Risk
Factors
Our
business is subject to numerous risks, as more fully described in the section titled “Risk Factors” immediately following
this prospectus summary. You should read and carefully consider these risks and all of the other information in this prospectus,
including the financial statements and the related notes included elsewhere in this prospectus, before deciding whether to invest
in the ADSs. In particular, such risks include, but are not limited to, the following:
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We
are a clinical stage biopharmaceutical company with a history of operating losses, are not currently profitable, do not expect
to become profitable in the near future and may never become profitable.
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We
have not yet commercialized any products or technologies, and we may never do so.
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We
depend heavily on the success of our current Phase 3 clinical trial of M-001 in Europe, and if we are unable to complete our
Phase 3 clinical trial and then fail to obtain marketing approvals for the commercialization of M-001, our business will be
materially harmed.
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We
may never receive FDA regulatory approval for the conduct of Phase 3 clinical trials in the U.S.
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Our
product candidate is subject to extensive regulation and may never obtain regulatory approval.
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Our
product candidate and future product candidates will remain subject to ongoing regulatory requirements even if they receive
marketing approval, and if we fail to comply with these requirements, we may not obtain such approvals or could lose those
approvals that have been obtained, and the sales of any approved commercial products could be suspended.
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If
we, or the parties from whom we license intellectual property, fail to adequately protect, enforce or secure rights to the
patents which we own or that were licensed to us or any patents we may own in the future, the value of our intellectual property
rights would diminish, and our business and competitive position would suffer.
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We
face significant competition. If we cannot successfully compete with new or existing products, M-001 or any other product
candidate that we develop may be rendered non-competitive or obsolete.
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We
are subject to extensive and costly government regulations relating to our business, we may be subject to fines and other
penalties that could harm our business.
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Our
U.S. shareholders may suffer adverse tax consequences if we are characterized as a passive foreign investment company, or
PFIC, for U.S. federal income tax purposes.
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Our
Corporate Information
We
were incorporated in Israel in 2003 as a privately held company. In February 2007, we completed an initial public offering of
our ordinary shares on the Tel Aviv Stock Exchange, or TASE, and in January 2018 we voluntarily delisted from TASE. American Depositary
Shares and ADS warrants have been traded on the NASDAQ Capital Market under the symbols “BVXV” and “BVXVW”,
respectively, since our initial public offering in the United States in May 2015.
As
of April 2019, our principal executive offices are located at Jerusalem BioPark, 2nd floor, Hadassah Ein Kerem Campus, Jerusalem,
Israel, and our telephone number is +972-8-930-2529. Our website is www.biondvax.com. Information contained on, or accessible
through, our website is not incorporated by reference herein and shall not be considered part of this prospectus. Our agent for
service of process in the United States is Puglisi & Associates, whose address is 850 Library Avenue, Suite 204, Newark, Delaware,
and whose telephone number is (302) 738-6680.
Implications
of Being an Emerging Growth Company
We
qualify as an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012, or JOBS Act.
For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced
reporting and other regulatory requirements that are generally unavailable to other public companies, including:
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an
exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required
by Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; and
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an
exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB,
requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required
to provide additional information about our audit and our financial statements.
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We
may take advantage of these provisions until December 31, 2020 or such earlier time that we are no longer an emerging growth company.
If we become a “large accelerated filer,” our annual gross revenues exceed $1.0 billion or we issue more than $1.0
billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to December 31,
2020.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. However, we have chosen to “opt out” of such extended transition period,
and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards
is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended
transition period for complying with new or revised accounting standards is irrevocable.
Implications
of being a Foreign Private Issuer
We
are subject to the information reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, that are applicable
to “foreign private issuers,” and under those requirements we will file reports with the U.S. Securities and Exchange
Commission, or the SEC. As a foreign private issuer, we will not be subject to the same requirements that are imposed upon U.S.
domestic issuers by the SEC, and we may be exempt from certain regulations of the NASDAQ Stock Market. Under the Exchange Act,
we will be subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic
reporting companies. For example, although we report our financial results on a quarterly basis, we are not be required to issue
quarterly reports, proxy statements that comply with the requirements applicable to U.S. domestic reporting companies, or individual
executive compensation information that is as detailed as that required of U.S. domestic reporting companies. We will also have
four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current
reports as frequently or promptly as U.S. domestic reporting companies. We may also present financial statements pursuant to International
Financial Reporting Standards, or IFRS, instead of pursuant to U.S. generally accepted accounting principles, or U.S. GAAP. Furthermore,
our officers, directors and principal shareholders will be exempt from the requirements to report transactions in our equity securities
and from the short-swing profit liability provisions contained in Section 16 of the Exchange Act. As a foreign private issuer,
we will also not be subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. These exemptions
and leniencies will reduce the frequency and scope of information and protections available to you in comparison to those applicable
to U.S. domestic reporting companies. We intend to take advantage of the exemptions available to us as a foreign private issuer
during and after the period we qualify as an emerging growth company.
summary
of THE rights OFFERING
The
following summary describes the principal terms of the rights offering but is not intended to be complete. See the information
under the heading “The Rights Offering” in this prospectus for a more detailed description of the terms and conditions
of the rights offering.
Offering
to ADS holders
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ADS
rights offering
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ADS
holders will receive 1 ADS right for each (1) ADS owned. The subscription rights may be exercised at any time beginning on
the date of this prospectus and ending at the expiration time of the ADS rights offering. Fractional ADS rights will not be
issued, and all ADS rights entitlement will be reduced to the next smaller whole number of ADS rights.
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Basic
Subscription Privilege
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The
basic subscription privilege of each ADS right will entitle you to purchase one ADS at a subscription price of $ per
ADS.
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No
Over-Subscription Privilege
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We
do not provide an over-subscription privilege to purchase additional ADSs that remain unsubscribed at the expiration of the
rights offering.
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Record
Date
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5:00
p.m., New York City time, on , 2019
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Expiration
Time of the ADS Rights Offering
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5:00
p.m., New York City time, on , 2019
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Subscription
Price
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$5.69
per ADS, payable in cash. To be effective, any payment related to the exercise of a right must clear prior to the expiration
of the rights offering.
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ADS
Rights Deposit Amount
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ADS
holders wishing to exercise ADS rights must deposit $5.705 per new ADS subscribed for, which equals the ADS subscription price
of $5.69 plus $0.015 per ADSs to cover the depositary’s fee for issuance of the new ADSs.
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ADS
Rights Agent
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The
Bank of New York Mellon. Holders of ordinary shares wishing to exercise share rights should contact the Company directly to
receive instructions.
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Use
of Proceeds
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We
are conducting the rights offering to raise capital that we intend to use for working capital and general corporate purposes
including completion of the pivotal Phase 3 clinical trial (second cohort) expected through the end of 2020. See “Use
of Proceeds.”
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Non-Transferability
of Rights
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The
subscription rights may not be sold, transferred or assigned and will not be listed for trading on the NASDAQ Capital Market
or any stock exchange or market.
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No
Board Recommendation
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Although
members of our board of directors may invest their own money in the rights offering, our board of directors is making no recommendation
regarding your exercise of the subscription rights. You are urged to make your decision based on your own assessment of our
business and the rights offering. Please see “Risk Factors” for a discussion of some of the risks involved in
investing in ADSs.
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No Revocation
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All exercises of ADS rights
are irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your ADS rights
and even if the rights offering is extended by our board of directors. However, if we amend the rights offering to allow for
an extension of the rights offering for a period of more than 30 days or make a fundamental change to the terms of the rights
offering set forth in this prospectus, you may cancel your subscription and receive a refund of any money you have advanced.
You should not exercise your ADS rights unless you are certain that you wish to purchase additional ADSs at a subscription
price of $5.69 per ADS.
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No Minimum Requirements
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There is no minimum purchase requirement
for closing this offering, and no minimum purchase requirement for any ADS rights holder.
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Extension, Cancellation and Amendment
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We have the option to extend
the expiration of the rights offering for a period not to exceed 30 days by giving oral or written notice to the ADS rights
agent prior to the expiration date of the rights offering, although we do not presently intend to do so. If we elect to
extend the expiration of the rights offering, we will issue a press release announcing such extension no later than 9:00
a.m., New York City time, on the next business day after the most recently announced ADS rights expiration time. We will
extend the duration of the rights offering as required by applicable law or regulation and may choose to extend it if
we decide to give investors more time to exercise their ADS rights in the rights offering.
Our board of directors may
cancel the rights offering at any time prior to the expiration of the rights offering for any reason. In the event the
rights offering is cancelled, all subscription payments received by the ADS rights agent will be promptly returned, without
interest.
Our board of directors also
reserves the right to amend or modify the terms of the rights offering in its sole discretion. If we should make any fundamental
changes to the terms of the rights offering set forth in this prospectus, we will file a post-effective amendment to the
registration statement in which this prospectus is included, offer potential purchasers who have subscribed for ADSs the
opportunity to cancel such subscriptions and issue a refund of any money advanced by such holders and recirculate an updated
prospectus after the post-effective amendment is declared effective by the SEC. In addition, upon such event, we may extend
the expiration date of the rights offering to allow holders of rights ample time to make new investment decisions and
for us to recirculate updated documentation. Promptly following any such occurrence, we will issue a press release announcing
any changes with respect to the rights offering and the new expiration date. The terms of the rights offering cannot be
modified or amended after the expiration date of the rights offering. Although we do not presently intend to do so, we
may choose to amend or modify the terms of the rights offering for any reason, including, without limitation, in order
to increase participation in the rights offering. Such amendments or modifications may include a change in the subscription
price, although no such change is presently contemplated.
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Procedures for Exercise
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If you hold ADSs and wish to exercise
your ADS rights, you should contact your broker or other securities intermediary through which you hold the ADSs and instruct
it to subscribe on your behalf through the automated system of The Depository Trust Company, or DTC, prior to the ADS expiration
time. Your intermediary will charge the applicable ADS rights deposit amount to your account. Your broker or other securities
intermediary will set a cutoff date and time to receive instructions that is earlier than the ADS rights expiration time stated
above. You should contact your securities intermediary to determine the cutoff date and time that applies to you.
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ADS
Rights Agent
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With
respect to ADS holders, The Bank of New York Mellon. For information regarding the ADS Rights Offering, please contact MacKenzie
Partners, Inc., the information agent, at 1-(212) 929-5500 or toll free at 800-322-2885, or by email at rightsoffer@mackenziepartners.com,
Monday- Friday, from 09:00 a.m. to 5:00 p.m. New York City time.
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Unexercised
rights
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If
you do not exercise your ADS rights within the ADS rights exercise period, they will expire and have no further value.
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Listing
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ADSs
and ADS warrants are traded on the NASDAQ Capital Market under the symbols “BVXV” and “BVXVW”, respectively.
The ADSs issued in the rights offering will also be traded on the NASDAQ Capital Market under the symbol “BVXV”.
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Potential
offering of unsubscribed rights
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At
our shareholders meeting held on 2019, the Company’s shareholders approved and we have agreed to grant to our largest
shareholder, Angels Investments in Hi Tech Ltd., a company controlled by Mr. Marius Nacht, or aMoon 2 Fund Limited Partnership,
a health-tech and life-sciences venture fund in which Mr. Marius Nacht is the anchor investor, (together “
Angels
”),
(i) an option to purchase, at the ADS subscription price, in addition to the full entitlement as a holder of ordinary shares
and ADSs under this rights offering, all ordinary shares and ADSs offered in this rights offering that are not purchased upon
exercise of share rights or ADS rights; and (ii) if the aggregate subscription for those unsubscribed ordinary shares and
ADSs is less than $10 million, to purchase, at the ADS subscription price in a private placement, an amount of additional
ADSs so that the total investment by Angels is $10 million (the “
Option
”), excluding the full entitlement
as a holder of ordinary shares and ADSs under this rights offering. In return for this Option, Angels has undertaken a firm
commitment to purchase at least its full entitlement as a holder of ordinary shares and the ADSs under this rights offering.
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Delivery
of new ADSs
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The
depositary will deliver new ADSs subscribed for in the rights offering as soon as practicable after confirmation of receipt
of the underlying new ordinary shares by the depositary’s custodian, which is expected to be on or about ______________.
To better understand the terms of the ADSs, you should carefully read “Description of American Depositary Shares”
in this prospectus. You should also read the deposit agreement, which is an exhibit to the registration statement of which
this prospectus forms a part.
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Fees
and Expenses
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We
will pay all fees charged by the ADS rights agent in connection with this rights offering, except the ADS issuance fee of
$0.015 per new ADS issued. You are responsible for paying any other commissions, fees, taxes or other expenses incurred
in connection with the exercise of the ADS rights, and the ADS issuance fee of $0.015 per new ADS issued, payable to the
depositary. The ADS rights agent will deduct the ADS issuance fee from the ADS rights deposit amount in respect of each
holder’s subscription.
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Information
Agent
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For
information regarding the ADS Rights Offering, please contact MacKenzie Partners, Inc., the information agent, at 1-(212)
929-5500 or toll free at 800-322-2885, or by email at rightsoffer@mackenziepartners.com, Monday- Friday, from 09:00 a.m. to
5:00 p.m. New York City time.
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For additional information regarding the rights offering to holders of ADSs, see “Rights Offering – Offering to ADS Holders”, which also contains a summary timetable containing important dates relating to the ADS rights offering.
Offering to shareholders
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Ordinary Share rights offering
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Shareholders will receive one subscription
right for each (1) ordinary share owned, at a subscription price of $0.14225 per new ordinary share. The ordinary share rights
may be exercised at any time beginning on the date of this prospectus. Fractional ordinary share rights will not be issued,
and ordinary share right entitlement will be reduced to the next smaller whole number of ordinary share rights.
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Ordinary Share Record Date
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5:00 p.m., Israel time, on , 2019
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Expiration Time of the share rights Offering
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5:00 p.m., Israel time, on , 2019
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Subscription Price
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$0.14225
per ordinary share, payable in cash. To be effective, any payment related to the exercise of a right must clear prior to the
expiration of the rights offering.
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Procedure for exercising ordinary share rights
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You may exercise your ordinary share rights
by delivering to us, via our legal counsel, Pearl Cohen Zedek Latzer Baratz, at 121 Menachem Begin Rd., 53
rd
Floor,
Tel-Aviv, Israel, attn: Mark Hamilton, Adv., a properly completed subscription form before the expiration time of the share
rights offering. To validly subscribe for new ordinary shares pursuant to your ordinary share rights we must receive the subscription
price for your new ordinary shares in full before the expiration time of the share rights offering.
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Non-Transferability of Rights
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The ordinary share subscription rights may not be sold, transferred or assigned and will not be listed for trading on any stock exchange or market in the U.S. or elsewhere.
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No Board Recommendation
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Although members of our board of directors
may invest their own money in the rights offering, our board of directors is making no recommendation regarding your exercise
of the subscription rights. You are urged to make your decision based on your own assessment of our business and the rights
offering. Please see “Risk Factors” for a discussion of some of the risks involved in investing in ADSs.
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No Revocation
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All exercises of subscription rights are
irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your subscription
rights and even if the rights offering is extended by our board of directors. However, if we amend the rights offering to
allow for an extension of the rights offering for a period of more than 30 days or make a fundamental change to the terms
of the rights offering set forth in this prospectus, you may cancel your subscription and receive a refund of any money you
have advanced. You should not exercise your subscription rights unless you are certain that you wish to purchase additional
ordinary shares at a subscription price of $0.14225 per ordinary share.
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Unexercised rights
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If you do not exercise your ordinary share rights within the ordinary share rights exercise period, they will expire and have no further value.
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Listing
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The ordinary shares and ordinary share rights are not listed on any securities market or exchange in the U.S. or elsewhere.
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Delivery of new ordinary shares
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We expect to deliver the new ordinary shares subscribed in this rights offering as soon as practicable after the closing of the offering.
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For
additional information regarding the rights offering to shareholders, see “Rights Offering – Offering to Shareholders”,
which also contains a summary timetable containing important dates relating to the ordinary share rights offering.
QUESTIONS
AND ANSWERS ABOUT THE RIGHTS OFFERING
What
is the rights offering?
We
are distributing to our shareholders and holders of ADSs, at no charge, non-transferable subscription rights. ADS holders
and shareholders will receive one subscription right for each ADS or ordinary share, respectively, owned at 5:00 p.m., New York
City time, on , 2019, and 5:00 p.m., Israel time, on , 2019, respectively (the “
rights offering
”); Each subscription
right will entitle the holder to a basic subscription privilege.
What
is the basic subscription privilege?
The
basic subscription privilege of each subscription right gives ADS holders the opportunity to purchase one ADS at a subscription
price of $5.69 per ADS and our shareholders the opportunity to purchase one ordinary
share at $0.14225 per ordinary share. You may exercise the basic subscription privilege
of any number of your subscription rights, or you may choose not to exercise any subscription rights.
Will
the Rights Offering include an oversubscription privilege?
No.
You will not be entitled to an oversubscription privilege to acquire rights remaining unpurchased after the expiration of all
subscription rights.
Why
are we conducting the rights offering?
We
are conducting the rights offering to raise capital that we intend to use to fund operations, including completion of the pivotal
Phase 3 trial (second cohort), expected through the end of 2020. See “Use of Proceeds.”
How
was the subscription price determined?
In
determining the subscription price, our board of directors considered a number of factors, including: the likely cost of capital
from other sources, the price at which our shareholders and ADS holders might be willing to participate in the rights offering,
historical and current trading prices of ADSs, our need for liquidity and capital and the desire to provide an opportunity to
ADS holders to participate in the rights offering on a
pro rata
basis. In conjunction with its review of these factors,
our board of directors has determined the subscription price to be the volume based weighted average price for the sixty calendar
days to April 8, 2019 inclusive, and the median of the volume based weighted average prices for the thirty, sixty and ninety calendar
days respectively to April 8, 2019. The subscription price is not necessarily related to our book value, net worth or any other
established criteria of value and may or may not be considered the fair value of the ADSs to be offered in the rights offering.
We cannot give any assurance that ADSs will trade at or above the subscription price in any given time period.
Am
I required to exercise all of the subscription rights I receive in the rights offering?
No.
You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights. However, if
you choose not to exercise your subscription rights in full, the relative percentage of the ordinary shares or ADSs that you own
will decrease, and your voting and other rights will be diluted.
How
soon must I act to exercise my subscription rights?
The
subscription rights may be exercised at any time beginning on the date of this prospectus and prior to the ADS expiration time
or share rights expiration time, which are 5:00 p.m., New York City time, on ,
2019 or 5:00 p.m., Israel time, on , 2019, respectively. If you elect to exercise
ADS rights, the ADS rights agent must actually receive all required documents and payments from you prior to the expiration of
the rights offering. Brokers and other securities intermediaries through which ADSs are held will set their own cut-off dates
and times to receive instructions to exercise ADS rights, which will be earlier than the ADS rights expiration time stated above.
You should contact your broker or other securities intermediary to determine the cut-off date and time that applies to you. Although
we have the option of extending the expiration of the rights offering for a period not to exceed 30 days, we currently do not
intend to do so.
May
I transfer my subscription rights?
No.
You may not sell or transfer your subscription rights to anyone.
Are
we requiring a minimum subscription to complete the rights offering?
No.
Are
there any conditions to completing the rights offering?
No
(other than this registration statement being declared effective by the SEC).
Can
our board of directors extend, cancel or amend the rights offering?
We have the option
to extend the expiration of the rights offering for a period not to exceed 30 days by giving oral or written notice to the ADS
rights agent prior to the expiration date of the rights offering, although we do not presently intend to do so. If we elect to
extend the expiration of the rights offering, we will issue a press release announcing such extension no later than 9:00 a.m.,
New York City time, on the next business day after the most recently announced expiration time of the rights offering. We will
extend the duration of the rights offering as required by applicable law or regulation and may choose to extend it if we decide
to give investors more time to exercise their subscription rights in the rights offering.
Our board of directors
may cancel the rights offering at any time prior to the expiration of the rights offering for any reason. In the event the rights
offering is cancelled, all subscription payments received by the ADS rights agent will be promptly returned, without interest.
Our board of directors also reserves the right to amend or
modify the terms of the rights offering in its sole discretion. If we should make any fundamental changes to the terms of the
rights offering set forth in this prospectus, we will file a post-effective amendment to the registration statement in which this
prospectus is included, offer potential purchasers who have subscribed for
ADSs
the opportunity to cancel such subscriptions and receive a refund of any money deposited by such ADS holder and recirculate an
updated prospectus after the post-effective amendment is declared effective by the SEC. In addition, upon such event, we may extend
the expiration date of the rights offering to allow holders of subscription rights ample time to make new investment decisions
and for us to recirculate updated documentation. Promptly following any such occurrence, we will issue a press release announcing
any changes with respect to the rights offering and the new expiration date. The terms of the rights offering cannot be modified
or amended after the expiration date of the rights offering. Although we do not presently intend to do so, we may choose to amend
or modify the terms of the rights offering for any reason, including, without limitation, in order to increase participation in
the rights offering. Such amendments or modifications may include a change in the subscription price, although no such change
is presently contemplated.
Has
our board of directors made a recommendation to shareholders and ADS holders regarding the rights offering?
Our
board of directors is not making any recommendation to shareholders and ADS holders regarding the exercise of subscription rights
in the rights offering. You should make an independent investment decision about whether or not to exercise your subscription
rights. Shareholders and ADS holders who exercise subscription rights risk investment loss on new money invested. We cannot assure
you that the market price for ADSs will remain above the subscription price or that anyone purchasing ADSs at the subscription
price will be able to sell those ADSs in the future at the same price or a higher price. If you do not exercise your rights, you
will lose any value represented by your rights and your percentage ownership interest in us will be diluted. Please see “Risk
Factors” for a discussion of some of the risks involved in investing in ADSs.
