		-		-			1,770
BALANCE AT SEPTEMBER 30, 2022		28,809,922		*		106,733		41		(92,462	)		14,312

BALANCE AT JULY 1, 2022		28,809,922		*		106,623		41		(89,395	)		17,269
Net loss		-		-		-		-		(3,067	)		(3,067	)
Share-based compensation		-		-		110		-		-			110
BALANCE AT SEPTEMBER 30, 2022		28,809,922		*		106,733		41		(92,462	)		14,312

BALANCE AT JANUARY 1, 2021		21,057,922		*		77,708		41		(70,239	)		7,510
Net loss		-		-		-		-		(8,087	)		(8,087	)
Issuance of shares due to the ATM program, net of issuance costs		4,386,728		*		21,805		-		-			21,805
Exercise of options to ordinary shares		157,711		*		397		-		-			397
Exercise of warrants to ordinary shares		3,175,050		*		3,158		-		-			3,158
Share-based compensation		-		-		1,493		-		-			1,493
Vested restricted share units		7,000		-		-		-		-			-
BALANCE AT SEPTEMBER 30, 2021		28,784,411		*		104,561		41		(78,326	)		26,276

BALANCE AT JULY 1, 2021		28,286,211		*		101,348		41		(75,112	)		26,277
Net loss		-		-		-		-		(3,214	)		(3,214	)
Issuance of shares due to the ATM program, net of issuance costs		440,463		*		2,463		-		-			2,463
Exercise of options to ordinary shares		57,737		*		122		-		-			122
Share-based compensation		-		-		628		-		-			628
BALANCE AT SEPTEMBER 30, 2021		28,784,411		*		104,561		41		(78,326	)		26,276

* Represents an amount less than one thousand US dollars.

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

ENTERA BIO LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands, except share and per share data)

(Unaudited)

	Nine months ended September 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		(10,036	)		(8,087	)
Adjustments required to reconcile net loss to net cash used in operating activities:
Depreciation		48			39
Deferred income taxes		151			(166	)
Share-based compensation		1,770			1,493
Finance income, net		(74	)		(6	)
Changes in operating asset and liabilities:
Decrease (increase) in accounts receivable		(50	)		3
Increase in other current assets		(380	)		(198	)
Increase in accounts payable		247			161
Increase (decrease) in accrued expenses and other payables		(2,149	)		368
Decrease in contract liabilities		(15	)		(158	)
Net cash used in operating activities		(10,488	)		(6,551	)
CASH FLOWS FROM INVESTING ACTIVITIES:

SEC Form 10-Q filed by Entera Bio Ltd.