What
will happen if I choose not to exercise my subscription rights?
If
you do not exercise any subscription rights, the number of ordinary shares or ADSs you own will not change; however, due to the
fact that ordinary shares and ADSs may be purchased by other shareholders and ADS holders in the rights offering, your percentage
of ownership in the Company after the completion of the rights offering will be diluted.
How
do I exercise my subscription rights? What forms and payment are required to purchase ADSs?
If
you hold ADSs and wish to exercise your ADS rights, you should contact your broker or other securities intermediary through which
you hold the ADSs and instruct it to subscribe on your behalf through the automated system of The Depository Trust Company, or
DTC, prior to , the ADS expiration time. Your intermediary will charge
the applicable ADS rights deposit amount to your account. Your broker or other securities intermediary will set a cutoff date
and time to receive instructions that is earlier than the ADS rights expiration time stated above. You should contact your securities
intermediary to determine the cutoff date and time that applies to you.
You
may exercise your ordinary share rights by delivering to us, via our legal counsel, Pearl Cohen Zedek Latzer Baratz, at 121 Menachem
Begin Rd., 53
rd
Floor, Tel-Aviv, Israel, Attn: Mark Hamilton, Adv., a properly completed subscription from before the
share rights expiration time, that is 5:00 p.m., Israel time, on , 2019. To validly
subscribe for new ordinary shares pursuant to your ordinary share rights we must receive the subscription price for your new ordinary
shares in full before the share rights expiration time.
When
will I receive my new ADSs?
If
you purchase ADSs through the rights offering, you will receive your new securities as soon as practicable after the closing of
the offering.
After
I send in my payment, may I cancel my exercise of subscription rights?
No.
All exercises of subscription rights are irrevocable, even if you later learn information that you consider to be unfavorable
to the exercise of your subscription rights and even if the rights offering is extended by our board of directors. However, if
we amend the rights offering to allow for an extension of the rights offering for a period of more than 30 days or make a fundamental
change to the terms of the rights offering set forth in this prospectus, you may cancel your subscription and receive a refund
of any money you have deposited. You should not exercise your subscription rights unless you are certain that you wish to purchase
additional securities at the subscription price of $5.69
per ADS or $0.14225
per ordinary share.
How
many ordinary shares will be outstanding after the rights offering?
Assuming ordinary
shares are issued in the rights offering through the exercise of subscription rights, and assuming the full exercise of the ADS
rights and share rights and the exercise of the Option we anticipate that ordinary
shares will be outstanding following the completion of the rights offering.
How
much proceeds will the Company receive from the rights offering?
Assuming
full participation in the rights offering and exercise of the Option, we estimate that the gross proceeds from the rights offering
will be approximately $20,000,000, after deducting expenses related to this offering payable by us estimated at approximately
$ . Please see “Use of Proceeds.”
Are
there risks in exercising my subscription rights?
Yes.
The exercise of your subscription rights involves risks. Exercising your subscription rights involves the purchase of additional
ADSs or ordinary shares and should be considered as carefully as you would consider any other equity investment. Among other things,
you should carefully consider the risks described under the headings “Risk Factors” in this prospectus.
If
the rights offering is not completed, will my subscription payment be refunded to me?
Yes.
If the rights offering is not completed, all subscription payments received will be promptly returned, without interest.
Will
the ADS rights be listed on a stock exchange or market?
The
ADS rights may not be sold, transferred or assigned and will not be listed for trading on the NASDAQ Capital Market or any stock
exchange or market. However, the ADSs issued in the rights offering will be traded on the NASDAQ Capital Market under the symbol
“BVXV.”
May
I exercise my subscription rights if I live outside the United States?
No
action has been taken to register or qualify this rights offering outside the U.S. and Israel. Holders located anywhere else are
responsible for determining if they can subscribe without violating the securities laws of the jurisdictions in which they are
located. The rights are not to be exercised by anyone in a way that would violate applicable laws.
What
is the option granted to the largest shareholder of the Company in connection with this rights offering and why have we granted
such option?
Pursuant
to the approval of our shareholders provided at the special meeting held on _______, 2019, or the “
Special Meeting
”,
we have agreed to grant our largest shareholder, Angels Investments in Hi Tech Ltd., a company controlled by Mr. Marius Nacht,
or aMoon 2 Fund Limited Partnership, a health-tech and life-sciences venture fund in which Mr. Marius Nacht is the anchor investor,
(together “
Angels
” or “
option holder
”), (i) an option to purchase, at the ADS subscription
price, all ADSs offered in this rights offering that are not purchased upon exercise of share rights or ADS rights; and (ii) if
the aggregate subscription for those unpurchased ADSs is less than $10 million, to purchase, at the ADS subscription price in
a private placement, an amount of additional ADSs so that the total investment by Angels is $10 million (the “
Option
”),
excluding the full entitlement as a holder of ordinary shares and ADSs under this rights offering. In return for this Option,
Angels has undertaken a firm commitment to purchase at least its full entitlement as a holder of ordinary shares and the ADSs
under this rights offering. The option will be exercised upon Angels’ discretion.
In
accordance with section 328(b)(1) of the Israeli Companies Law, we will sell Angels additional ADSs at the ADS subscription price
in a private placement, so that as a result Angels may hold ordinary shares of the Company which constitute more than 25% or 45%
of the voting rights in the general meeting of the shareholders of the Company (where no other person or entity holds 25% or 45%
or more of the voting rights) and thus may become a controlling shareholder (as defined under the Israeli Companies Law). We anticipate
that if Angels exercises the Option, Angles will increase its holdings to over 25% of the voting rights of the Company. However,
we anticipate that Angels will increase its holdings to over 45% of the voting rights of the Company only if very few or no other
shareholders participate in the rights offering.
aMoon
2 is an Israeli health-tech and life-sciences venture fund in which Marius Nacht is the anchor investor. With funds under management
in excess of $650 million, aMoon 2 is one of the largest life-science fund in Israel and, in the view of the board of the Company,
a desirable value-added investor. In addition, the funds provided to the Company through the Rights Offering and Angels’
additional investment would enable the Company to plan the second season of the Phase 3 pivotal trial with a larger number of
participants than originally contemplated and thereby enhancing the statistical power of the trial, and to provide additional
working capital for staffing and other operational needs through 2020.
We
have received a letter of commitment from Angels agreeing to purchase at least its full entitlement as a holder of ordinary shares
and ADSs under this rights offering, subject to the approval of the Option grant, which was provided by the shareholders of the
Company at the Special Meeting. Under the letter of commitment, if the total consideration of the unsubscribed rights is less
than $10 million, Angels shall be entitled to receive additional ADSs in a private placement under the same terms of the rights
offering, so that the total unsubscribed rights together with the additional ADSs issued shall be for a consideration of $10 million,
excluding the full entitlement of Angels as a holder of ordinary shares and ADSs under this rights offering.
Is
the Option holder being compensated in this rights offering?
No.
When
is the Option exercisable and when will it expire?
The
Option shall be exercisable subject to the following conditions: (i) Angels has undertaken to purchase at least its full entitlement
as a holder; (ii) the shareholders meeting approved the Option grant. We intend to publish a notice of a shareholders meeting
to be convened prior to the closing of the rights offering. The Option shall become exercisable on the date the rights offering
prospectus is declared effective by the Securities and Exchange Commission and shall expire on the closing date of the rights
offering.
Why
was shareholder’s approval required in connection with this Option?
Subject
to the execution of the rights offering, Angels, including Angels Investments in Hi Tech Ltd., currently holding 20.56% of the
issued and outstanding capital of the Company, may be precluded from purchasing part of the rights, due to a restriction under
the Israeli law which will not permit Angels to increase its holdings over 25% and 45% of the voting rights of the Company, without
first submitting a tender offer to all shareholders of the Company.
Section
328 of the Israeli Companies Law provides that any acquisition of shares of over 25% and 45% of the voting rights of the Company
must be executed by submitting a tender offer to the shareholders of the Company, provided there is no other shareholder holding
25% or 45% or more of the voting rights of the Company. However, Section 328(b)(1) exempts a purchaser from filing a tender offer
in the event the Company issues the purchaser securities in a private placement equal to such amount that following such private
placement the purchaser shall hold over 25% and 45% of the voting rights of the Company.
The
issuance of ADSs under the abovementioned terms and conditions, as approved by the shareholders of the Company, shall allow Angels
to purchase ADSs in the rights offering, including unsubscribed ADSs, and increase the maximum capital potentially raised by the
Company.
We
anticipate that if Angels exercises the Option, Angles will increase its holdings to over 25% of the voting rights of the Company.
However, we anticipate that Angels will increase its holdings to over 45% of the voting rights of the Company only if very few
or no other shareholders participate in the rights offering.
What
fees or charges apply if I purchase ADSs?
We
are not charging any fee or sales commission to issue subscription rights to you or to deliver ADSs or ordinary shares to you
if you exercise your subscription rights. If you exercise ADS rights, you are responsible for paying any fees your broker or other
securities intermediary may charge you, and an ADS issuance fee of $0.015 per new ADS issued.
What
are the tax consequences of receipt of or exercise of subscription rights?
For
U.S. federal income tax purposes, it is intended that U.S. holders of our ordinary shares and warrants generally should not recognize
income or loss in connection with the receipt or exercise of subscription rights. You are urged to consult your own tax advisor
as to your particular tax consequences resulting from the receipt and exercise of subscription rights. For further information,
please see “Taxation – U.S. Federal Income Tax Consequences.”
If
I am a holder of ordinary shares, to whom should I send my forms and payment?
You
may exercise your ordinary share rights by delivering to us, via our legal counsel, Pearl Cohen Zedek Latzer Baratz, at 121 Menachem
Begin Rd., 53rd Floor, Tel-Aviv, Israel, attn: Mark Hamilton, Adv., a properly completed subscription from before the expiration
time of the share rights offering, that is 5:00 p.m., Israel time, on , 2019. To validly subscribe
for new ordinary shares pursuant to your ordinary share rights we must receive the subscription price for your new ordinary shares
in full before the expiration time of the share rights offering.
You
are solely responsible for completing delivery to the subscription agent of your subscription documents, rights certificate and
payment. We urge you to allow sufficient time for delivery of your subscription materials to the subscription agent.
Whom
should I contact if I have other questions?
If
you have other questions or need assistance, please contact MacKenzie Partners, Inc., the information agent, at 1-(212) 929-5500
or toll free at 800-322-2885, or by email at rightsoffer@mackenziepartners.com, Monday- Friday, from 09:00 a.m. to 5:00 p.m, New
York City time.
RISK
FACTORS
An
investment in these securities involves a high degree of risk. We operate in a dynamic industry that involves numerous risks and
uncertainties. You should carefully consider the factors described below, together with all of the other information contained
in this prospectus, including the audited and unaudited financial statements and the related notes included elsewhere in this
prospectus, before deciding whether to invest in the ADSs. The following risks may adversely affect our business, financial condition,
operating results and cash flows and cause the trading price of the ADSs to decline, and you could lose all or part of your investment.
Risks
Related to Our Financial Position and Capital Requirements
We
are a clinical stage biopharmaceutical company with a history of operating losses, are not currently profitable, do not expect
to become profitable in the near future and may never become profitable.
We
are a clinical stage biopharmaceutical company that was incorporated in 2003. Since our incorporation, we have primarily focused
our efforts on research and development and clinical trials of our product candidate, M-001. M-001 is in clinical trials and has
not yet been approved for commercial sale. We may not receive the necessary regulatory approvals to commercialize our product
candidate. We are not profitable and have incurred losses since inception, principally as a result of research and development,
clinical trials and general administrative expenses in support of our operations. We have not generated any revenue, expect to
incur substantial losses for the foreseeable future and may never become profitable. For the years ended December 31, 2016, 2017
and 2018, we had net losses of $2,452, $9,220 and $23,407 thousands respectively, and we expect such losses to continue for the
foreseeable future. In addition, as of December 31, 2018, we had an accumulated deficit of approximately $56,335 thousands and
we expect to experience negative cash flow for the foreseeable future. As a result, we will ultimately need to generate significant
revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability
in the future. If M-001 fails in clinical trials or does not gain regulatory clearance or approval, or if M-001 does not achieve
market acceptance, we may never become profitable. Our failure to achieve or maintain profitability, or substantial delays in
achieving profitability, could negatively impact the value of the securities and our ability to raise additional financing. A
substantial decline in the value of the securities would also affect the price at which we could sell them to secure future funding,
which could dilute the ownership interest of current shareholders. Even if we achieve profitability in the future, we may not
be able to sustain profitability in subsequent periods. Accordingly, it is difficult to evaluate our business prospects. Moreover,
our prospects must be considered in light of the risks and uncertainties encountered by an early-stage company in highly regulated
and competitive markets, such as the biopharmaceutical market, where regulatory approval and market acceptance of our products
are uncertain. There can be no assurance that our efforts will ultimately be successful or result in revenues or profits.
We
will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed
could force us to delay, limit, reduce or terminate our product development or commercialization efforts.
As
of December 31, 2018, we had approximately $20,246 thousands in cash and cash equivalents, a working capital of $14,688 thousands
and an accumulated deficit of $56,335 thousands. As of December 31, 2018, we had sufficient cash and cash commitments to fund
operations for at least 15 months if we do not raise additional capital. Since our inception, most of our resources have been
dedicated to the development of M-001. In particular, we have expended and believe that we will continue to expend significant
operating and capital expenditures for the foreseeable future developing M-001 and any future product candidate. These expenditures
will include, but are not limited to, costs associated with research and development, manufacturing, conducting clinical trials,
contracting CMOs, hiring additional management and other personnel and obtaining regulatory approvals, as well as commercializing
any products approved for sale. Furthermore, we incur additional costs associated with operating as a public company in the United
States. Because the outcome of our current Phase 3 clinical trials is highly uncertain, we cannot reasonably estimate the actual
amounts necessary to successfully complete the development and commercialization of our product candidates. We also expect to
incur additional costs for the purpose of conducting our ongoing and future clinical trials.
As
a result of these and other factors currently unknown to us, we will require additional funds, through public or private equity
or debt financings or non-dilutive sources or other sources, such as strategic partnerships and alliances and licensing arrangements.
In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe
we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy,
competitive position, quality compliance and financial condition.
Our
future capital requirements depend on many factors, including:
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the
scope, progress, results and costs of researching and developing M-001 and any future product candidate, and conducting preclinical
and clinical trials;
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the
timing of, and the costs involved in, obtaining regulatory approvals for M-001 and any future product candidate;
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the
cost of commercialization activities if any of M-001 and any future product candidate are approved for sale, including marketing,
sales and distribution costs;
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the
cost of manufacturing of M-001 and any future product candidate and any products we successfully commercialize;
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our
ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial terms of such
agreements;
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the
costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation
costs and the outcome of such litigation;
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the
timing, receipt and amount of sales of, or royalties on, any future products;
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the
expenses needed to attract and retain skilled personnel; and
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any
product liability or other lawsuits related to any future products.
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Additional
funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available
to us on a timely basis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other
research and development activities for M-001 or any future product candidate or delay, limit, reduce or terminate our establishment
of sales and marketing capabilities or other activities that may be necessary to commercialize M-001 or any future product candidate.
We have entered into a finance
contract with the European Investment Bank, or EIB, for the receipt of a loan of 20 million euros, which was extended to 24 million
euros as described in this prospectus, and into a security agreement and creation of a first ranking floating charge over all
assets of the Company in favor of EIB, and a breach of such finance contract or security agreement may cause EIB to exercise the
pledge and materialize certain of our assets.
We
entered into a finance contract, or the Finance Contract, with the European Investment Bank, or EIB, for the financing of up to
20 million euros, which was extended to 24 million euros as described in this prospectus, and up to 50% of the Company’s
expected cost of developing and marketing our product candidate, M-001. A description of the main provisions of the Finance Contract
is described in this prospectus. To the date of this prospectus, we have drawn down an amount of the loan equal to 20 million
euros.
We have also entered
into a security agreement, or the Security Agreement, whereby we created a first ranking floating charge over all of our assets
in favor of EIB, excluding assets and/or intellectual property rights subject to the license agreement with YEDA Research and
Development Company Limited. While intellectual property rights are excluded from the floating charge pledge, any breach of the
Finance Contract or the Security Agreement may cause the EIB to exercise the floating charge pledge and to materialize certain
of our assets at the time of such exercise.
Raising
additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights
to our technologies or product candidates.
We
may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships
and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible
debt securities, the ownership interests of existing shareholders will be diluted, and the terms may include liquidation or other
preferences that adversely affect shareholder rights. Debt financing, if available, may involve agreements that include covenants
limiting or restricting our ability to take certain actions, such as incurring debt, making capital expenditures or declaring
dividends. If we raise additional funds through strategic partnerships, alliances and licensing arrangements with third parties,
we may have to relinquish valuable rights to our technologies or any product candidate, or grant licenses on terms that are not
favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to
delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market product
candidates that we would otherwise prefer to develop and market ourselves.
Risks
Related to Development, Clinical Testing and Regulatory Approval of M-001 and Any Future Product Candidate
We
have not yet commercialized any products, and we may never become profitable.
We
currently have one product candidate, M-001, in Phase 3 clinical development and no products on the market or close to entering
the market. We do not know when or if we will complete our product development efforts, obtain regulatory approval for M-001 or
successfully commercialize M-001. Even if we are successful in developing M-001 or any product candidate that we may develop in
the future (if any), we will not be successful unless such product gains market acceptance for appropriate indications at favorable
reimbursement rates. The degree of market acceptance of these products will depend on a number of factors, including, but not
limited to:
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the
timing of regulatory approvals in the U.S. and other countries, and for the uses, we intend to pursue with respect to the
commercialization of M-001 or any future product candidate;
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the
competitive environment;
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the
establishment and demonstration in, and acceptance by, the medical community of the safety and clinical efficacy of our product
candidate and its potential advantages over other competitive products;
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our
ability to enter into supply agreements with health organizations and governments around the world for the supply of our product
candidate or our ability to enter into strategic agreements with pharmaceutical and biopharmaceutical companies with strong
marketing and sales capabilities;
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the
establishment of external, and potentially, internal, sales and marketing capabilities to effectively market and sell M-001
or any future product candidate in the United States, Israel, Europe and other jurisdictions;
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the
adequacy and success of our distribution, sales and marketing efforts; and
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the
pricing and reimbursement policies of government and third-party payors, such as insurance companies, health maintenance organizations
and other plan administrators.
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Physicians,
participants, third-party payors or the medical community in general may be unwilling to accept, utilize or recommend, and in
the case of third-party payors, cover payment for M-001 or any future product candidate. As a result, we are unable to predict
the extent of our future losses or the time required for us to achieve profitability, if at all. Even if we successfully develop
one or more products, we may not become profitable.
We
depend heavily on the success of our M-001. If we are unable to successfully complete our Phase 3 clinical trial for M-001 as
and when expected and obtain marketing approvals for M-001, or if thereafter we fail to commercialize M-001 or experience significant
delays in doing so, our business will be materially harmed.
We
have invested a significant portion of our efforts and financial resources in the development of M-001. There remains significant
risk that we will fail to successfully develop M-001 for any indication. We do not expect to have top line data from our pivotal
clinical efficacy Phase 3 trial for M-001 available until the end of 2020. The timing of the availability of such top-line data
and the completion of our pivotal clinical efficacy Phase 3 trial is dependent in part on our ability to locate and enroll a sufficient
number of eligible participants in our pivotal clinical efficacy Phase 3 trial on a timely basis. A significant delay in enrolment
would result in delays to our development timeline and additional development costs beyond what we have budgeted. If we ultimately
obtain favorable results from our pivotal clinical efficacy Phase 3 trial of M-001, we will submit application(s) for marketing
approval for M-001.
We
may experience numerous unforeseen events during, or as a result of, our Phase 3 clinical trial of M-001, that could delay or
prevent our ability to receive marketing approvals to commercialize M-001, including:
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Possible
negative or inconclusive results, compelling us to conduct additional clinical trials or abandon product development programs;
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Slower
or insufficient enrolment rate of trial participants than anticipated;
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Higher
dropout rate of trial participants than anticipated;
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Our
third party contactors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely
manner;
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Regulators,
institutional review board or independent ethics committees may not authorize us or our investigators to commence a clinical
trial or conduct a clinical trial at a prospective trial site, or may require that we or our investigators suspend or terminate
clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants
are being exposed to unacceptable health risks;
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The
cost of clinical trials of our product candidate may be greater than we anticipate;
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The
supply or quality of our product candidate or other materials necessary to conduct clinical trials may be insufficient or
inadequate; and
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Our
M-001 may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators,
institutional review board or independent ethics committees to suspend or terminate the trial(s).
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The
naturally occurring influenza attack rate may be lower than anticipated, thereby compelling us to increase the number of trial
participants and/or extend the trial to an additional season, as per our flexible enrollment trial protocol design.
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We
may not develop additional product candidates other than M-001.
M-001
is our only product candidate in development. Other than M-001, we may not develop additional product candidates based on our
research and know-how and we may never attempt to develop other peptide-based products. As a result, our business and future success
depends on our ability to obtain regulatory approval of and then successfully commercialize M-001.
We
may never receive FDA regulatory approval for the performance of Phase 3 clinical trials in the U.S.
We
have entered into a pivotal clinical efficacy phase 3 trial in Europe and a clinical trial agreement with NIAID, for a Phase 2
clinical trial in the U.S. using M-001, for which the first participants were enrolled in 2018. We intend, subject to the successful
results of our Phase 3 clinical trial in Europe, to enter into discussions with the FDA, regarding market approval of M-001 in
the U.S., and to comply with the applicable requirements. Although we believe that the previous approved preclinical and clinical
trials we performed will serve as an adequate basis for future FDA regulated clinical trials in the U.S., we may not receive FDA
approval to conduct Phase 3 clinical trials in the U.S. Failure to receive FDA approval to conduct Phase 3 clinical trials in
the U.S. will materially reduce our target market and the future profitability of M-001, may have a material adverse effect on
our business and could potentially cause us to cease operations. It is also possible that we may decide or that the FDA may require
that we conduct further clinical trials, provide additional data and information, and meet additional standards for receipt of
approval. If this were to occur, the time and financial resources required for obtaining FDA approval for Phase 3 clinical trials,
and complications and risks associated therewith, would likely substantially increase. Moreover, while receipt of clinical trial
approval by the FDA does not ensure the receipt of clinical trial approval in other countries, failure or delay in obtaining clinical
trial approval by the FDA may have a negative effect on the regulatory process in other countries. Any failure or any delay or
setback in obtaining clinical trial approval in the U.S. or in other countries would impair our ability to develop and commercialize
M-001.
M-001
is subject to extensive regulation and may never obtain regulatory approval.
M-001
must satisfy rigorous standards of safety and efficacy before it can be approved for commercial use by the FDA or foreign regulatory
authorities for all or any of the indications for which it has undergone or is planned to undergo testing. The FDA and foreign
regulatory authorities have full discretion over this approval process. We may need to conduct significant additional research,
including testing in animals and in humans, before we can file applications for product approval. Typically, in the pharmaceutical
industry, there is a high rate of attrition for product candidates in preclinical testing and clinical trials. Satisfying FDA
and foreign regulatory requirements typically takes many years, is dependent upon the type, complexity and novelty of the product
and requires the expenditure of substantial resources. Success in preclinical testing and early clinical trials does not ensure
that later clinical trials will be successful. For example, a number of companies in the pharmaceutical industry have suffered
significant setbacks in advanced clinical trials, even after promising results in earlier trials. In addition, delays or rejections
may be encountered based upon additional government regulation, including any changes in legislation or EMA, FDA or foreign regulatory
policy, during the process of product development, clinical trials and regulatory reviews. Failure to obtain EMA, FDA or foreign
regulatory approval of M-001 in a timely manner or at all will severely undermine our business by delaying or halting commercialization
of our products, imposing costly procedures, diminishing competitive advantages and reducing the number of saleable products and,
therefore, corresponding product revenues.
M-001
and any product candidate we may develop in the future will remain subject to ongoing regulatory requirements even if we receive
regulatory approval to market such product, and if we fail to comply with such requirements, we may not obtain such approvals
or could lose those approvals that have been obtained, and the sales of any approved commercial products could be suspended.
Even
if we receive regulatory approval to market M-001 and/or other product candidates, any such product will remain subject to extensive
regulatory requirements, including requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage,
advertising, promotion, distribution and record keeping. Even if regulatory approval of a product is granted, the approval may
be subject to limitations on the uses for which the product may be marketed or the conditions of approval, or may contain requirements
for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product, which could negatively impact
us or our collaboration partners by reducing revenues or increasing expenses, and cause the approved product candidate not to
be commercially viable. In addition, as clinical experience with a drug expands after approval, typically because it is used by
a greater number and more diverse group of people after approval than during clinical trials, side effects and other problems
may be observed over time after approval that were not seen or anticipated during pre-approval clinical trials or other studies.
Any adverse effects observed after the approval and marketing of a product candidate could result in limitations on the use of,
withdrawal of FDA or foreign regulatory approval or withdrawal of any approved products from the marketplace. Absence of long-term
safety data may also limit the approved uses of our products, if any. If we fail to comply with the regulatory requirements of
the FDA and other applicable U.S. and foreign regulatory authorities, or previously unknown problems with any approved commercial
products, manufacturers or manufacturing processes are discovered, we could be subject to administrative or judicially imposed
sanctions or other setbacks, including, without limitation, the following:
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suspension
or imposition of restrictions on the products, manufacturers or manufacturing processes, including costly new manufacturing
requirements;
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civil
or criminal penalties, fines and/or injunctions;
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product
seizures or detentions;
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import
or export bans or restrictions;
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voluntary
or mandatory product recalls and related publicity requirements;
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suspension
or withdrawal of regulatory approvals;
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total
or partial suspension of production; and
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refusal
to approve pending applications for marketing approval of new products or supplements to approved applications.
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If
we or our collaborators are slow to adapt, or are unable to adapt, to changes in existing regulatory requirements or adoption
of new regulatory requirements or policies, marketing approval for our product candidates may be lost or cease to be achievable,
resulting in decreased revenue from milestones, product sales or royalties, which would have a material adverse effect on our
business, financial condition or results of operations.
If
clinical trials for M-001 are prolonged or delayed, we would be unable to commercialize our M-001 on a timely basis, which would
require us to incur additional costs and delay our receipt of any revenues from potential M-001 sales.
We
cannot predict whether we will encounter problems with any of our completed, ongoing or planned clinical trials that will cause
us or any regulatory authority to delay or suspend those clinical trials or delay the analysis of data derived from them. A number
of events, including any of the following, could delay the completion of our ongoing and planned clinical trials and negatively
impact our ability to obtain regulatory approval for, and to market and sell, a particular product candidate:
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conditions
imposed on us by the FDA or any applicable foreign regulatory authority regarding the scope or design of our clinical trials;
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delays
in recruiting and enrolling participants or volunteers into clinical trials;
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delays
in obtaining, or our inability to obtain, required approvals from institutional review boards or other reviewing entities
at clinical sites selected for participation in our clinical trials;
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insufficient
supply or deficient quality of our product candidates or other materials necessary to conduct our clinical trials;
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lower
than anticipated retention rate of subjects and participants in clinical trials;
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negative
or inconclusive results from clinical trials, or results that are inconsistent with earlier results, that necessitate additional
clinical studies;
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serious
and unexpected drug-related side effects experienced by subjects and participants in clinical trials; or
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failure
of our third-party contractors to comply with regulatory requirements or otherwise meet their contractual obligations to us
in a timely manner.
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Clinical
trials require sufficient participant enrollment, which is a function of many factors, including the size of the participant population,
the nature of the trial protocol, the proximity of participants to clinical sites, the availability of effective treatments for
the relevant disease and the eligibility criteria for the clinical trial. Delays in participant enrollment can result in increased
costs and longer development times. The failure to enroll participants in a clinical trial could delay the completion of the clinical
trial beyond our current expectations. In addition, the FDA or foreign applicable regulatory authorities could require us to conduct
clinical trials with a larger number of subjects than we have projected for any of our product candidates. We may not be able
to enroll a sufficient number of participants in a timely or cost-effective manner. Furthermore, enrolled participants may drop
out of clinical trials, which could impair the validity or statistical significance of those clinical trials.
Prior
to commencing clinical trials in the United States, we must submit an IND application to the FDA and the IND application must
become effective.
We
do not know whether additional clinical trials will begin as planned, will need to be restructured or will be completed on schedule,
if at all. Delays in our clinical trials will result in increased development costs for M-001. In addition, if our clinical trials
are delayed, our competitors may be able to bring products to market before we do and the commercial viability of M-001 or any
other future candidates could be limited.
Clinical
trials are very expensive, time-consuming and difficult to design and implement, and, as a result, we may suffer delays or suspensions
in future trials which would have a material adverse effect on our ability to generate revenues
Human
clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory
requirements. Regulatory authorities, such as the EMA and FDA, may preclude clinical trials from proceeding. Additionally, the
clinical trial process is time-consuming, failure can occur at any stage of the trials and we may encounter problems that cause
us to abandon or repeat clinical trials. The commencement and completion of clinical trials may be delayed by several factors,
including:
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unforeseen
safety issues;
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determination
of proper dosing;
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lack
of effectiveness or efficacy during clinical trials;
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failure
of our contract manufacturers or inability of our in-house facility to manufacture our product candidates in accordance with
cGMP;
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failure
of third party suppliers to perform final manufacturing steps for the drug substance;
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slower
than expected rates of participant recruitment and enrollment;
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lack
of healthy volunteers and participants to conduct trials;
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inability
to monitor participants adequately during or after treatment;
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failure
of third party contract research organizations to properly implement or monitor the clinical trial protocols;
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failure
of the FDA, institutional review boards, or IRBs, or other regulatory bodies to approve our clinical trial protocols;
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inability
or unwillingness of medical investigators and IRBs to follow our clinical trial protocols; and
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lack
of sufficient funding to finance the clinical trials.
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In
addition, we or regulatory authorities may suspend our clinical trials at any time if it appears that we are exposing participants
to unacceptable health risks or if the regulatory authorities find deficiencies in our regulatory submissions or the conduct of
these trials. Any suspension of clinical trials will delay possible regulatory approval, if any, and adversely impact our ability
to develop products and generate revenue.
Specifically,
we are conducting a phase 3 clinical trial in Europe. If we fail to meet the obligations and planned time table for the performance
of this trial, either due to delays caused by factors that are not in our control or that are caused by third parties, we may
suffer delays in the commencement of the second cohort of the clinical trial. In addition, other factors, such as delays in the
construction of the mid-sized manufacturing facility and the manufacturing of M-001 batches for the clinical trial, may also delay
or jeopardize the completion of the planned clinical trial.
Although
we are currently conducting a Phase 3 clinical trial in Europe, we have never conducted a Phase 3 clinical trial in the U.S.,
and may be unable to do so for M-001 or any other future product candidates we may develop.
We
have never conducted a Phase 3 clinical trial in the U.S, but we are currently conducting a clinical trial in Europe.
The
submission of a successful clinical trial plan, or IND application, and conducting of later-stage clinical trials are complicated
processes. As an organization, we have conducted only Phase 1 and Phase 2 clinical trials in Israel in accordance with Israeli
Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable Israeli legislation,
and a Phase 2b clinical trial in Europe, as part of the UNISEC consortium, and we are currently in the process of conducting a
pivotal clinical efficacy phase 3 trial in Europe. We also have had limited interactions with the FDA and have not discussed our
proposed future Phase 3 clinical trial designs or implementation with the FDA. Consequently, we may be unable to successfully
and efficiently execute and complete our planned and ongoing clinical trials in a way that leads to the approval of Phase 3 clinical
trials for M-001 in the U.S. We may require more time and incur greater costs than our competitors and may not succeed in obtaining
regulatory approvals of M-001. Failure to commence or complete, or delays in our planned clinical trials, would prevent us from
or delay us in developing and commercializing M-001 or any other product candidate we are developing.
We
may be forced to abandon development of M-001 altogether, which will significantly impair our ability to generate product revenues.
The
results of any clinical trial may not meet any or all of the trial’s endpoints. Further, success in preclinical testing
and early clinical trials does not ensure that later clinical trials will be successful, and the results of later clinical trials
may not replicate the results of prior clinical trials and preclinical testing. The clinical trial process may fail to demonstrate
that M-001 is safe for humans and effective for indicated uses. Any such failure may cause us to abandon M-001 and may delay development
of other product candidates. Any delay in, or termination or suspension of, our clinical trials will delay the requisite filings
with the relevant foreign regulatory authorities and, ultimately, our ability to commercialize M-001 and generate product revenues.
If the clinical trials do not support our drug product claims, the completion of development of M-001 may be significantly delayed
or abandoned, which would materially adversely affect our business, financial condition or results of operations.
Positive
results in the previous clinical trials of M-001 may not be replicated in future clinical trials, which could result in development
delays or a failure to obtain marketing approval.
Positive
results in the previous clinical trials of M-001 may not be predictive of similar results in future clinical trials. Also, interim
results during a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biopharmaceutical
industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in early-stage
development. Accordingly, the results from the completed preclinical studies and clinical trials for M-001 may not be predictive
of the results we may obtain in later stage trials. Our clinical trials may produce negative or inconclusive results, and we may
decide, or regulators may require us, to conduct additional clinical trials. Moreover, clinical data are often susceptible to
varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical
studies and clinical trials have nonetheless failed to obtain FDA or European Medicines Agency, or other applicable regulatory
agency, approval for their products.
If
we experience delays in the enrollment of participants in our clinical trials, our receipt of necessary regulatory approvals could
be delayed or prevented.
We
may not be able to initiate or continue clinical trials for M-001 or any future product candidate. Although we have succeeded
in enrolling cohort 1 of our Phase 3 clinical trial in Europe, we will have to enroll additional participants for our cohort 2.
Participant enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size
and nature of the population eligible to participate, the proximity of potential participants to clinical sites, the eligibility
criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and participants’
perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new
drugs that may be approved for the indications we are investigating. If we fail to enroll and maintain the number of participants
for which the clinical trial was designed, the statistical power of that clinical trial may be reduced, which would make it harder
to demonstrate that the product candidate being tested in such clinical trial is safe and effective. Additionally, enrollment
delays in our clinical trials may result in increased development costs for M-001 and any future product candidate, which would
cause our value to decline and limit our ability to obtain additional financing. Our inability to enroll a sufficient number of
participants for any of our current or future clinical trials would result in significant delays or may require us to abandon
one or more clinical trials altogether.
If
we are not successful in discovering, developing and commercializing additional product candidates, our ability to expand our
business and achieve our strategic objectives may be impaired.
Although
all of our efforts to date have been, and a substantial amount of our efforts in the future are expected to be focused on the
development of M-001, another possible future element of our strategy may include identifying and testing additional compounds
that are optimized for peptide-based products. Research programs designed to identify additional product candidates require substantial
technical, financial and human resources, whether or not any product candidates are ultimately identified. Our research programs
may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development
or commercialization for many reasons, including the following:
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the
research methodology used may not be successful in identifying potential product candidates;
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competitors
may develop alternatives that render our product candidates obsolete;
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a
product candidate may, on further study, be shown to have harmful side effects or other characteristics that indicate it is
unlikely to be effective or otherwise does not meet applicable regulatory criteria;
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a
product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and
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a
product candidate may not be accepted as safe and effective by regulatory authorities, participants, the medical community
or third-party payors.
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If
we are unable to identify suitable compounds for preclinical and clinical development, we may not be able to obtain sufficient
product revenues in future periods, which likely would result in significant harm to our financial position and adversely impact
the ADS price.
Reimbursement
may not be available for M-001 (if and when approved for commercial sale) or any future product candidates, which could make it
difficult for us to sell such products profitably.
Market
acceptance and sales of M-001 or any future product candidate will depend on coverage and reimbursement policies and may be affected
by healthcare reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance
organizations, decide which products they will pay for and establish reimbursement levels. We cannot be sure that coverage and
reimbursement will be available for our products. We also cannot be sure that the amount of reimbursement available, if any, will
not reduce the demand for, or the price of, our products. If reimbursement is not available or is available only at limited levels,
we may not be able to successfully compete through sales of our proposed products.
We
are subject to extensive and costly government regulation.
The
product we are developing is, and any products we may develop in the future will be, subject to extensive and rigorous domestic
government regulation, including with respect to Israel, regulation by the Israeli Ministry of Health, and with respect to the
U.S., regulation by the FDA, the CMS, other divisions of the U.S. Department of Health and Human Services, including its Office
of Inspector General, the U.S. Department of Justice, the Departments of Defense and Veterans Affairs and, to the extent our products
are paid for directly or indirectly by those departments, state and local governments and their respective foreign equivalents.
The FDA regulates the research, development, preclinical and clinical testing, manufacture, safety, effectiveness, record keeping,
reporting, labeling, storage, approval, advertising, promotion, sale, distribution, import and export of pharmaceutical products
under various regulatory provisions. M-001 or any product candidates we may develop, which will be tested and marketed abroad,
will be subject to extensive regulation by foreign governments, whether or not we have obtained the Israeli Ministry of Health’s
approval and/or FDA approval for M-001 or any other given product and its uses. Such foreign regulation may be equally or more
demanding than corresponding Israeli or U.S. regulation.
Government
regulation substantially increases the cost and risk of researching, developing, manufacturing, and selling products. Our failure
to comply with these regulations could result in, by way of example, significant fines, criminal and civil liability, product
seizures, recalls, withdrawals, withdrawals of approvals, and exclusion and debarment from government programs. Any of these actions,
including the inability of our proposed products to obtain and maintain regulatory approval, would have a materially adverse effect
on our business, financial condition, results of operations and prospects.
Changes
in regulatory requirements and guidance or unanticipated events during our clinical trials may occur, which may result in necessary
changes to clinical trial protocols, which could result in increased costs to us, delay our development timeline or reduce the
likelihood of successful completion of our clinical trials.
Changes
in regulatory requirements and guidance or unanticipated events during our clinical trials may occur, as a result of which we
may need to amend clinical trial protocols. Amendments may require us to resubmit our clinical trial protocols to IRBs for review
and approval, which may adversely affect the cost, timing and successful completion of a clinical trial. If we experience delays
in the completion of, or if we terminate, any of our clinical trials, the commercial prospects for any affected product candidate
would be harmed and our ability to generate product revenue would be delayed, possibly materially.
If
we acquire or license additional technologies or product candidates, we may incur a number of additional costs, have integration
difficulties and/or experience other risks that could harm our business and results of operations.
We
may acquire and in-license additional product candidates and technologies. Any product candidate or technologies we in-license
or acquire will likely require additional development efforts prior to commercial sale, including extensive preclinical or clinical
testing, or both, and approval by the FDA and applicable foreign regulatory authorities, if any. All product candidates are prone
to risks of failure inherent in pharmaceutical product development, including the possibility that the product candidate or product
developed based on in-licensed technology will not be shown to be sufficiently safe and effective for approval by regulatory authorities.
In addition, we cannot assure you that any product candidate that we develop based on acquired or licensed technology that is
granted regulatory approval will be manufactured or produced economically, successfully commercialized or widely accepted or competitive
in the marketplace. Moreover, integrating any newly acquired or in-licensed product candidates could be expensive and time-consuming.
If we cannot effectively manage these aspects of our business strategy, our business may not succeed.
Risks
Related to Our Business and Industry
We
are a clinical stage biopharmaceutical company with no approved products, which makes it difficult to assess our future viability.
We
are a clinical stage biopharmaceutical company with a limited operating history. We have not yet demonstrated an ability to successfully
overcome many of the risks and uncertainties frequently encountered by companies in rapidly evolving fields, particularly in the
pharmaceutical area. For example, to execute our business plan, we will need to successfully:
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execute
product candidate development activities;
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obtain
required FDA and applicable foreign regulatory approvals for the development and commercialization of any product candidate;
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maintain,
leverage and expand our intellectual property portfolio;
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build
and maintain robust sales, distribution and marketing capabilities, either on our own or in collaboration with strategic partners;
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gain
market acceptance for our products;
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develop
and maintain any strategic relationships we elect to enter into; and
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manage
our spending as costs and expenses increase due to drug discovery, preclinical development, clinical trials, regulatory approvals
and commercialization.
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If
we are unsuccessful in accomplishing these objectives, we may not be able to develop product candidates, raise capital, expand
our business or continue our operations.
The
members of our management team and certain consultants are important to the efficient and effective operation of our business,
and we may need to add and retain additional leading experts. Failure to retain our management and consulting team and add additional
leading experts could have a material adverse effect on our business, financial condition or results of operations.
Our
executive officers, our management team and technical personnel, as well as certain consultants, are important to the efficient
and effective operation of our business, particularly Dr. Ron Babecoff, our Chief Executive Officer, and Dr. Tamar Ben-Yedidia,
our Chief Scientific Officer. Our failure to retain the personnel that have developed much of the technology we utilize today,
or any other key management and technical personnel, could have a material adverse effect on our future operations. Our success
is also dependent on our ability to attract, retain and motivate highly trained technical, and management personnel, among others,
to continue the development and commercialization of our current and future products.
We
face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer
and we may never be profitable.
We
will compete against fully integrated pharmaceutical and biopharmaceutical companies and smaller companies that are collaborating
with pharmaceutical companies, academic institutions, government agencies and other public and private research organizations.
In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and
development programs than we do, and have substantially greater financial resources than we do, as well as significantly greater
experience in:
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developing
immuno-modulating products (including vaccines);
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undertaking
preclinical testing and human clinical trials;
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obtaining
FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals of drugs;
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formulating
and manufacturing drugs; and
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launching,
marketing and selling drugs.
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Generally,
our competitors currently include large fully integrated pharmaceutical companies such as Sanofi-Pasteur, GlaxoSmithKline, Seqirus
(Ex bioCSL and Novartis flu vaccines), AstraZeneca and Abbott (Solvay) as well as companies and academic research institutes in
various developmental stages attempting to develop improved influenza vaccines, such as Imutex, AltImmune, Inovio Pharmaceuticals,
Inc., FluGen, Inc., Medicago, Vivaldi Biosciences, Vaccitech, and Vaxart. If our competitors develop and commercialize products
faster than we do, or develop and commercialize products that are superior to our product candidates, our commercial opportunities
will be reduced or eliminated. Our competitors may succeed in developing and commercializing products earlier and obtaining regulatory
approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors may also develop products or
technologies that are superior to those we are developing, and render our product candidate obsolete or non-competitive. If we
cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.
The
extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond
our control. Competition in the biotechnology and biopharmaceutical industry is intense and has been accentuated by the rapid
pace of technology development. Our competitors also compete with us to:
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attract
parties for acquisitions, joint ventures or other collaborations;
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license
proprietary technology that is competitive with M-001;
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attract
and hire scientific talent and other qualified personnel.
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We
may be subject to legal proceedings and/or to product liability lawsuits.
We
could incur substantial costs in connection with product liability claims relating to our current or potential product candidates.
We may incur substantial liabilities and may be required to limit commercialization of our products in response to product liability
lawsuits, which may result in substantial losses.
M-001
or any future product candidate could cause adverse events, including injury, disease or adverse side effects. These adverse events
may not be observed in clinical trials, but may nonetheless occur in the future. If any of these adverse events occur, they may
render M-001 or any future product candidate ineffective or harmful in some participants, and any future sales would suffer, materially
adversely affecting our business, financial condition and results of operations.
In
addition, potential adverse events caused by M-001 or any future product candidate could lead to product liability lawsuits. If
product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may be required to limit
the marketing and commercialization of any future product. Our business exposes us to potential product liability risks, which
are inherent in the testing, manufacturing, marketing and sale of pharmaceutical products. We may not be able to avoid product
liability claims. For example, changes in laws outside the U.S. are expanding our potential liability for injuries that occur
during clinical trials. Product liability insurance is expensive, subject to deductibles and coverage limitations, and may not
be available in the amounts that we desire for a price we are willing to pay. Product liability insurance for the pharmaceutical
and biotechnology industries is generally expensive, if available at all. If, at any time, we are unable to obtain sufficient
insurance coverage on reasonable terms or to otherwise protect against potential product liability claims, we may be unable to
clinically test, market or commercialize our product candidate. A successful product liability claim brought against us in excess
of our insurance coverage, if any, may cause us to incur substantial liabilities, and, as a result, our business, liquidity and
results of operations would be materially adversely affected. In addition, the existence of a product liability claim could affect
the market price of the ADSs.
If
our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider
trading, our business may experience serious adverse consequences.
We
are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures: to
comply with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established,
to comply with federal and state health-care fraud and abuse laws and regulations, to report financial information or data accurately
or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry
are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission,
customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information
obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. Our
board of directors adopted a Code of Ethics. However, it is not always possible to identify and deter employee misconduct, and
the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or
losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance
with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves
or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant
fines or other sanctions.
In
addition, during the course of our operations, our directors, executives and employees may have access to material, non-public
information regarding our business, our results of operations or potential transactions we are considering. If a director, executive
or employee was to be investigated, or an action was to be brought against a director, executive or employee for insider trading,
it could have a negative impact on our reputation and the market price of the ADSs. Such a claim, with or without merit, could
also result in substantial expenditures of time and money, and divert attention of our management team from other tasks important
to the success of our business.
We
may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect
on our business, results of operations and financial condition.
We
may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth,
including potentially rapid and substantial growth, which will result in an increase in the level of responsibility for management
personnel and place a strain on our human and capital resources. To manage growth effectively, we will be required to continue
to implement and improve our operating and financial systems and controls to expand, train and manage our employee base. Our ability
to manage our operations and growth effectively will require us to continue to expend funds to enhance our operational, financial
and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable
to scale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies
in existing systems and controls, then we will not be able to successfully commercialize our product candidate or future products.
Failure to attract and retain sufficient talented personnel will further strain our human resources and could impede our growth
or result in ineffective growth. Moreover, the management, systems and controls currently in place or to be implemented may not
be adequate for such growth, and the steps we have taken to hire personnel and to improve such systems and controls might not
be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on our business, results
of operations and financial condition.
If
we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately
insured loss or damage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely
affected if we experience difficulty in obtaining adequate directors’ and officers’ liability insurance.
Our
business will expose us to potential liability that results from risks associated with conducting clinical trials of M-001 and
any future product candidate. We are currently conducting a Phase 3 clinical trial in several countries in Europe. The clinical
trial liability insurance is subject in each country to local laws and ranges between $1,150 to $19,000 thousands per each country.
A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business,
prospects, financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained.
The current and planned insurance coverages may only mitigate a small portion of a substantial claim against us.
In
addition, we may be unable to maintain sufficient insurance as a public company to cover liability claims made against our officers
and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified
officers and directors to manage the Company.
Recent
disruptions in the financial markets and economic conditions could affect our ability to raise capital.
In
recent years, the U.S. and global economies suffered dramatic downturns as the result of a deterioration in the credit markets
and related financial crisis as well as a variety of other factors including, among other things, extreme volatility in security
prices, severely diminished liquidity and credit availability, ratings downgrades of certain investments and declining valuations
of others. The U.S. and certain foreign governments have taken unprecedented actions in an attempt to address and rectify these
extreme market and economic conditions by providing liquidity and stability to the financial markets. If the actions taken by
these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability
to raise capital, if needed, on a timely basis and on acceptable terms or at all.
Our
current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply
or adequately comply with federal securities laws, rules or regulations could subject us to fines or regulatory actions, which
may materially adversely affect our business, results of operations and financial condition.
Although
our ordinary shares were traded on the Tel Aviv Stock Exchange and we have filed public reports in Israel in the past, our current
management team has limited experience managing and operating a company publicly traded in the U.S. Failure to comply or adequately
comply with any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially
adversely affect our business, results of operation or financial condition and could result in delays in achieving the development
of an active and liquid trading market for the ADSs.
We
may be subject to extensive environmental, health and safety, and other laws and regulations in multiple jurisdictions.
Our
business involves the controlled use, directly or indirectly through our service providers, of hazardous materials, various biological
compounds and chemicals; therefore, we, our agents and our service providers may be 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. The
risk of accidental contamination or injury from these materials cannot be eliminated. If an accident, spill or release of any
regulated chemicals or substances occurs, we could be held liable for resulting damages, including for investigation, remediation
and monitoring of the contamination, including natural resource damages, the costs of which could be substantial. We are also
subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures,
exposure to blood-borne pathogens and the handling of biohazardous materials and chemicals. Although we maintain workers’
compensation insurance to cover the costs and expenses that may be incurred because of injuries to our employees resulting from
the use of these materials, this insurance may not provide adequate coverage against potential liabilities. Additional or more
stringent federal, state, local or foreign laws and regulations affecting our operations may be adopted in the future. We may
incur substantial capital costs and operating expenses and may be required to obtain consents to comply with any of these or certain
other laws or regulations and the terms and conditions of any permits or licenses required pursuant to such laws and regulations,
including costs to install new or updated pollution control equipment, modify our operations or perform other corrective actions
at our respective facilities or the facilities of our service providers. For instance, we have undergone inspections and obtained
approvals from various governmental agencies.
Governments
outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.
In
some countries, particularly the countries comprising the European Union, or the EU, the pricing of pharmaceuticals and certain
other therapeutics is subject to governmental control. In these countries, pricing negotiations with governmental authorities
can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval
in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate
to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is
set at unsatisfactory levels, our business could be harmed, possibly materially.
Risks
Related to Dependence on Third Parties
M-001
is based on an exclusive license from Yeda, and we could lose our rights to this license if a dispute with Yeda arises or if we
fail to comply with the financial and other terms of the license.
We
license our core intellectual property from Yeda under an exclusive license agreement, pursuant to which we received an exclusive
worldwide license for the development, manufacturing, use, marketing, sale, distribution and importing of products that are directly
or indirectly based on certain patents and patent applications owned by Yeda and/or certain other intellectual property to be
developed by Yeda and related thereto. Pursuant to the terms of the license agreement, unless earlier terminated in accordance
with the provisions thereof, the license agreement will expire upon the later of: (i) the expiration date of the last patent licensed
thereunder; (ii) in the event only one product will be developed and/or commercialized by utilizing the licensed intellectual
property, 15 years from the date of first commercial sale of such product in either the U.S or Europe, following receipt of New
Drug Approval from the FDA or equivalent approval in any European country for such product; (iii) in the event that more than
one product will be developed and/or commercialized by utilizing the licensed intellectual property, following the receipt of
New Drug Approval from the FDA or equivalent approval in any European country for such product, the expiry of a 20 year period
during which there shall not have been a sale of any such products in either the U.S. or Europe. However, Yeda is entitled to
terminate the exclusivity rights or to terminate the license agreement with 30 days prior written notice to us if: (a) no commercial
sales of at least one product are initiated during six months after receipt of an FDA or similar regulatory approval for commercial
marketing; or (b) no sales of any products are reported for over a year after sales of a product have commenced. Yeda will also
be entitled to terminate the license agreement by written notice: (x) in the event we materially breach any of our obligations
under the agreement, provided that such material breach is un-curable or, if curable, is not cured by us within 30 days (or in
the case of failure by us to make payments due to Yeda in connection with the license agreement, 10 days) from receipt of notice
of such breach; or (y) in the event a temporary or permanent liquidator is appointed for our Company, a resolution is passed to
voluntarily wind up our Company, or an order or act is granted for the winding up of our Company, provided that if such order
or act was initiated by any third party, such order or act is not cancelled within 120 days; or (z) we contest the validity of
one of the patents registered by Yeda. Upon termination of the license agreement, other than in the case of expiration pursuant
to (i) through (iii) above, all rights and documents will be returned to Yeda, and we will be required to grant Yeda an exclusive
world-wide irrevocable license to our know-how and products which are based on the intellectual property licensed from Yeda or
that were discovered or occur or arise from the performance of our development work pursuant to the license agreement. In the
event that Yeda terminates the license agreement due to any reason other than (a), (b) or (x) through (z) above, we will be entitled
to receive royalty payments equal to 25% of the net proceeds received by Yeda from the grant to third parties, within the five
years following the termination of the license agreement, of a license or other rights which include our developments, up to the
aggregate amount of research funds actually expended by us for development. If Yeda terminates the license agreement, or licenses
to a third party the intellectual property licensed to us pursuant to the license agreement, or if any dispute arises with respect
to our arrangement with Yeda, such dispute may disrupt our operations and would likely have a material and adverse impact on us
if resolved in a manner that is unfavorable to us. Our current product candidate is based on the intellectual property licensed
under the license agreement, and if the license agreement is terminated prior to its expiration, it would have a material adverse
effect on our business, prospects and results of operations.
We
rely on third parties to conduct our clinical trials and those third parties may not perform satisfactorily, including failing
to meet deadlines for the completion of such trials
We
do not independently conduct our Phase 3 clinical trial of M-001 in Europe. We rely on third parties such as contract research
organizations, clinical data management organizations, medical institutions and clinical investigators, to perform this function.
We expect to continue to rely on such third parties in conducting our clinical trials of M-001, and expect to rely on these third
parties to conduct clinical trials of any other product candidate that we develop. Any of these third parties may terminate their
engagement with us at any time. If we need to enter into alternative arrangements, it would delay our product development activities.
Our
reliance on these third parties for clinical development activities reduces our control over these activities but does not relieve
us of our responsibilities. We remain responsible for ensuring that our clinical trial is conducted in accordance with the requirements
of the relevant regulator, and failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
Furthermore,
third parties that we rely on for our clinical development activities may also have relationships with other entities, some of
which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines
or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain,
or may be delayed in obtaining, marketing approvals for M-001. Our product development costs will increase if we experience delays
in testing or obtaining marketing approvals.
We
have entered into a finance contract with the European Investment Bank, or EIB, for the receipt of a loan of 20 million euros,
which was extended to 24 million euros as described in this prospectus, and into a security agreement and creation of a first
ranking floating charge over all assets of the Company in favor of EIB, and a breach of such finance contract or security agreement
may cause EIB to exercise the pledge and materialize certain of our assets.
We
entered into a finance contract, or the Finance Contract, with the European Investment Bank, or EIB, for the financing of up to
20 million euros, which was extended to 24 million euros as described in this prospectus, and up to 50% of the Company’s
expected cost of developing and marketing our product candidate, M-001. A description of the main provisions of the Finance Contract
is described in this prospectus. To the date of this prospectus, we have drawn down an amount of the loan equal to 20 million
euros.
We
have also entered into a security agreement, or the Security Agreement, whereby the Company created a first ranking floating charge
over all of our assets in favor of EIB, excluding assets and/or intellectual property rights subject to the license agreement
with YEDA Research and Development Company Limited. While intellectual property rights are excluded from the floating charge pledge,
any breach of the Finance Contract or the Security Agreement may cause the EIB to exercise the floating charge pledge and to materialize
certain of our assets at the time of such exercise.
Use
of third parties to manufacture our M-001 may increase the risk that we will not have sufficient quantities of M-001 at an acceptable
cost, which could delay, prevent or impair our development or commercialization efforts.
In August 2018, and
as planned, we relocated to our mid-sized manufacturing facility in Jerusalem, with potential capacity to annually produce up to
forty million doses of M-001 for Phase 3 clinical trial supply or commercial supply. Our production line is still under construction.
We currently rely on a third party CMO for the supply of M-001 until the completion of our independent production line.
Reliance
on a third party CMO entails risks, including:
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Reliance
on third party for regulatory compliance and quality assurance;
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The
possible breach of the manufacturing agreement by the third party;
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The
possible failure to manufacture sufficient quantities of M-001 due to reasons outside of the reasonable control of the third
party;
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The
possible misappropriation of our propriety information, including our know-how; and
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The
possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.
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Our
CMO may not be able to comply with current cGMP, regulations or similar regulatory requirements outside of the U.S. Our failure,
or the failure of our third party manufacturers to comply with applicable regulations could result in sanctions being imposed
on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures
or recalls of product candidate or product, operating restrictions and criminal prosecutions, any of which could significantly
and adversely affect supplies of our product candidates.
Failure
to complete the construction of our independent production line in our new facility, in a timely manner or at all, will prolong
our dependency on third parties for the manufacturing of M-001 and may result in insufficient quantities of M-001.
We
currently rely on our CMO in the U.S. for the supply of M-001 clinical batches for our current pivotal clinical efficacy Phase
3 clinical trial. In August 2018 we moved to our new facility in Jerusalem and we intend to complete the construction of our independent
production line of M-001 for the purpose of future clinical trials and commercialization by the end of 2021, subject to the successful
completion of the pivotal clinical efficacy Phase 3 trial we are currently conducting in Europe. If we fail to complete our production
line in a timely manner or at all, we will enter into agreements with CMOs or expand our existing agreement to manufacture M-001
for the purpose of conducting future clinical trials, as may be, and commercialization. If we fail to expand our existing manufacturing
agreement and/or enter into additional agreements, or if our partners do not manufacture adequate amounts of M-001 for reasons
that are not within our control, we may not possess adequate amounts of M-001 for our anticipated purposes. Insufficient amounts
of M-001 may cause delays in our clinical development and commercialization of M-001.
We
may not obtain the necessary materials for the performance of additional clinical trials in the U.S. or other countries around
the world.
Some
of our clinical trials involve obtaining materials and information that may not currently be in our possession and that we rely
on suppliers and manufacturers to provide. Specifically, we were not able to satisfy the FDA’s request for information regarding
the H5N1 vaccine (including information as to manufacturing, dosage, formulation, etc.) required for our previously contemplated
Phase 2 clinical trial in the U.S., and as a result we elected to convert our IND application submitted in June 2013 into a Drug
Master File. It is possible that the FDA or any other relevant regulatory body will request us to provide other materials that
are not in our possession before approving any proposed Phase 3 clinical trials to test the safety and efficacy of M-001 for such
indication.
Risks
Related to Our Intellectual Property
If
we fail to adequately protect, enforce or secure rights to the patents which we own or that were licensed to us or any patents
we may own or license in the future, the value of our intellectual property rights would diminish and our business and competitive
position would suffer.
Our
success, competitive position and future revenues, if any, depend in part on our ability to obtain and successfully leverage intellectual
property covering our products and product candidates, know-how, methods, processes and other technologies, to protect our trade
secrets, to prevent others from using our intellectual property and to operate without infringing the intellectual property rights
of third parties.
The
risks and uncertainties that we face with respect to our intellectual property rights include, but are not limited to, the following:
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the
degree and range of protection any patents will afford us against competitors;
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the
patents concerning our business activities were not registered in all countries and therefore our patent protection may be
lacking in some territories;
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if
and when patents will be issued;
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whether
or not others will obtain patents claiming aspects similar to those covered by our own or licensed patents and patent applications;
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we
may be subject to interference proceedings;
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we
may be subject to opposition or post-grant proceedings in foreign countries;
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any
patents that are issued may not provide meaningful protection;
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we
may not be able to develop additional proprietary technologies that are patentable;
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other
companies may challenge patents licensed or issued to us or our customers;
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other
companies may independently develop similar or alternative technologies, or duplicate our technologies;
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other
companies may design around technologies we have licensed or developed;
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enforcement
of patents is complex, uncertain and expensive; and
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we
may need to initiate litigation or administrative proceedings that may be costly whether we win or lose.
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If
patent rights covering our products and methods are not sufficiently broad, they may not provide us with any protection against
competitors with similar products and technologies. Furthermore, if the United States Patent and Trademark Office, or the USPTO,
or any foreign patent office issue patents to us or our licensors, others may challenge the patents or design around the patents,
or the patent office or the courts may invalidate the patents. Thus, any patents we own or license from or to third parties may
not provide any protection against our competitors.
We
cannot be certain that patents will be issued as a result of any pending applications, and we cannot be certain that any of our
issued patents or patents licensed from Yeda (or any other third-party in the future) will give us adequate protection from competing
products. For example, issued patents, including the patents licensed by us, may be circumvented or challenged, declared invalid
or unenforceable, or narrowed in scope.
In
addition, since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot
be certain that we were the first to make our inventions or to file patent applications covering those inventions.
It
is also possible that others may obtain issued patents that could prevent us from commercializing our products or require us to
obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to those
patents that we have licensed, our rights depend on maintaining our obligations to the licensor under the applicable license agreement,
and we may be unable to do so.
In
addition to patents and patent applications, we depend upon proprietary know-how to protect our proprietary technology. We require
our employees, consultants, advisors and collaborators to enter into confidentiality agreements that prohibit the disclosure of
confidential information to any other parties. We also require our employees and consultants to disclose and assign to us their
ideas, developments, discoveries and inventions. These agreements may not, however, provide adequate protection for our know-how
or other proprietary information in the event of any unauthorized use or disclosure.
Obtaining
and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance
with these requirements.
Periodic
maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime
of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,
fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be
cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance
can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights
in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application
include, but are not limited to, failure to respond to office actions within prescribed time limits, non-payment of fees and failure
to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would
have a material adverse effect on our business.
Costly
litigation may be necessary to protect our intellectual property rights and we may be subject to claims alleging the violation
of the intellectual property rights of others.
We
may face significant expense and liability as a result of litigation or other proceedings relating to patents and other intellectual
property rights of others. In the event that another party has also filed a patent application or been issued a patent relating
to an invention or technology claimed by us in pending applications, we may be required to participate in an interference proceeding
declared by the USPTO to determine priority of invention, which could result in substantial uncertainties and costs for us, even
if the eventual outcome is favorable to us. We, or our licensors, also could be required to participate in interference proceedings
involving issued patents and pending applications of another entity. An adverse outcome in an interference proceeding could require
us to cease using the technology or to license rights from prevailing third parties.
The
cost to us of any patent litigation or other proceeding relating to our licensed patents or patent applications, even if resolved
in our favor, could be substantial and could divert management’s resources and attention. Our ability to enforce our patent
protection could be limited by our financial resources, and may be subject to lengthy delays. A third party may claim that we
are using inventions claimed by their patents and may go to court to stop us from engaging in our normal operations and activities,
such as research, development and the sale of any future products. Such lawsuits are expensive and would consume time and other
resources. There is a risk that a court will decide that we are infringing the third party’s patents and will order us to
stop the activities claimed by the patents, redesign our products or processes to avoid infringement or obtain licenses (which
may not be available on commercially reasonable terms or at all). In addition, there is a risk that a court will order us to pay
the other party damages for having infringed their patents.
Moreover,
there is no guarantee that any prevailing patent owner would offer us a license so that we could continue to engage in activities
claimed by the patent, or that such a license, if made available to us, could be acquired on commercially acceptable terms. In
addition, third parties may, in the future, assert other intellectual property infringement claims against us with respect to
our product candidate, technologies or other matters. Any claims of infringement asserted against us, whether or not successful,
may have a material adverse effect on us.
We
rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties
using our intellectual property to compete against us.
Although
we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the
non-disclosure of confidential information to third parties, as well as agreements that purport to require the disclosure and
assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees and consultants while we
employ them, the agreements can be difficult and costly to enforce. Although we seek to enter into these types of agreements with
our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize or independently
develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights
associated with M-001 or any future product candidates. If a dispute arises, a court may determine that the right belongs to a
third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary
know-how that we seek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors
or others. Despite the protective measures we employ, we still face the risk that:
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these
agreements may be breached;
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these
agreements may not provide adequate remedies for the applicable type of breach;
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our
proprietary know-how will otherwise become known; or
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our
competitors will independently develop similar technology or proprietary information.
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International
patent protection is particularly uncertain, and if we are involved in opposition proceedings in foreign countries, we may have
to expend substantial sums and management resources.
Patent
law outside the United States may be different than in the United States. Further, the laws of some foreign countries, such as
China where certain patents owned or licensed by us were granted, may not protect our intellectual property rights to the same
extent as the laws of the United States, if at all. A failure to obtain sufficient intellectual property protection in any foreign
country could materially and adversely affect our business, results of operations and future prospects. Moreover, we may participate
in opposition proceedings to determine the validity of our foreign patents or our competitors’ foreign patents, which could
result in substantial costs and divert management’s resources and attention. Additionally, due to uncertainty in patent
protection law, we have not filed patent applications in many countries where significant markets exist.
Intellectual
property rights do not necessarily address all potential threats to our competitive advantage.
The
degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have
limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples
are illustrative:
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others
may be able to make compounds that are the same as or similar to M-001 or any future product candidate but that are not covered
by the claims of the patents that we own or have exclusively licensed;
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we
or our licensors or any future strategic partners might not have been the first to make the inventions covered by the issued
patent or pending patent application that we own or have exclusively licensed;
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we
or our licensors or any future strategic partners might not have been the first to file patent applications covering certain
of our inventions;
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others
may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our
intellectual property rights;
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it
is possible that our pending patent applications will not lead to issued patents;
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issued
patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid
or unenforceable, as a result of legal challenges by our competitors;
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our
competitors might conduct research and development activities in countries where we do not have patent rights and then use
the information learned from such activities to develop competitive products for sale in our major commercial markets;
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we
may not develop additional proprietary technologies that are patentable; and
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the
patents of others may have an adverse effect on our business.
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We
may be subject to claims challenging the inventorship of our patents and other intellectual property.
We
may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other
intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations
of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against
these and other claims challenging inventorship. If we fail in defending any such claims, in addition to paying monetary damages,
we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property.
Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims,
litigation could result in substantial costs and be a distraction to management and other employees. In addition, the Israeli
Supreme Court ruled in 2012 that an employee who receives a patent or contributes to an invention during his employment may be
allowed to seek compensation for such contributions from his or her employer, even if the employee’s contract of employment
specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The Israeli Supreme
Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation, does not rule out
the right of the employee to claim their right for royalties. As a result, it is unclear whether and, if so, to what extent our
employees may be able to claim compensation with respect to our future revenue. We may receive less revenue from future products
if any of our employees successfully claim for compensation for their work in developing our intellectual property, which in turn
could impact our future profitability.
Risks
Related to Our Operations in Israel
Potential
political, economic and military instability in the State of Israel, where our senior management, our head executive office, research
and development, and manufacturing facilities are located, may adversely affect our results of operations.
Our
head executive office, our research and development facilities, our current manufacturing facility, as well as some of our clinical
sites are located in Israel. Our officers and most of our directors are residents of Israel. Accordingly, political, economic
and military conditions in Israel and the surrounding region may directly affect our business and operations. Since the establishment
of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries. Any
hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely
affect our operations and results of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed
conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party. In December 2008, January 2009, November
2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas, the Palestinian Authority and/or
other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted
in missiles being fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding
Jerusalem. These conflicts involved missile strikes against civilian targets in various parts of Israel, including areas in which
our employees and some of our consultants are located, and negatively affected business conditions in Israel. Our offices and
laboratory, located in Jerusalem, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities
and towns from Gaza sporadically since 2006, with escalations in violence during which there were a substantially larger number
of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and
an increase in terrorist activity in the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence
included protests throughout Egypt, and the appointment of a military regime in his stead, followed by the elections to parliament
which brought groups affiliated with the Muslim Brotherhood (which had been previously outlawed by Egypt), and the subsequent
overthrow of this elected government by a military regime. Such political turbulence and violence may damage peaceful and diplomatic
relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has
occurred in other countries in the region, including Syria which shares a common border with Israel, and is affecting the political
stability of those countries. Since April 2011, internal conflict in Syria has escalated, and evidence indicates that chemical
weapons have been used in the region. This instability and intervention by third parties such as Russia may lead to deterioration
of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the
potential for causing additional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed
to be developing nuclear weapons. Iran is also believed to have a strong influence among extremist groups in the region, such
as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, a violent jihadist group named
Islamic State of Iraq and the Levant (known as ISIS) is involved in hostilities in Iraq and Syria, and has executed terror attacks
in Europe and around the world. Although ISIS’s activities have not directly affected the political and economic conditions
in Israel, ISIS’s stated purpose is to take control of the Middle East, including Israel. These situations may potentially
escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political
instability in the region could adversely affect business conditions and could harm our results of operations and could make it
more difficult for us to raise capital. Parties with whom we do business may decline to travel to Israel during periods of heightened
unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face.
In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance
in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions
in such agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts.
Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies
may have an adverse impact on our operating results, financial condition or the expansion of our business.
Our
operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.
Many
Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until
they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event
of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods
of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future.
Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption
could materially adversely affect our business, financial condition and results of operations.
Investors
may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal
securities laws, against us, or our executive officers and directors or asserting U.S. securities laws claims in Israel.
None
of our directors or officers are residents of the United States, except for director Mark Germain. Director George Lowell is a
dual U.S. and Israel citizen. Most of our directors’ and officers’ assets and our assets are located outside the United
States. Service of process upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the
United States against us or our non-U.S. directors and executive officers may be difficult to obtain within the United States.
We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original
actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli
courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because
Israel may not be the most appropriate forum 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 proved as a fact, 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 addressing the matters described above. Israeli
courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against
us or our officers and directors.
Moreover,
among other reasons, including but not limited to, fraud or absence of due process, or the existence of a judgment which is at
variance with another judgment that was given in the same matter if a suit in the same matter between the same parties was pending
before a court or tribunal in Israel, an Israeli court will not enforce a foreign judgment if it was given in a state whose laws
do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases) or if its enforcement is likely
to prejudice the sovereignty or security of the State of Israel.
Under
applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent
our competitors from benefiting from the expertise of some of our former employees. In addition, employees may be entitled to
seek compensation for their inventions irrespective of their agreements with us, which in turn could impact our future profitability.
We
generally enter into non-competition agreements with our employees and key consultants. These agreements prohibit our employees
and key consultants, if they cease working for us, from competing directly with us or working for our competitors or clients for
a limited period of time. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees
work and it may be difficult for us to restrict our competitors from benefitting from the expertise our former employees or consultants
developed while working for us. For example, Israeli courts have required employers seeking to enforce non-compete undertakings
of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of
material interests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential
commercial information or the protection of its intellectual property. If we cannot demonstrate that such interests will be harmed,
we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our
ability to remain competitive may be diminished.
Your
rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights
and responsibilities of shareholders of U.S. corporations.
Since
we are incorporated under Israeli law, the rights and responsibilities of our shareholders 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
of U.S.-based corporations. In particular, a shareholder of an Israeli company, such as us, has a duty to act in good faith and
in a customary manner in exercising its rights and performing its obligations towards us and other shareholders and to refrain
from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,
such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related
party transactions that require shareholder approval. A shareholder also has a general duty to refrain from discriminating against
other shareholders. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine
the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder of ours or other power towards
us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. Since
Israeli corporate law underwent extensive revisions approximately 15 years ago, the parameters and implications of the provisions
that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to impose additional obligations
and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.
Provisions
of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a
change of control, even when the terms of such a transaction are favorable to us and our shareholders.
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, the holder of a majority of each class
of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer
receives 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), and the shareholders,
including those who indicated their acceptance of the tender offer, may, at any time within six months following the completion
of the tender offer, petition the court to alter the consideration for the acquisition (unless the acquirer stipulated in the
tender offer that a shareholder that accepts the offer may not seek appraisal rights).
Our
articles of association provide that our directors (other than external directors) are elected to terms, with only two or three
of our directors (other than external directors) to be elected each year, in each case for a term of three years. Our 2015 annual
general meeting approved the staggering and extension of the term of our board members. The staggering of the terms of our directors
prevents a potential acquirer from readily replacing our entire board of directors at a single annual general shareholder meeting.
This could prevent an acquirer from seeking to effect a change in control of our company by proposing an acquisition proposal
offer opposed by our board, even if beneficial to our shareholders.
Furthermore,
Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders 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 fulfillment of numerous conditions, including a
holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating
companies are restricted. 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.
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.
We
have received Israeli government grants for certain research and development expenditures. The terms of these grants and loans
may require us to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. In
addition, under the Encouragement of Industrial, Research and Development Law, 5744-1984, or the Research Law, to which we are
subject due to our receipt of grants from the Israeli Innovations Authority, or IIA (formerly known as the Office of the Chief
Scientist of the Israeli Ministry of Economy, or OCS), a recipient of IIA grants such as us must report to the IIA regarding any
change of control or any change in the holding of the means of control of our Company which transforms any non-Israeli citizen
or resident into an “interested party”, as defined in the Research Law, in our Company, and in the latter event, the
non-Israeli citizen or resident shall execute an undertaking in favor of the IIA, in a form provided under the IIA guidelines.
Because
a certain portion of our expenses is incurred in currencies other than the U.S. Dollar, our results of operations may be harmed
by currency fluctuations and inflation.
Our
reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S.
Dollar and Euro. As a result, we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency
hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rate of the currencies mentioned
above in relation to the NIS. These measures, however, may not adequately protect us from adverse effects.
We
have received Israeli government grants towards some of our research and development activities. The terms of these grants
may require us to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel.
We may be required to pay penalties in addition to the repayment of the grants. Such grants may be terminated or reduced
in the future, which would increase our costs.
Our
research and development efforts have been financed, partially, through grants that we have received from the formerly known as
the OCS, or IIA. We therefore must comply with the requirements of the Research Law and related regulations, including, but not
limited to, pay royalties to the IIA on income generated from the sale of products and related services associated with such products.
As of December 31, 2018, we have received $5.5 million in IIA grants.
The
discretionary approval of an IIA committee will be required for any transfer to third parties outside of Israel of rights related
to M-001, which has been developed with IIA funding. We may not receive the required approvals should we wish to transfer this
technology, manufacturing and/or development outside of Israel in the future. We may be required to pay penalties in addition
to repayment of the grants. Such grants may be terminated or reduced in the future, which would increase our costs. IIA approval
is not required for the export of any products resulting from the IIA funded research or development in the ordinary course of
business.
Risks
Related to the ADSs and the Offering
We
incur significant additional increased costs as a public company in the United States, and our management is required to devote
substantial additional time to new compliance initiatives as well as to compliance with ongoing U.S. reporting requirements.
We
are a publicly traded company in the U.S. As a public company in the U.S., we incur additional significant accounting, legal and
other expenses that we did not incur before our initial public offering. We also incur costs associated with corporate governance
requirements of the SEC and the NASDAQ Capital Market, as well as requirements under Section 404 and other provisions of the Sarbanes-Oxley
Act. We expect these rules and regulations to increase our legal and financial compliance costs, introduce new costs such as investor
relations, stock exchange listing fees and shareholder reporting, and to make some activities more time consuming and costly.
The implementation and testing of such processes and systems may require us to hire outside consultants and incur other significant
costs. Any future changes in the laws and regulations affecting public companies in the United States, including Section 404 and
other provisions of the Sarbanes-Oxley Act, and the rules and regulations adopted by the SEC and the NASDAQ Capital Market, for
so long as they apply to us, will result in increased costs to us as we respond to such changes. These laws, rules and regulations
could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability
insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the
same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified
persons to serve on our board of directors, our board committees, if any, or as executive officers.
We
may currently be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes or may become one in any
subsequent year. There may be negative tax consequences for U.S. taxpayers that are holders of our ordinary shares or the ADSs
Generally,
if for any taxable year 75% or more of our gross income is passive income, or at least 50% of our assets are held for the production
of, or produce, passive income, we would be characterized as a PFIC for U.S. federal income tax purposes. 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 such amounts
derived due to the temporary investment of funds, including those raised in a public offering. In determining whether a non-US
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 considered.
Although
we were not a PFIC in 2016, we believe we may have become a PFIC in 2017, and although we have not determined whether we became
a PFIC in 2018, or in any subsequent year, our operating results for any such years may cause us to be a PFIC. If we are a PFIC
in 2018, or any subsequent year, and a U.S. shareholder 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. shareholder, 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. shareholder’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. shareholder to make
a timely QEF or mark-to-market election. U.S. shareholders 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.
shareholders who made a timely QEF or mark-to-market election. A U.S. shareholder 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 will annually furnish U.S. shareholders 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. shareholder) and to make and
maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC.
The
application of the PFIC rules may result in a U.S. shareholder incurring a tax liability in excess of cash received. For instance,
the application of the deemed deferral benefit under the excess distribution rules can result in an effective tax rate of more
than one hundred percent. Further, if a U.S. shareholder makes a QEF election, such U.S. shareholder will be subject to U.S. federal
income tax on a modified passthrough basis and may be allocated taxable income without receiving a corresponding distribution
of cash to pay any resulting tax. Likewise, a U.S. shareholder who makes a mark-to-market election will not receive a distribution
of cash to pay any resulting tax. Finally, the disposition of PFIC stock in an otherwise tax-deferred transaction may require
a U.S. shareholder to recognize the resulting gain as a PFIC inclusion.
Failure
to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material
adverse effect on our business, results of operation or financial condition. In addition, current and potential shareholders could
lose confidence in our financial reporting, which could have a material adverse effect on the price of the ADSs and warrants.
Effective
internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required
to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley
Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting. In addition,
if we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time
to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial
reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal controls, failing to remediate
these deficiencies or weaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment
may cause investors to lose confidence in our reported financial information, which could have a material adverse effect on the
price of the ADSs and warrants. If we cannot provide reliable financial reports or prevent fraud, our operating results could
be harmed.
As
an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain
disclosure requirements, which could make the ADSs and ADS warrants less attractive to investors.
For
as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting
and other regulatory requirements that are generally unavailable to other public companies, including:
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an
exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required
by Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; and
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an
exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB,
requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required
to provide additional information about our audit and our financial statements.
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We
will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual
gross revenues of $1 billion or more, (ii) December 31, 2020, (iii) the date on which we have, during the previous three-year
period, issued more than $1 billion in non-convertible debt or (iv) the date on which we are deemed a “large accelerated
issuer” as defined in Regulation S-K of the Securities Act.
We
cannot predict if investors will find the securities less attractive because we may rely on these exemptions. If some investors
find the securities less attractive as a result, there may be a less active trading market for securities and the market price
of the securities may be more volatile.
We
are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting
companies.
We
are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC.
Under the Exchange Act, we are subject to reporting obligations that, in certain respects, are less detailed and less frequent
than those of U.S. domestic reporting companies. For example, we are not required to issue quarterly reports, proxy statements
that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under the regulations
promulgated under the Companies Law, as an Israeli public company listed overseas we will be required to disclose the compensation
of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted
for Israeli public companies listed overseas prior to such amendment), this disclosure will not be as extensive as that required
of U.S. domestic reporting companies. We also have four months after the end of each fiscal year to file our annual reports with
the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. Furthermore,
our officers, directors and principal shareholders will be exempt from the requirements to report short-swing profit recovery
contained in Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are also not subject to the requirements
of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency
and scope of information and protections available to you in comparison to those applicable to U.S. domestic reporting companies.
As
a “foreign private issuer,” we are permitted, and follow certain home country corporate governance practices instead
of otherwise applicable SEC and NASDAQ Capital Market requirements, which may result in less protection than is accorded to investors
under rules applicable to domestic U.S. issuers.
As
a “foreign private issuer,” we are permitted, and follow certain home country corporate governance practices instead
of those otherwise required under the listing rules of the NASDAQ Capital Market for domestic U.S. issuers. For instance, we intend
to follow home country practice in Israel with regard to, among other things, board independence requirements, director nomination
procedures and quorum requirements. In addition, we may follow our home country law instead of the listing rules of the NASDAQ
Capital Market that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment
of certain equity based compensation plans, an issuance that will result in a change of control of us, certain transactions other
than a public offering involving issuances of a 20% or greater interest in the Company, and certain acquisitions of the stock
or assets of another company. We also intend to follow our home country rules regarding the periodic approval of and changes to
the formal charter for our compensation committee instead of the listing rules of the NASDAQ Capital Market. We may in the future
elect to follow home country corporate governance practices in Israel with regard to other matters. Following our home country
corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the NASDAQ
Capital Market may provide less protection to you than what is accorded to investors under the listing rules of the NASDAQ Capital
Market applicable to domestic U.S. issuers.
If
securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or
if they adversely change their recommendations or publish negative reports regarding our business or our traded securities, our
securities price and trading volume could be negatively impacted.
The
trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish
about us, our business, our market or our competitors. We do not have any control over these analysts, and we cannot provide any
assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change
their recommendation regarding the securities, or provide more favorable relative recommendations about our competitors, the price
of the securities would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly
publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the
securities or their trading volume.
The
ADSs do not trade on any exchange outside of the United States and our ordinary shares are not listed on any securities exchange.
The
ADSs are listed only in the United States on the Nasdaq Capital Market, and our ordinary shares are not currently listed on any
securities exchange. We have no plans to list the ADSs or our ordinary shares in any other jurisdiction. As a result, a holder
of ADSs outside of the United States may not be able to effect transactions in the ADSs as readily as the holder may if the ADSs
were listed on an exchange in that holder’s home jurisdiction. Additionally, a holder of ordinary shares may not be able
to effect transactions in our ordinary shares without depositing such ordinary shares with the depositary in exchange for the
issuance of ADSs representing such ordinary shares.
The
market price for the ADSs may be volatile.
The
market price for the ADSs is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including
the following:
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our
failure to obtain the approvals necessary to commence further clinical trials;
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results
of clinical and preclinical studies;
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announcements
of regulatory approval or the failure to obtain it, or specific label indications or patient populations for its use, or
changes or delays in the regulatory review process;
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announcements
of technological innovations, new products or product enhancements by us or others;
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adverse
actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing
activities;
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changes
or developments in laws, regulations or decisions applicable to our product candidates or patents;
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any
adverse changes to our relationship with manufacturers or suppliers;
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announcements
concerning our competitors or the pharmaceutical or biotechnology industries in general;
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achievement
of expected product sales and profitability or our failure to meet expectations;
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our
commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions
or intellectual property infringement actions;
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any
major changes in our board of directors, management or other key personnel;
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legislation
in the United States, Europe and other foreign countries relating to the sale or pricing of pharmaceuticals;
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announcements
by us of significant strategic partnerships, out-licensing, in-licensing, joint ventures, acquisitions or capital commitments;
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expiration
or terminations of licenses, research contracts or other collaboration agreements;
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public
concern as to the safety of therapeutics we, our licensees or others develop;
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success
of research and development projects;
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developments
concerning intellectual property rights or regulatory approvals;
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variations
in our and our competitors’ results of operations;
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changes
in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs are covered by analysts;
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future
issuances of ordinary shares, ADSs or other securities;
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general
market conditions, including the volatility of market prices for shares of biotechnology companies generally, and other factors,
including factors unrelated to our operating performance; and
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the
other factors described in this “Risk Factors” section.
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These
factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs, which would
result in substantial losses by our investors.
In
addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related
to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the
market price of the ADSs.
Substantial
future sales or perceived potential sales of ADSs in the public market could cause the price of ADSs to decline.
Substantial
sales of ADSs, including in this offering, may cause the market price of the ADSs to decline. Sales by us or our security holders
of substantial amounts of the ADSs, or the perception that these sales may occur in the future, could cause a reduction in the
market price of the ADSs.
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 the ADSs and will have
a dilutive effect on our existing shareholders and holders of ADSs.
We
have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate
in value, our investors may not benefit from holding our securities.
We
have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends our ordinary
shares in the foreseeable future. Moreover, the Israeli Companies Law, as amended, or the Companies Law, imposes certain restrictions
on our ability to declare and pay dividends. See “Description of Share Capital — Dividends” for additional information.
As a result, investors in the ADSs or ordinary shares will not be able to benefit from owning these securities unless their market
price becomes greater than the price paid by such investors and they are able to sell such securities. We cannot assure you that
you will ever be able to resell our securities at a price in excess of the price paid.
ADS
holders may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some
limited circumstances, you may not receive dividends or other distributions on our ordinary shares and you may not receive any
value for them, if it is illegal or impractical to make them available to you.
The
depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary
shares or other deposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions
in proportion to the number of ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that
it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make
a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act, but that are
not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars
from foreign currency that was part of a dividend made in respect of deposited ordinary shares may require the approval or license
of, or a filing with, any government or agency thereof, which may be unobtainable. In these cases, the depositary may determine
not to distribute such property and hold it as “deposited securities” or may seek to effect a substitute dividend
or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable
substitute. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities
received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary
shares, rights or anything else to holders of ADSs. In addition, the depositary may withhold from such dividends or distributions
its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes it is required
to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders
of our ordinary shares, and, in some limited circumstances, you may not receive any value for such distributions or dividends
if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value
of the ADSs.
Holders
of ADSs must act through the depositary to exercise their rights
.
Holders
of the ADSs do not have the same rights as our shareholders and may only exercise the voting rights with respect to the underlying
ordinary shares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice
period required to convene a shareholders meeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda
for the shareholders meeting. When a shareholder meeting is convened, holders of the ADSs may not receive sufficient notice of
a shareholders’ meeting to permit them to withdraw their ordinary shares to allow them to cast their vote with respect to
any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the
ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to
extend voting rights to holders of the ADSs in a timely manner, but we cannot assure holders that they will receive the voting
materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, the depositary and its agents
will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for
the effect of any such vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack
recourse if their ADSs are not voted as they requested. In addition, in the capacity as a holder of ADSs, they will not be able
to call a shareholders’ meeting.
You
may be subject to limitations on transfer of your ADSs.
Your
ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from
time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse
to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any
time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental
body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement.
Your
percentage ownership in us may be diluted following this rights offering as well as by future issuances of share capital, which
could reduce your influence over matters on which shareholders vote.
If
you choose not to exercise your subscription rights in full, the relative percentage of the ordinary shares or ADSs that you own
will decrease, and your voting and other rights will be diluted. In addition, subject to the approval of our shareholders meeting,
if Angels exercises its option to purchase unexercised rights, your voting and other rights will be significantly diluted as well.
Following
the completion of this offering, our board of directors will have the authority, in most cases without action or vote of our shareholders,
to issue all or any part of our authorized but unissued shares, including ordinary shares issuable upon the exercise of outstanding
warrants and options. Issuances of additional shares would reduce your influence over matters on which our shareholders vote.
You
will experience immediate dilution in book value of any ADSs you purchase.
Because
the price per ADS being offered is substantially higher than our net tangible book value per ADS, you will suffer substantial
dilution in the net tangible book value of any ADS you purchase in this offering.
Management
will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.
Our
management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in
ways that you do not agree with or that do not improve our results of operations or enhance the value of ADSs (see “Use
of Proceeds”). Our failure to apply these funds effectively could have a material adverse effect on our business and cause
the price of the ADSs to decline.
Rights
to subscribe for new ADSs are not transferrable
The
rights to subscribe for new ADSs in this offering are not transferrable. As a result, you will not be able to realize the inherent
value of your subscription rights without exercising such subscription rights and paying the applicable subscription price for
any new ADSs for which your subscribe. Existing ADSs holders who do not exercise their subscription rights will receive no economic
value for their subscription rights, as such unexercised subscription rights will become void and worthless at the end of the
subscription period.
Furthermore,
the value of subscription rights depends largely on the trading price of the ADSs. Therefore, a significant decline in the trading
price of the ADSs could also adversely affect the value of such subscription rights.
If
there is insufficient interest in the rights offering, we may determine not to proceed with the offering
There
is no minimum condition at which we are required to consummate the offering described in this prospectus, and we reserve the rights
to cancel or terminate the offering at any time. If there is insufficient interest from exiting holders of our ordinary shares
or holders of ADSs to subscribe for new ADSs in this rights offering, we may determine not to proceed with the offering. If we
do not proceed with the rights offering, the share rights and ADSs rights will be cancelled and will have no further value.
There
can be no assurance that the rights offering will be completed. If we terminate the rights offering, neither we nor the subscription
agent will have any obligation to you with respect to the rights, expect to return your subscription payments, without interest
or deduction.
Subject
to the approval of our shareholder’s meeting, our largest shareholder may receive a discretionary option to purchase unsubscribed
units and may become a controlling shareholder, as defined under Israeli law
Subject
to the fulfillment of certain conditions, our largest shareholder, Angels, may receive an option to purchase all unexercised units
in this rights offering and increase its holdings to over 25% or 45% of the voting rights of the Company. The grant of this option
is conditioned upon Angels commitment to purchase its pro-rata units in this rights offering, as well as our shareholders meeting
approval for the option grant. Subject to the fulfillment of these conditions, Angels shall be permitted, but not obligated, to
purchase the unexercised units in this rights offering. If Angels does not exercise the option, Angels holdings may not purchase
units to exceed its holding to over 24.99% of the voting rights of the Company, and depending on the level of participation of
other shareholders, we may determine that there is insufficient interest from existing holders and cancel this offering.
In
addition, as a result of the exercise of this option and participation in the rights offering, Angels may increase its holdings
to over 25% or 45% of the voting rights of the Company. Under such circumstances, Angels shall be deemed a controlling shareholder
as defined under the Israeli Companies Law. Under Israeli law, a controlling shareholder is any shareholder that has the ability
to direct the Company’s activities (other than by means of being a director or office holder of the Company), including
a person who holds 25% or more of the voting rights in the general meeting of the Company if there is no other person who holds
more than 45% of the voting rights in the Company. A person is presumed to be a controlling shareholder if it holds or controls,
by himself or together with others, one half or more of any one of the “means of control” of a company. “Means
of control” is defined as any one of the following: (i) the right to vote at a general meeting of a company, or (ii) the
right to appoint directors of a company. Therefore, in the event following the rights offering Angels shall be deemed a controlling
shareholder, you may have more limited ability to direct the Company’s activities. In addition, in the event that Angels
becomes a controlling shareholder of the Company, the board of directors shall take the necessary actions to appoint two external
directors, as defined in the Israeli Companies Law, which will increase the number of board members in the Company.
The
market price of the ADSs may decline below the ADS subscription price prior to the expiration of the applicable subscription period.
Once
you exercise your subscription rights pursuant to this offering, you may not revoke the exercise. The market price of the ADSs
may decline below the ADS subscription price as a result of, among other things, market factors and the number of new ordinary
shares, including those represented by ADSs, to be issued in this offering. If you exercise your ADS rights and the market price
of the ADSs trades below the ADS subscription price on the date the new ADSs are issued to you in respect of such rights, then
you will have purchased those ADSs at a price that is higher than the market price. Any decrease in market prices may continue
after the completion of this offering. On March 14, 2019, the closing price of the ADSs on the NASDAQ Capital Market was $[*]
per ADS.
ADS
holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in
less favorable outcomes to the plaintiff(s) in any such action.
The
deposit agreement governing the ADSs representing our ordinary shares provides that, to the fullest extent permitted by law, ADS
holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to
our ordinary shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws.
If
we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable
based on the facts and circumstances of the case in accordance with the applicable state and federal law. To our knowledge, the
enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws
has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial
waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement,
by a federal or state court in the City of New York, which has non-exclusive jurisdiction over matters arising under the deposit
agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider
whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with
respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision
before entering into the deposit agreement.
If
you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising
under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial
owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging
lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement,
it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil
procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable
to the plaintiff(s) in any such action.
Nevertheless,
if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the deposit
agreement with a jury trial.
No
condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs
or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and
regulations promulgated thereunder.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements about our expectations, beliefs and intentions regarding, among other things, our
product development efforts, business, financial condition, results of operations, strategies, plans and prospects. In addition,
from time to time, we or our representatives have made or may make forward-looking statements, orally or in writing. Forward-looking
statements can be identified by the use of forward-looking words such as “believe”, “expect”, “intend”,
“plan”, “may”, “should”, “could”, “might”, “seek”, “target”,
“will”, “project”, “forecast”, “continue” or “anticipate” or their
negatives or variations of these words or other comparable words or by the fact that these statements do not relate strictly to
historical matters. These forward-looking statements may be included in, among other things, various filings made by us with the
SEC, press releases or oral statements made by or with the approval of one of our authorized executive officers. Forward-looking
statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking
statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that
could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements.
Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in
forward-looking statements.
This
prospectus identifies important factors which could cause our actual results to differ materially from those indicated by the
forward-looking statements, particularly those set forth under the heading “Risk Factors.”
We
believe these forward-looking statements are reasonable; however, these statements are only current predictions and are subject
to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels
of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements.
We discuss many of these risks in this prospectus in greater detail under the heading “Risk Factors” and elsewhere
in this prospectus. Given these uncertainties, you should not rely upon forward-looking statements as predictions of future events.
All
forward-looking statements attributable to us or persons acting on our behalf speak only as of the date hereof and are expressly
qualified in their entirety by the cautionary statements included in this prospectus. We undertake no obligations to update or
revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence
of unanticipated events, except as required by applicable law. In evaluating forward-looking statements, you should consider these
risks and uncertainties.
USE
OF PROCEEDS
We
estimate that we will receive gross proceeds from this offering of approximately $ ,
assuming the full exercise of subscription rights for the ADSs and ordinary shares offered in this offering and after deducting
estimated fees and offering expenses payable by us.
We
are conducting this right offering to raise capital that we intend to use to fund operations, including completion of the pivotal
Phase 3 trial (second cohort), through the end of 2020, working capital and general corporate purposes. We have broad discretion
in determining how the proceeds of this offering will be used, and our discretion is not limited by the aforementioned possible
uses. Our board of directors believes the flexibility in application of the net proceeds is prudent. See “Risk
Factors—Risks Related to this Rights Offering—We will have broad discretion in the use of the net proceeds from the
rights offering and may not use the proceeds effectively.”
As
of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to be received
from this offering. The amounts and timing of our actual expenditures will depend on numerous factors. Accordingly, our management
will have broad discretion in the application of the net proceeds, and investors will be relying on the judgment of management
regarding the application of the net proceeds from the offering.
CAPITALIZATION
The
following table sets forth our cash and cash equivalents, total debt and capitalization as of December 31, 2018:
|
●
|
on
an actual basis; and
|
|
●
|
on
an a pro forma adjusted basis to give effect to the rights offering, assuming gross proceeds from the rights offering of $20,000,000
and after deducting expenses related to the rights offering payable by us estimated at approximately $ .
|
You
should read this table in conjunction with “Selected Financial Data,” “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this
prospectus.
The
data below based on the December 31, 2018 exchange rate of [3.748] = $1.00
|
|
As of December
31, 2018
|
|
|
|
Actual
|
|
|
As
Adjusted(1)
|
|
|
|
In thousands, in $
|
|
Cash
and cash equivalents
|
|
|
20,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
Ordinary shares
|
|
|
—
|
*)
|
|
|
|
|
Share Premium
|
|
|
48,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
(56,335
|
)
|
|
|
|
|
Total shareholders’ equity
|
|
|
(8,328
|
)
|
|
|
|
|
Total capitalization
|
|
|
(8,328
|
)
|
|
|
|
|
*)
|
The
amount is less than 1 USD.
|
Each
decrease of 1,000 ADSs sold in this offering, or 40,000 ordinary shares represented by ADSs, would decrease the as adjusted amount
of cash, cash equivalents, marketable securities and term deposits, capital and other reserves, total equity and total ibexibex
by approximately .
The
number of ordinary shares that will be outstanding immediately after this offering is based on 261,419,599 ordinary shares outstanding
as of December 31, 2018. This number excludes, as of such date:
|
●
|
ordinary shares outstanding and exercisable
of 10,979,503 options at a weighted average exercise price of NIS 0.78 or $(0.2) per ordinary share;
|
|
●
|
ordinary
shares issuable upon the exercise of 1,762,897 ADS warrants previously issued in connection with an initial public offering
of our securities at an exercise price per share equal to $6.25, exercisable until May 15, 2020.
|
|
●
|
ordinary
shares issuable upon the exercise of 65,425 ADS warrants previously issued to Aegis Capital Corp. as underwriter in connection
with an initial public offering of our securities at an exercise price per share equal to $6.25, exercisable until May 11,
2020.
|
DILUTION
If
you do not exercise your rights to subscribe for ADSs in this offering, your ownership interest will be diluted. In addition,
even if you exercise your rights to subscribe for ordinary shares or ADSs in this offering, your ownership interest may be diluted
to the extent that the subscription price per ADS in this offering exceeds our as adjusted net tangible book value per ADS after
this offering.
Our
historical net tangible book value as of December 31, 2018, was approximately NIS
million, or $ million. We calculate our historical net tangible book
value per share or per ADS by taking the amount of our total tangible assets, subtracting the amount of our total liabilities,
and then dividing the difference by the actual total number of ordinary shares or ADSs outstanding, as applicable.
After
giving effect to the sale of the ADSs at an offering price of $5.69 per ADS, and after deducting the estimated offering expenses
payable by us, our net tangible book value as of December 31, 2018, would have been $ per
ADS. This represents an immediate increase in the net tangible book value of $
per ADS to our existing shareholders and an immediate and substantial dilution in net tangible book value of $
per ADS. The following table illustrates this per share dilution:
The
following table illustrates this per share dilution
Assumed
public offering price per ADS
|
|
$
|
|
|
Net
tangible book value (deficit) per ADS
|
|
$
|
|
|
Increase
in net tangible book value per ADS attributable to the offering
|
|
$
|
|
|
|
|
|
|
|
As
adjusted net tangible book value per ADS after giving effect to the offering
|
|
$
|
|
|
|
|
|
|
|
Dilution
per share to investors purchasing ADSs in this offering
|
|
$
|
|
|
Assuming
the full exercise of subscription rights for the ADSs offered in this offering at the subscription price of 5.69
per ADS, after deducting estimated fees and offering expenses payable by us, our as adjusted net tangible book value as of December
31, 2018 would have been or
per ADS. This would represent an immediate dilution of our as adjusted net tangible book value of
per ADS to holders who exercise subscription rights in this offering, or %,
assuming full exercise of subscription rights for the ADSs offered hereby.
Each
decrease of 1,000 in the number of ADSs sold in this offering, including ordinary shares represented by ADSs, would further decrease
our as adjusted net tangible book value by per ADS to existing shareholders
and ADS holders who exercise subscription rights in this offering.
EXCHANGE
RATE INFORMATION
As
of April 30, 2019, the daily representative exchange rate of NIS per U.S. dollars was [*]. The following table sets forth information
regarding the exchange rates of NIS per U.S. dollars for the periods indicated. Average rates are calculated by using the daily
representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.
|
|
NIS per U.S. $
|
|
Year Ended December 31,
|
|
High
|
|
|
Low
|
|
|
Average
|
|
|
Period End
|
|
2018
|
|
|
3.781
|
|
|
|
3.388
|
|
|
|
3.597
|
|
|
|
3.748
|
|
2017
|
|
|
3.860
|
|
|
|
3.467
|
|
|
|
3.600
|
|
|
|
3.467
|
|
2016
|
|
|
3.983
|
|
|
|
3.746
|
|
|
|
3.841
|
|
|
|
3.845
|
|
2015
|
|
|
4.053
|
|
|
|
3.761
|
|
|
|
3.884
|
|
|
|
3.902
|
|
2014
|
|
|
3.994
|
|
|
|
3.402
|
|
|
|
3.577
|
|
|
|
3.889
|
|
SELECTED
FINANCIAL DATA
The
following tables summarize our financial data. We have derived the selected statements of comprehensive loss data for the
years ended December 31, 2016, 2017 and 2018 ended and the balance sheet data as of December 31, 2017 and 2018 from our audited
financial statements included elsewhere in this prospectus. The selected financial statement data as of December 31, 2018
is derived from our audited financial statement that is included elsewhere in this prospectus. Our historical results are not
necessarily indicative of the results that may be expected in the future. The following selected financial data should be read
in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and our financial statements and related notes included elsewhere in this prospectus.
Our
financial statements included in this prospectus were prepared in accordance with IFRS, as issued by the IASB, and reported in
NIS.
The selected statements
of operations data for the years ended December 31, 2018 and 2017 and the selected balance sheet data as of December 31, 2018
and 2017, have been derived from our audited financial statements set forth elsewhere in this prospectus. The selected statement
of operations data for the year ended December 31, 2016, 2015 and 2014, has been derived from our audited financial statements
not included in this prospectus.
Our financial statements
included in this prospectus were prepared in accordance with IFRS, as issued by the International Accounting Standards Board,
and reported in NIS. This annual report contains conversions of NIS amounts into U.S. dollars at specific rates solely for the
convenience of the reader. Unless otherwise noted, for the purpose of the presentation of financial data for the period ending
on December 31, 2018, all conversions from NIS to U.S. dollars and from U.S. dollars to NIS were made at a rate of 3.748 NIS to
$1 U.S. dollar, the daily representative rate in effect as of December 31, 2018. No representation is made that the NIS amounts
referred to in this annual report could have been or could be converted into U.S. dollars at any particular rate or at all.
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
NIS in thousands
|
|
|
Convenience translation into USD in thousands
(2)
|
|
Statements of comprehensive loss data:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
|
6,441
|
|
|
|
10,736
|
|
|
|
9,397
|
|
|
|
19,423
|
|
|
|
72,056
|
|
|
|
19,225
|
|
Participation by the IIA and UNISEC
|
|
|
(949
|
)
|
|
|
(2,830
|
)
|
|
|
(1,603
|
)
|
|
|
(646
|
)
|
|
|
(143
|
)
|
|
|
(38
|
)
|
Research and development, net of participations expenses
|
|
|
5,492
|
|
|
|
7,906
|
|
|
|
7,794
|
|
|
|
18,777
|
|
|
|
71,913
|
|
|
|
19,187
|
|
Marketing, general and administrative expenses
|
|
|
2,650
|
|
|
|
3,397
|
|
|
|
4,106
|
|
|
|
4,879
|
|
|
|
5,154
|
|
|
|
1,375
|
|
Operating loss
|
|
|
8,142
|
|
|
|
11,303
|
|
|
|
11,900
|
|
|
|
23,656
|
|
|
|
77,067
|
|
|
|
20,562
|
|
Financial income
|
|
|
394
|
|
|
|
1,128
|
|
|
|
3,019
|
|
|
|
18
|
|
|
|
2,936
|
|
|
|
783
|
|
Financial expenses
|
|
|
(16
|
)
|
|
|
(24
|
)
|
|
|
(303
|
)
|
|
|
(10,913
|
)
|
|
|
(13,596
|
)
|
|
|
(3,628
|
)
|
Financial income (expenses), net
|
|
|
378
|
|
|
|
1,104
|
|
|
|
2,716
|
|
|
|
(10,895
|
)
|
|
|
(10,660
|
)
|
|
|
(2,845
|
)
|
Net loss
|
|
|
7,764
|
|
|
|
10,199
|
|
|
|
9,184
|
|
|
|
34,551
|
|
|
|
87,727
|
|
|
|
23,407
|
|
Loss from available-for-sale financial assets
|
|
|
4
|
|
|
|
5
|
|
|
|
6
|
|
|
|
6
|
|
|
|
-
|
|
|
|
-
|
|
Total comprehensive loss
|
|
|
7,768
|
|
|
|
10,204
|
|
|
|
9,190
|
|
|
|
34,557
|
|
|
|
87,727
|
|
|
|
23,407
|
|
Basic and Diluted net loss per share (NIS)
|
|
|
0.14
|
|
|
|
0.1
|
|
|
|
0.07
|
|
|
|
0.17
|
|
|
|
0.34
|
|
|
|
0.09
|
|
Weighted average number of shares outstanding used to compute basic and diluted loss per share (in thousands)
|
|
|
54,286
|
|
|
|
105,523
|
|
|
|
135,097
|
|
|
|
201,031
|
|
|
|
261,420
|
|
|
|
261,420
|
|
(1)
|
Diluted
loss per share data is not presented because the effect of the exercise of our outstanding options is anti-dilutive.
|
(2)
|
Calculated using the exchange rate reported
by the Bank of Israel for December 31, 2018, at the rate of one U.S. dollar per NIS 3.748.
|
|
|
December
31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
NIS
in thousands
|
|
|
Convenience
translation into USD in thousands
(2)
|
|
Statement
of financial position
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
|
15,705
|
|
|
|
71,382
|
|
|
|
75,883
|
|
|
|
20,246
|
|
Short-term deposits
|
|
|
7,602
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Marketable securities
– short term
|
|
|
2,017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other receivables
|
|
|
815
|
|
|
|
3,923
|
|
|
|
965
|
|
|
|
258
|
|
Marketable securities
– long term
|
|
|
2,050
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Property, plant and
equipment
|
|
|
1,443
|
|
|
|
5,510
|
|
|
|
28,249
|
|
|
|
7,537
|
|
Other long term assets
|
|
|
478
|
|
|
|
880
|
|
|
|
740
|
|
|
|
197
|
|
Total assets
|
|
|
30,110
|
|
|
|
81,695
|
|
|
|
105,837
|
|
|
|
28,238
|
|
Trade payables
|
|
|
686
|
|
|
|
6,223
|
|
|
|
20,723
|
|
|
|
5,529
|
|
Other payables
|
|
|
689
|
|
|
|
660
|
|
|
|
1,076
|
|
|
|
287
|
|
Warrants
|
|
|
3,043
|
|
|
|
8,177
|
|
|
|
6,168
|
|
|
|
1,645
|
|
Liability in respect
of government grants
|
|
|
-
|
|
|
|
10,300
|
|
|
|
14,643
|
|
|
|
3,907
|
|
Loan from others
|
|
|
-
|
|
|
|
-
|
|
|
|
94,360
|
|
|
|
25,176
|
|
Severance pay liability,
net
|
|
|
76
|
|
|
|
83
|
|
|
|
82
|
|
|
|
22
|
|
Total liabilities
|
|
|
4,494
|
|
|
|
25,443
|
|
|
|
137,052
|
|
|
|
36,566
|
|
Total shareholders’ equity
|
|
|
25,616
|
|
|
|
56,252
|
|
|
|
(31,215
|
)
|
|
|
(8,328
|
)
|
(1)
|
Calculated using the exchange rate reported
by the Bank of Israel for December 31, 2018, at the rate of one U.S. dollar per NIS 3.748.
|
PRICE
RANGE OF ADS
Our
ADSs have been trading on the Nasdaq Capital Market under the symbols “BVXV” and “BVXVW”, respectively.
The following tables set forth for the periods indicated the high and low sales prices per ADS and ADS warrants as reported on
the NASDAQ Capital Market:
BVXV
|
|
High
|
|
|
Low
|
|
Annual:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 (through April 30,
2019)
|
|
$
|
7.18
|
|
|
$
|
4.76
|
|
2018
|
|
$
|
7.49
|
|
|
$
|
3.97
|
|
2017
|
|
$
|
10.42
|
|
|
$
|
3.58
|
|
2016
|
|
$
|
4.1
|
|
|
$
|
3.25
|
|
2015 (from May 12, 2015 and through December 31,
2015)
|
|
$
|
5.78
|
|
|
$
|
3.28
|
|
|
|
|
|
|
|
|
|
|
Quarterly:
|
|
|
|
|
|
|
|
|
First Quarter 2019 ( and through April 30, 2019)
|
|
$
|
7.18
|
|
|
$
|
4.76
|
|
Fourth Quarter 2018
|
|
$
|
5.99
|
|
|
$
|
3.97
|
|
Third Quarter 2018
|
|
$
|
6.78
|
|
|
$
|
5.50
|
|
Second Quarter 2018
|
|
$
|
6.93
|
|
|
$
|
5.55
|
|
First Quarter 2018
|
|
$
|
7.49
|
|
|
$
|
5.43
|
|
Fourth Quarter 2017
|
|
$
|
7.78
|
|
|
$
|
4.73
|
|
Third Quarter 2017
|
|
$
|
10.42
|
|
|
$
|
6.67
|
|
Second Quarter 2017
|
|
$
|
8.85
|
|
|
$
|
6.25
|
|
First Quarter 2017
|
|
$
|
6.21
|
|
|
$
|
3.58
|
|
Fourth Quarter 2016
|
|
$
|
3.94
|
|
|
$
|
3.25
|
|
Third Quarter 2016
|
|
$
|
3.94
|
|
|
$
|
3.31
|
|
Second Quarter 2016
|
|
$
|
4.1
|
|
|
$
|
3.3
|
|
First Quarter 2016
|
|
$
|
4.05
|
|
|
$
|
3.4
|
|
Fourth Quarter 2015
|
|
$
|
4.08
|
|
|
$
|
3.57
|
|
Third Quarter 2015
|
|
$
|
5.78
|
|
|
$
|
3.28
|
|
Second Quarter 2015
|
|
$
|
5.75
|
|
|
$
|
3.81
|
|
|
|
|
|
|
|
|
|
|
Most recent Six Months:
|
|
|
|
|
|
|
|
|
April 30 2019
|
|
$
|
7.18
|
|
|
$
|
5.43
|
|
March 31,2019
|
|
$
|
5.59
|
|
|
$
|
4.76
|
|
February 28,2019
|
|
$
|
5.80
|
|
|
$
|
4.83
|
|
January 31, 2019
|
|
$
|
5.60
|
|
|
$
|
4.82
|
|
December 31, 2018
|
|
$
|
5.70
|
|
|
$
|
3.97
|
|
November 30, 2018
|
|
$
|
5.99
|
|
|
$
|
5.32
|
|
BVXVW
|
|
High
|
|
|
Low
|
|
Annual:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 ( through April 30,
2019)
|
|
$
|
1.45
|
|
|
$
|
0.31
|
|
2018
|
|
$
|
1.95
|
|
|
$
|
0.69
|
|
2017
|
|
$
|
4.34
|
|
|
$
|
0.37
|
|
2016
|
|
$
|
71
|
|
|
$
|
0.37
|
|
2015 (from May 12, 2015 and through December 31,
2015)
|
|
$
|
1.4
|
|
|
$
|
0.61
|
|
|
|
|
|
|
|
|
|
|
Quarterly:
|
|
|
|
|
|
|
|
|
First Quarter 2019 ( and through April 30, 2019)
|
|
$
|
1.45
|
|
|
$
|
0.31
|
|
Fourth Quarter 2018
|
|
$
|
1.17
|
|
|
$
|
0.69
|
|
Third Quarter 2018
|
|
$
|
1.35
|
|
|
$
|
1.15
|
|
Second Quarter 2018
|
|
$
|
1.59
|
|
|
$
|
1.10
|
|
First Quarter 2018
|
|
$
|
1.95
|
|
|
$
|
1.10
|
|
Fourth Quarter 2017
|
|
$
|
2.5
|
|
|
$
|
1.20
|
|
Third Quarter 2017
|
|
$
|
4.34
|
|
|
$
|
1.66
|
|
Second Quarter 2017
|
|
$
|
2.57
|
|
|
$
|
0.9
|
|
First Quarter 2017
|
|
$
|
1.45
|
|
|
$
|
0.37
|
|
Fourth Quarter 2016
|
|
$
|
0.6
|
|
|
$
|
0.37
|
|
Third Quarter 2016
|
|
$
|
0.7
|
|
|
$
|
0.37
|
|
Second Quarter 2016
|
|
$
|
0.83
|
|
|
$
|
0.4
|
|
First Quarter 2016
|
|
$
|
71
|
|
|
$
|
0.4
|
|
Fourth Quarter 2015
|
|
$
|
0.98
|
|
|
$
|
0.71
|
|
Third Quarter 2015
|
|
$
|
1.25
|
|
|
$
|
0.7
|
|
Second Quarter 2015
|
|
$
|
1.4
|
|
|
$
|
0.61
|
|
|
|
|
|
|
|
|
|
|
Most recent Six Months:
|
|
|
|
|
|
|
|
|
April 30 2019
|
|
$
|
1.45
|
|
|
$
|
0.31
|
|
March 31,2019
|
|
$
|
0.55
|
|
|
$
|
0.31
|
|
February 28,2019
|
|
$
|
0.75
|
|
|
$
|
0.4109
|
|
January 31, 2019
|
|
$
|
1.00
|
|
|
$
|
0.75
|
|
December 31, 2018
|
|
$
|
1.15
|
|
|
$
|
0.81
|
|
November 30, 2018
|
|
$
|
1.15
|
|
|
$
|
0.92
|
|
On April 30, 2019,
the last reported sale price of the ADS and the ADS warrants on the Nasdaq Capital Market was $5.4 and $0.5, respectively.
No
trading market currently exists for our ordinary shares. Our ordinary shares have been trading on the TASE under the symbol “BNDX”
since June 18, 2007 and under the symbol “BVXV” since May 18, 2015, and were voluntarily delisted from the TASE as
of January 22, 2018.
the
rights offering
General
Information
We are granting
to our shareholders share rights to subscribe for new ordinary shares, and through The Bank of New York Mellon, as ADS rights
agent, are granting ADS holders, non transferable ADS rights to subscribe for new ADSs pursuant to a rights offering. Except to
the extent otherwise provided under Israeli law, the ordinary shares rights will be non-transferrable. Each ADS represents forty
(40) ordinary shares, no par value.
If you are
a holder of ADSs at , which is the ADS record date, you
will receive one ADS right for each ADS owned on that date. One ADS right will entitle you to subscribe for one new ADS at
$5.69 per ADS. A holder of ADS rights must pay to the ADS rights agent the ADS rights deposit amount. Fractional ADSs will
not be issued, and ADS right entitlements will be reduced to the next smaller whole number of ADS rights. ADS rights will not
be assignable or transferrable.
If you are a shareholder
on , which is the ordinary share record date, you will have the ordinary
share right to subscribe for and purchase one ordinary share, at a subscription price of per new ordinary share held on the ordinary
share record date, payable as described below. No fractional ordinary shares will be issued and ordinary share right entitlements
will be reduced to the next smaller whole number of ordinary share rights.
Shareholders and
ADS holders generally will be treated alike in the rights offering, except that the timing of certain actions and periods will
differ for holders of ADS rights and holders of share rights.
We will not provide
over-subscription privilege in this offering, and you will not be able to purchase more than your basic subscription privileges.
We will not deliver any fractional ADSs or fractional ordinary shares in the rights offering. Holders of subscription rights may
only exercise rights to purchase ADSs or ordinary shares in whole numbers.
Subscription Price
In determining
the subscription price, our board of directors considered a number of factors, including: the likely cost of capital from other
sources, the price at which our shareholders and ADS holders might be willing to participate in the rights offering, historical
and current trading prices of ADSs, our need for liquidity and capital and the desire to provide an opportunity to ADS holders
to participate in the rights offering on a
pro rata
basis. In conjunction with its review of these factors, our board of
directors has determined the subscription price to be the volume based weighted average price for the sixty calendar days to April
8, 2019 inclusive, and the median of the volume based weighted average prices for the thirty, sixty and ninety calendar days respectively
to April 8, 2019. The subscription price is not necessarily related to our book value, net worth or any other established criteria
of value and may or may not be considered the fair value of the ADSs to be offered in the rights offering. We cannot give any
assurance that the ADSs will trade at or above the subscription price in any given time period.
Extension,
Amendment or Cancellation of Rights Offering
We
have the option to extend the expiration of the rights offering for a period not to exceed 30 days by giving oral or written notice
to the ADS rights agent prior to the expiration date of the rights offering, although we do not presently intend to do so. If
we elect to extend the expiration of the rights offering, we will issue a press release announcing such extension no later than
9:00 a.m., New York City time, on the next business day after the most recently announced expiration time of the rights offering.
We will extend the duration of the rights offering as required by applicable law or regulation and may choose to extend it if
we decide to give investors more time to exercise their subscription rights in the rights offering.
Our
board of directors may cancel the rights offering at any time prior to the expiration of the rights offering for any reason. In
the event the rights offering is cancelled, all subscription payments received by the ADS rights agent for the rights offering
will be promptly returned, without interest.
Our
board of directors also reserves the right to amend or modify the terms of the rights offering in its sole discretion. If we should
make any fundamental changes to the terms of the rights offering set forth in this prospectus, we will file a post-effective amendment
to the registration statement in which this prospectus is included, offer potential purchasers who have subscribed for rights
the opportunity to cancel such subscriptions and issue a refund of any money advanced by such holder and recirculate an updated
prospectus after the post-effective amendment is declared effective by the SEC. In addition, upon such event, we may extend the
expiration date of the rights offering to allow holders of rights ample time to make new investment decisions and for us to recirculate
updated documentation. Promptly following any such occurrence, we will issue a press release announcing any changes with respect
to the rights offering and the new expiration date. The terms of the rights offering cannot be modified or amended after the expiration
date of the rights offering. Although we do not presently intend to do so, we may choose to amend or modify the terms of the rights
offering for any reason, including, without limitation, in order to increase participation in the rights offering. Such amendments
or modifications may include a change in the subscription price, although no such change is presently contemplated.
Grant
of Option to Angels
At our shareholders
meeting held on 2019, shareholders approved and we have agreed to
grant to our largest shareholder, Angels Investments in Hi Tech Ltd., a company controlled by Mr. Marius Nacht, or aMoon 2 Fund
Limited Partnership, a health-tech and life-sciences venture fund in which Mr. Marius Nacht is the anchor investor, (together
“
Angels
”), (i) an option to purchase, at the ADS subscription price, in addition to the full entitlement as
a holder of ordinary shares and ADSs under this rights offering, all ordinary shares and ADSs offered in this rights offering
that are not purchased upon exercise of share rights or ADS rights and (ii) if the aggregate subscription for those unsubscribed
ordinary shares and ADSs is less than $10 million, to purchase , at the ADS subscription price in a private placement, an amount
of additional ADSs so that the total investment by Angels is $10 million (the “
Option
”), excluding the full
entitlement as a holder of ordinary shares and ADSs under this rights offering. In return for this Option Angels has undertaken
a firm commitment to purchase at least its full entitlement as a holder of ordinary shares and the ADSs under this rights offering.
In accordance with section 328(b)(1) of the Israeli Companies Law, we will sell Angels additional ADSs at the ADS subscription
price in a private placement, so that as a result Angels may hold ADSs and ordinary shares of the Company which constitute more
than 25% or 45% of the voting rights in the general meeting of the shareholders of the Company (where no other person or entity
holds 25% or 45% or more of the voting rights) and thus may become a Controlling Shareholder (as defined under the Israel Companies
Law).
However,
the exercise of this option remains at the discretion of Angels and Angels is not obligated to purchase all or any of the unsubscribed
rights.
In accordance with
section 328(b)(1) of the Israeli Companies Law, we will sell Angels additional ADSs at the ADS subscription price in a private
placement, so that as a result Angels may hold ordinary shares of the Company which constitute more than 25% or 45% of the voting
rights in the general meeting of the shareholders of the Company (where no other person or entity holds 25% or 45% or more of
the voting rights) and thus may become a controlling shareholder (as defined under the Israeli Companies Law). We anticipate that
if Angels exercises the option, they will increase their holdings to over 25% of the voting rights of the Company. However, we
anticipate that Angels will increase their holdings to over 45% of the voting rights of the Company only if very few or no other
shareholders participate in the rights offering.
We
have received a letter of commitment from Angels agreeing to purchase at least its full entitlement as a holder of ordinary shares
and the ADSs under this rights offering, subject to the approval of option grant by the shareholder’s meeting. Under the
letter of commitment, if the total consideration of the unsubscribed rights is less than $10 million, Angels shall be entitled
to receive additional ADSs in a private placement under the same terms of the rights offering, so that the total unsubscribed
rights together with the additional ADSs issued shall be for a consideration of $10 million, excluding the full entitlement as
a holder of ordinary shares and ADSs under this rights offering.
The
option shall be exercisable subject to the following conditions: (i) Angels has undertaken to purchase at least its full entitlement
as a holder; (ii) the shareholders meeting approved the option grant. We intend to publish a notice of a shareholders meeting
to be convened prior to the closing of the rights offering. The option shall become exercisable on the date the rights offering
prospectus is declared effective by the Securities and Exchange Commission and shall expire on the closing date of the rights
offering.
The
Information Agent
MacKenzie
Partners, Inc., the information agent, at 1-(212) 929-5500 or toll free at 800-322-2885, or by email at rightsoffer@mackenziepartners.com,
Monday- Friday, from 09:00 a.m. to 5:00 p.m, New York City time.
Offering
to ADS holders
Summary
timetable
The
summary timetable below lists some important dates relating to the rights offering. All times referred to in this timetable are
New York City time, unless stated otherwise:
ADS
record date- date for determining holders of ADSs receiving ADS rights
|
|
ADS
rights offering commencement date – beginning of period during which rights holders can subscribe for and purchase new
ADSs
|
|
ADS
rights expiration time – end of period during which rights holders can subscribe for and purchase new ADSs. Please note
that your broker, bank or other securities intermediary may impose an earlier date by which instructions must be received
from you
|
|
New
ordinary shares expected to be deposited with the custodian
|
|
New
ADSs expected to be delivered
|
On
or about
|
Offering to ADS holders
If you hold ADSs
on the ADS record date, you will receive one ADS right for each (1) ADS you hold on that date. One ADS right will entitle you
to subscribe for and purchase one new ADS. Fractional ADS rights will not be issued, and ADS rights entitlements will be reduced
to the next smaller whole number of ADS rights.
ADS Record Date and Subscription
Period
ADS holders on
the record date, that is , 2019, may participate in this rights offering.
Rights may be exercised during the period from through ,
which is the ADS rights expiration date. If you do not exercise your ADS rights within the rights exercise period, your ADS rights
will expire and will have no further value.
Subscription Price
The subscription
price is $5.69 per ADS.
ADS rights deposit amount
In order to exercise
your ADS rights to subscribe for and purchase any additional ADSs, you must pay the ADS rights deposit amount of $5.705 which
includes the subscription price of $5.69 and ADS issuance fee of the depositary of $0.015 per new ADS. The ADS rights agent will
deduct the ADS issuance fee from each subscription holder’s ADS rights deposit amount. You must pay the ADS rights deposit
amount in U.S. dollars
No Revocation of Exercise
The exercise of
rights is irrevocable and may not be cancelled modified or revoked. However, if we amend the rights offering to allow for an extension
of the rights offering for a period of more than 30 days or make a fundamental change to the terms of the rights offering set
forth in this prospectus, you may cancel your subscription and receive a refund of any money you have deposited.
Procedure for Exercising ADS Rights
Subscription
by DTC Participants.
If you hold ADSs through a broker or other securities intermediary and wish to exercise your ADS rights,
you should contact your securities intermediary and instruct it to subscribe on your behalf through the automated system of The
Depository Trust Company, or DTC, prior to 5:00 p.m. (New York City time) on ,
also referred to as the ADS rights expiration time. Your securities intermediary will charge the applicable ADS rights deposit
amount to your account. Your broker or other securities intermediary will set a cutoff date and time to receive instructions that
is earlier than the ADS rights expiration time stated above. You should contact your securities intermediary to determine the
cutoff date and time that applies to you.
We
and the ADS rights agent will determine all questions about the timeliness, validity, form and eligibility of any exercise of
ADS rights. We, in our sole discretion, may waive any defect or irregularity, or permit you to correct a defect or irregularity
within the time we determine. ADS subscriptions will not be considered received or accepted until we have waived all irregularities,
or you have cured them in time. Neither we nor the ADS rights agent have to notify you of any defect or irregularity in submitting
ADS subscriptions. We and the ADS rights agent will not incur any liability for failing to do so.
Non-transferability
of ADS Rights
ADS
rights are not transferable, and any purported transfer of ADS rights will be null and void.
ADS
Issuance Fee
Subscribing
holders will be charged an ADS issuance fee of $0.015 per new ADS issued, payable to the depositary. The ADS rights agent will
deduct the ADS issuance fee from the ADS rights deposit amount in respect of each subscription.
Delivery
of ADSs
The
depositary will deliver new ADSs purchased pursuant to the ADS rights offering as soon as practicable after the receipt of the
ordinary shares by the depositary’s custodian, which is expected to be on or about [*].
ADS
Rights Agent
The
Bank of New York Mellon, in addition to acting as depositary in respect of the ADS program, will act as the ADS rights
agent. The ADS rights are to be issued under the terms of an ADS rights agent agreement relating to this offering between us
and The Bank of New York Mellon. We have filed a copy of the deposit agreement as an exhibit to the registration statement of
which this prospectus forms a part and a copy of the rights agent agreement on a Form 6-K. Results of this rights
offering will be filed on a Form 6-K.
Offering
to Holders of Ordinary Shares
Summary
Timetable
The
timetable below lists some important dates relating to the common share rights offering. All times referred to in this timetable
are Vienna time, unless stated otherwise.
Ordinary
share record date—date for determining holders of
ordinary
shares receiving common share rights
|
|
Ordinary
share rights commencement date—beginning of period during which ordinary share rights holders can subscribe for and
purchase new ordinary shares
|
|
Ordinary
share rights expiration date—end of period during which ordinary share rights holders can subscribe for new ordinary
shares
|
|
Ordinary
share subscription price payment date—end of period during which ordinary share rights holders can pay for new ordinary
shares (on a same day funds basis)
|
|
Delivery
of new ordinary shares to ordinary shareholders
|
|
Rights
Offering to Holders of Ordinary Shares
If
you are a holder of ordinary shares on , which is the ordinary share
record date, you will have the ordinary share right to subscribe for and purchase new
ordinary share at a subscription price of $0.14225 per new ordinary share held on the ordinary share record date, payable as described
below. No fractional ordinary shares will be issued and common share right entitlements will be reduced to the next smaller whole
number of ordinary shares.
Ordinary
Share Rights
Ordinary
share rights will not be listed on any national securities market or exchange. Ordinary share rights will not be transferable
or assignable, except to the extent otherwise provided under Israeli law.
Ordinary
Share Record Date
The
record date for the determination of shareholders entitled to ordinary share rights is .
Only shareholders of record on the ordinary share record date will be entitled to ordinary share rights.
Share
Rights Exercise Period
Ordinary
share rights may be exercised during the period from through 5:00 p.m.
(Israel time) on , 2019. Following the ordinary share rights expiration
date, the ordinary share rights will expire and shareholders will have no rights to participate in the rights offering.
Ordinary
Share Subscription Price
The
ordinary share subscription price for new ordinary shares purchased upon the exercise of ordinary share rights is $0.14225
per ordinary share.
Procedure
for Exercising Ordinary Share Rights
The
exercise of ordinary share rights is irrevocable and may not be cancelled or modified.
However, if we amend the rights
offering to allow for an extension of the rights offering for a period of more than 30 days or make a fundamental change to the
terms of the rights offering set forth in this prospectus, you may cancel your subscription and receive a refund of any money
you have advanced. You may exercise your share rights by delivering to us, via our legal counsel, Pearl Cohen Zedek Latzer Baratz,
121 Menachem Begin Rd., 53
rd
floor, Tel Aviv, Israel, a properly completed subscription form and full payment of the
ordinary share subscription price for the new ordinary shares being purchased.
If
you fail to exercise your common share rights by 5:00 p.m. (Israel time) on
and to arrange for payment for your new ordinary shares so that we receive full payment by 5:00 p.m. (Israel time) on ,
your rights will lapse and will have no further value.
We
will determine all questions about the timeliness, validity, form and eligibility of exercising the common share rights. Our determinations
will be final and binding. We may decide to waive a defect or irregularity in subscriptions for new ordinary shares, or permit
you to correct a defect or irregularity within the time we determine. Instructions will not be considered, received or accepted
until we have waived all irregularities or you have cured them in time. We have no obligation to notify you of any defect or irregularity
in submitting instructions, and we will not incur any liability for failing to do so.
Non-transferability
of Ordinary Share Rights
Ordinary
share rights will not be transferable, and any purported transfer of ordinary share rights will be null and void, except to the
extent otherwise provided under Israeli law.
Delivery
of New Ordinary Shares
We
intend to issue the new ordinary shares as soon as practical after the closing, at which time you should receive physical delivery
of the share certificate representing the new ordinary shares you subscribed for and purchased in the ordinary share rights offering.
Results of this rights offering will be filed on a Form 6-K.
DIVIDENDS
AND DIVIDEND POLICY
We
have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to
reinvest any earnings in developing and expanding our business. Any future determination relating to our dividend policy will
be at the discretion of our board of directors and will depend on a number of factors, including future earnings, our financial
condition, operating results, contractual restrictions, capital requirements, business prospects, applicable Israeli law and other
factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, which
permits the distribution of dividends only out of distributable profits. See “Description of Share Capital — Dividends.”
If
we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares,
subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Description of American
Depositary Shares.” Cash dividends on our ordinary shares, if any, will be paid to ADS holders in U.S. dollars.
DESCRIPTION
OF SECURITIES
Description
of our share capital
The
following description of our share capital is a summary of the material terms of our articles of association and Israeli corporate
law regarding our ordinary shares and the holders thereof. This description contains all material information concerning our ordinary
shares but does not purport to be complete. For a complete description, you should read our articles of association, a copy of
which has been filed with the SEC as an exhibit to the registration statement on Form F-1 of which this prospectus forms a part.
The following description is qualified in its entirety by reference to our articles of association and applicable law.
Ordinary
Shares
As
of December 31, 2018 our authorized share capital consists of 600,000,000 ordinary shares, no par value. As of December 31, 2018
there are 261,419,599 ordinary shares issued and outstanding. All of our outstanding ordinary shares are validly issued, fully
paid and non-assessable. Our ordinary shares are not redeemable and do not have any preemptive rights. Our ordinary shares are
not listed on any national stock exchange. No preferred shares are issuable, issued and outstanding.
Options
We previously maintained
the 2005 Plan, adopted by our board of directors in July 2005, which provides for granting options to our directors, officers,
employees, consultants, advisers and service providers. The 2005 Plan expired on July 2015. To date, an aggregate amount of 13,060,403
options to purchase 13,060,403 ordinary shares were granted. Of such 10,979,503 are outstanding and exercisable options, with
a weighted average exercise price of NIS 0.78 per share, and will expire 10 years from the date of grant, during the years 2019
- 2024. In March 2018 our shareholders have adopted a similar option plan, or the 2018 Plan.
On June 25, 2018,
the Company granted 130,710 options to a board member which vest over a period of four years at an exercise price of $ 3.45 per
ADS. The fair value of the options as of the date of grant totaled approximately NIS 1,627 ($ 450).
Articles
of Association
The
following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to
the material terms of our ordinary shares.
Purposes
and Objects of the Company
Our
purpose is set forth in Section 4 of our articles of association and includes every lawful purpose in the field of Bio-Technology.
Registration
Number
Our
number with the Israeli Registrar of Companies is 513436105.
Voting
Rights
Holders
of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholder
meeting. Shareholders may vote at shareholder meetings either in person, by proxy or by written ballot. Israeli law does not allow
public companies to adopt shareholder resolutions by means of written consent in lieu of a shareholder meeting. The board of directors
shall determine and provide a record date for each shareholders meeting and all shareholders at such record date may vote. Unless
stipulated differently in the Companies Law or in the articles of association, all shareholders’ resolutions shall be approved
by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the prior
approval of at least 75% of our shares represented and voting at a general meeting.
Transfer
of Shares
Our
ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association,
unless the transfer is restricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded.
The ownership or voting of our ordinary shares by non-residents of Israel is not restricted in any way by our articles of association
or Israeli law, except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.
The
Powers of the Directors
Our
board of directors shall direct the Company’s policy and shall supervise the performance of the Company’s Chief Executive
Officer. Pursuant to the Companies Law and our articles of association, our board of directors may exercise all powers and take
all actions that are not required under law or under our articles of association to be exercised or taken by our shareholders,
including the power to borrow money for company purposes.
Amendment
of share capital
Our
articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the
Companies Law and must be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on
such change in the capital. In addition, transactions that have the effect of reducing capital, such as the declaration and payment
of dividends in the absence of sufficient retained earnings and profits and an issuance of shares for less than their nominal
value, require a resolution of our board of directors and court approval.
Dividends
Under
Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable
concern that the distribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as
they become due. Under the Companies Law, the distribution amount is further limited to the greater of retained earnings or earnings
generated over the two most recent years legally available for distribution according to our then last reviewed or audited financial
statements, provided that the date of the financial statements is not more than six months prior to the date of distribution.
In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for
distribution, we may seek the approval of the court in order to distribute a dividend. The court may approve our request if it
is determined that there is no reasonable concern that the payment of a dividend will prevent us from satisfying our existing
and foreseeable obligations as they become due.
Shareholder
Meetings
Under
Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no
later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting
of shareholders are referred to as special meetings. Our board of directors may call special meetings whenever it sees fit, at
such time and place, within or outside of Israel, as it may determine. In addition, the Companies Law and our articles of association
provide that our board of directors is required to convene a special meeting upon the written request of (i) any two of our directors
or one quarter of the directors then in office; or (ii) one or more shareholders holding, in the aggregate either (a) 5% of our
issued share capital and 1% of our outstanding voting power, or (b) 5% of our outstanding voting power.
Subject
to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote
at general meetings are the shareholders of record on a date to be decided by the board of directors. Furthermore, the Companies
Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting
of our shareholders:
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amendments
to our articles of association;
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appointment
or termination of our auditors;
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appointment
of directors and appointment and dismissal of external directors;
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approval
of acts and transactions requiring general meeting approval pursuant to the Companies Law;
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director
compensation, indemnification and change of the principal executive officer;
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increases
or reductions of our authorized share capital;
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the
exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its
powers and the exercise of any of its powers is required for our proper management; and
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authorizing
the chairman of the board of directors or his relative to act as the company’s chief executive officer or act with such
authority; or authorize the company’s chief executive officer or his relative to act as the chairman of the board of
directors or act with such authority.
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The
Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting
and if the agenda of the meeting includes the appointment or removal of directors, the approval of transactions with office holders
or interested or related parties, or an approval of a merger, notice must be provided at least 35 days prior to the meeting.
The
Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently,
our articles of association do not allow shareholders to approve corporate matters by written consent.
Pursuant
to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted
to a vote before the shareholders at a general meeting.
Quorum
The
quorum required for our general meetings of shareholders consists of one or more shareholders present in person, by proxy or by
other voting instrument in accordance with the Companies Law who hold or represent, in the aggregate, at least 10% of the total
outstanding voting rights, within half an hour from the appointed time.
A
meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later
date if so specified in the summons or notice of the meeting. At the reconvened meeting, any number of our shareholders present
in person or by proxy shall constitute a lawful quorum.
Resolutions
Our
articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required
by applicable law.
Israeli
law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot
in which the shareholder indicates how he or she votes on resolutions relating to the following matters:
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an
appointment or removal of directors;
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an
approval of transactions with office holders or interested or related parties, that require shareholder approval;
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an
approval of a merger;
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authorizing
the chairman of the board of directors or his relative to act as the company’s chief executive officer or act with such
authority; or authorize the company’s chief executive officer or his relative to act as the chairman of the board of
directors or act with such authority;
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any
other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of
association do not stipulate any additional matters; and
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other
matters which may be prescribed by Israel’s Minister of Justice.
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The
provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient
to determine the vote.
The
Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company
and its other shareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required
when voting at general meetings on matters such as changes to the articles of association, increasing the company’s registered
capital, mergers and approval of certain interested or related party transactions. A shareholder also has a general duty to refrain
from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, any shareholder
who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles
of association, can appoint or prevent the appointment of an office holder or other power towards the company, is required to
act with fairness towards the company. The Companies Law does not describe the substance of this duty except that the remedies
generally available upon a breach of contract will also apply to a breach of the duty to act with fairness, and, to the best of
our knowledge, there is no binding case law that addresses this subject directly.
Under
the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting
requires approval by a simple majority of the voting rights represented at the meeting, in person, by proxy or written ballot,
and voting on the resolution. Generally, a resolution for the voluntary winding up of the company requires the approval of holders
of 75% of the voting rights represented at the meeting, in person, by proxy or by written ballot and voting on the resolution.
In
the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of
our ordinary shares in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected
by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that
may be authorized in the future.
Access
to Corporate Records
Under
the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings,
its shareholders register and principal shareholders register, articles of association, financial statements and any document
it is required by law to file publicly with the Israeli Companies Registrar and the Israeli Securities Authority, or ISA. Any
of our shareholders may request to review any document in our possession that relates to any action or transaction with a related
party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to
review a document if we determine that the request was not made in good faith, that the document contains a commercial secret
or a patent or that the document’s disclosure may otherwise prejudice our interests.
Acquisitions
under Israeli Law
Full
Tender Offer
A
person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s
issued and outstanding share capital is required by the Companies Law to make a tender offer to all of the company’s shareholders
for the purchase of all of the issued and outstanding shares of the company. A person wishing to acquire shares of a public Israeli
company and who would as a result hold over 90% of the issued and outstanding share capital of a certain class of shares is required
to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of the issued and
outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding
share capital of the company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred
to the acquirer by operation of law (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). However, a shareholder that had its
shares so transferred may petition the court within six months from the date of acceptance of the full tender offer, whether or
not such shareholder agreed to the tender or not, to determine whether the tender offer was for less than fair value and whether
the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that a shareholder
that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer
and the company disclosed the information required by law in connection with the full tender offer. If the shareholders who did
not accept the tender offer hold 5% or more of the issued and outstanding share capital of the company or of the applicable class,
the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued
and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.
Special
Tender Offer
The
Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer
if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless
one of the exemptions in the Companies Law is met. This rule does not apply if there is already another holder of at least 25%
of the voting rights in the company. Similarly, the Companies Law provides that an acquisition of shares in a public company must
be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% or more of the
voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the
company, unless one of the exemptions in the Companies Law is met.
A
special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing
more than 5% of the voting power attached to the company’s outstanding shares, regardless of how many shares are tendered
by shareholders. A special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s
outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares
whose holders objected to the offer.
If
a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the
purchaser or such controlling person or entity may not make a subsequent tender offer for the purchase of shares of the target
company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the
purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer.
Under
regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose
shares are listed for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the
stock exchange, include provisions limiting the percentage of control which may be acquired or that the purchaser is required
to make a tender offer to the public. However, the Israeli Securities Authority’s opinion is that such leniency does not
apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including the NASDAQ
Capital Market, which do not provide for sufficient legal restrictions on obtaining control or an obligation to make a tender
offer to the public, therefore the special tender offer requirements shall apply to such companies.
Merger
The
Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements
described under the Companies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders’
meeting called with at least 35 days’ prior notice.
For
purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the
shares represented at the shareholders meeting that are held by parties other than the other party to the merger, or by any person
who holds 25% or more of the outstanding shares or the right to appoint 25% or more of the directors of the other party, vote
against the merger. If the transaction would have been approved but for the separate approval of each class or the exclusion of
the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least
25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value
of the parties to the merger and the consideration offered to the shareholders.
Upon
the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that
there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations
of any of the parties to the merger, and may further give instructions to secure the rights of creditors.
In
addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the
merger was filed by each party with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved
by the shareholders of each party.
Antitakeover
Measures
The
Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including
shares providing certain preferred rights, distributions or other matters and shares having preemptive rights. As of the date
of this prospectus, we do not have any authorized or issued shares other than our ordinary shares. In the future, if we do create
and issue a class of shares other than ordinary shares, such class of shares, depending on the specific rights that may be attached
to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market
value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association
which requires the prior approval of the holders of a majority of our shares at a general meeting. Shareholders voting in such
meeting will be subject to the restrictions provided in the Companies Law as described above.
ADS
warrants
We
have issued ADS warrants as part of an initial public offering in the U.S. The following summary of certain terms and provisions
of the ADS warrants is not complete and is subject to, and qualified in its entirety by the provisions of the ADS warrant Agent
Agreement and form of Warrant Certificate, which are an exhibit to the registration statement of which this prospectus forms a
part.
Exercisability.
The warrants are exercisable immediately upon issuance and at any time up to the date that is five years from the date of issuance.
The warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise
notice accompanied by payment in full for the number of ADSs purchased upon such exercise (except in the case of a cashless exercise
as discussed below), together with the ADS issuance fee of $0.015 per ADS and other applicable charges and taxes. Unless otherwise
specified in the warrant, the holder does not have the right to exercise the warrants, in whole or in part, if the holder (together
with its affiliates) would beneficially own in excess of 4.99% of the number of our ordinary shares outstanding immediately after
giving effect to the exercise, as such percentage is determined in accordance with the terms of the warrants.
Cashless Exercise.
In the event that a registration statement covering ADSs underlying the warrants is not effective, and an exemption from registration
is not available for the resale of such shares of ordinary shares underlying the warrants, the holder may, in its sole discretion,
exercise warrants and, in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment
of the aggregate exercise price, elect instead to receive upon such exercise the net number of shares of ordinary shares determined
according to the formula set forth in the warrant agreement. The issuance fee of $0.015 per ADS, as well as other applicable charges
and taxes, are due and payable upon any cashless exercise.
Exercise Price.
The
initial exercise price per share of ADSs purchasable upon exercise of the warrants is $6.25 per ADS. In addition to the exercise
price per share of ADS, a $0.015 issuance fee per ADS and other applicable charges and taxes are due and payable upon exercise.
Anti-Dilution
Provisions.
The exercise price is subject to adjustment in the event of sales of ADSs or equivalent number of ordinary shares
during the one-year period following the closing at a price per share less than the exercise price then in effect (or securities
convertible or exercisable into ADSs or equivalent number of ordinary shares at a conversion or exercise price less than the exercise
price then in effect subject to customary exceptions). In addition, the exercise price and the number of shares issuable upon
exercise are subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock
subdivisions and combinations, reclassifications or similar events affecting ADSs or ordinary shares.
Transferability.
Subject to applicable laws, the warrants may be transferred at the option of the holders upon surrender of the warrants to
us together with the appropriate instruments of transfer.
Warrant
Agent and Exchange Listing.
The warrants are issued in registered form under an ADS Warrant Agent Agreement between The Bank
of New York Mellon, as warrant agent and us.
Fundamental
Transaction
. If, at any time while the warrants are outstanding, (1) we consolidate or merge with or into another corporation
and we are not the surviving corporation, (2) we sell, lease, license, assign, transfer, convey or otherwise dispose of all or
substantially all of our assets, (3) any purchase offer, tender offer or exchange offer (whether by us or another individual or
entity) is completed pursuant to which holders of our shares of ordinary shares are permitted to sell, tender or exchange their
shares of ordinary shares for other securities, cash or property and has been accepted by the holders of 50% or more of our outstanding
shares of ordinary shares, (4) we effect any reclassification or recapitalization of our shares of ordinary shares or any compulsory
share exchange pursuant to which our ordinary shares are converted into or exchanged for other securities, cash or property, or
(5) we consummate a stock or share purchase agreement or other business combination with another person or entity whereby such
other person or entity acquires more than 50% of our outstanding ordinary shares, each, a “Fundamental Transaction”,
then upon any subsequent exercise of the warrants, the holders thereof will have the right to receive the same amount and kind
of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction
if it had been, immediately prior to such Fundamental Transaction, the holder of the number of warrant shares then issuable upon
exercise of the warrant, and any additional consideration payable as part of the Fundamental Transaction.
Rights
as a Stockholder.
Except as otherwise provided in the warrant agreement or by virtue of such holder’s ownership of ADSs
or ordinary shares, the holder of warrants does not have rights or privileges of a holder of ADSs or ordinary shares, including
any voting rights, until the holder exercises the warrant.
Representative
warrants
We
have issued Aegis Capital Corp., our underwriters in the initial public offering in the U.S., representative’s warrants,
exercisable to up to 95,500 ADSs, of which 65,425 are outstanding. The representative’s warrants will expire on the fifth
year following the effective date of the underwriting agreement signed between us and the underwriter, that is May 11, 2020. The
representative warrants are exercisable at a price per ADS of $6.25. The provisions of the Form of Warrant Certificate are an
exhibit to the registration statement of which this prospectus forms a part.
DESCRIPTION
OF AMERICAN DEPOSITARY SHARES
The
Bank of New York Mellon, as depositary, registered and delivered American Depositary Shares, also referred to as ADSs. Each ADS
represents forty (40) ordinary shares (or a right to receive forty (40) ordinary shares) deposited with an office of The Bank
of New York Mellon, located in the United Kingdom. Each ADS also represents any other securities, cash or other property which
may be held by the depositary. The depositary’s office at which the ADSs are administered and its principal executive office
are located at 240 Greenwich Street, New York, New York 10286.
You
may hold ADSs either (A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate
evidencing a specific number of ADSs, registered in your name, or (ii) by having ADSs registered in your name in the Direct Registration
System, or DRS, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution.
If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are
an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution
to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to
find out what those procedures are.
The
DRS is a system administered by The Depository Trust Company, or DTC, under which the depositary may register the ownership of
uncertificated ADSs, which ownership is confirmed by periodic statements sent by the depositary to the registered holders of uncertificated
ADSs.
As
an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder rights. Israeli law governs
shareholder rights. The depositary will be the holder of the ordinary shares underlying your ADSs. As a registered holder of ADSs,
you will have ADS holder rights. A deposit agreement among us, the depositary, ADS holders and all other persons indirectly or
beneficially holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs
the deposit agreement and the ADSs.
The
following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the
entire deposit agreement and the form of ADR. For directions on how to obtain copies of those documents see “Where You Can
Find More Information”.
Dividends
and Other Distributions
How
will you receive dividends and other distributions on the shares?
The
depositary has agreed to pay to ADS holders the cash dividends or other distributions it or the custodian receives on ordinary
shares or other deposited securities, after deducting its fees and expenses. You will receive these distributions in proportion
to the number of ordinary shares your ADSs represent.
Cash
.
The depositary will convert any cash dividend or other cash distribution we pay on the ordinary shares into U.S. dollars, if it
can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government
approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only
to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the
ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.
Before
making a distribution, the depositary will deduct any withholding taxes, or other required governmental charges. See “Taxation”.
The depositary will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If
the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some or all of
the value of the distribution.
Shares
.
The depositary may distribute additional ADSs representing any ordinary shares we distribute as a dividend or free distribution.
The depositary will only distribute whole ADSs. It may sell ordinary shares which would require it to deliver a fraction of an
ADS and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs,
the outstanding ADSs will also represent the new shares. The depositary may sell a portion of the distributed ordinary shares
sufficient to pay its fees and expenses in connection with that distribution.
Rights
to purchase additional shares
.
If we offer holders of our securities any rights to subscribe for additional ordinary
shares or any other rights, the depositary may make these rights available to ADS holders. If the depositary decides it is not
legal and practical to make the rights available but that it is practical to sell the rights, the depositary will use reasonable
efforts to sell the rights and distribute the proceeds in the same way as it does with cash. The depositary will allow rights
that are not distributed or sold to lapse.
In that case, you will receive no value for them.
If
the depositary makes rights available to ADS holders, it will exercise the rights and purchase the ordinary shares on your behalf.
The depositary will then deposit the ordinary shares and deliver ADSs to the persons entitled to them. It will only exercise rights
if you pay it the exercise price and any other charges the rights require you to pay.
U.S.
securities laws may restrict transfers and cancellation of the ADSs represented by ordinary shares purchased upon exercise of
rights. For example, you may not be able to trade these ADSs freely in the United States. In this case, the depositary may deliver
restricted depositary shares that have the same terms as the ADSs described in this section except for changes needed to put the
necessary restrictions in place.
Other
Distributions
.
The depositary will send to ADS holders anything else we distribute on deposited securities by any
means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary will have a choice.
It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide
to hold what we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is
not required to distribute any securities (other than ADSs) to ADS holders unless it receives reasonably satisfactory evidence
from us that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property
sufficient to pay its fees and expenses in connection with that distribution
The
depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders.
We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation
to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders.
This means that
you may not receive the distributions we make on our ordinary shares or any value for them if it is illegal or impractical for
us to make them available to you
.
Deposit,
Withdrawal and Cancellation
How
are ADSs issued?
The
depositary will deliver ADSs if you or your broker deposits ordinary shares or evidence of rights to receive ordinary shares with
the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes
or fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or
upon the order of the person or persons that made the deposit.
How
can ADS holders withdraw the deposited securities?
You
may surrender your ADSs at the depositary’s office. Upon payment of its fees and expenses and of any taxes or charges, such
as stamp taxes or stock transfer taxes or fees, the depositary will deliver the ordinary shares and any other deposited securities
underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request,
risk and expense, the depositary will deliver the deposited securities at its office, if feasible.
How
do ADS holders interchange between certificated ADSs and uncertificated ADSs?
You
may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel
that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated
ADSs. Alternatively, upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting
the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing
those ADSs.
Voting
Rights
How
do you vote?
ADS
holders may instruct the depositary how to vote the number of deposited ordinary shares their ADSs represent.
Otherwise, you
won’t be able to exercise your right to vote unless you withdraw the shares. However, you may not know about the meeting
sufficiently in advance to withdraw the shares.
The
depositary will notify ADS holders of shareholders’ meetings and arrange to deliver our voting materials to them if we ask
it to. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to
vote. For instructions to be valid, they much reach the depositary by a date set by the depositary.
The
depositary will try, as far as practical, subject to the laws of Israel and of our articles of association or similar documents,
to vote or to have its agents vote the ordinary shares or other deposited securities as instructed by ADS holders. The depositary
will only vote or attempt to vote as instructed or as described in the following sentence. If we ask the depositary to solicit
your instructions at least 30 days before the meeting date but the depositary does not receive voting instructions from you by
the specified date, it will consider you to have authorized and directed it to give a discretionary proxy to a person designated
by us to vote the number of deposited securities represented by your ADSs. The depositary will give a discretionary proxy in those
circumstances to vote on all questions at to be voted upon unless we notify the depositary that:
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we
do not wish to receive a discretionary proxy;
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there
is substantial shareholder opposition to the particular question; or
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the
particular question would have an adverse impact on our shareholders.
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We
are required to notify the depositary if one of the conditions specified above exists.
We
can not assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your
shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the
manner of carrying out voting instructions.
This means that you may not be able to exercise your right to vote and there may
be nothing you can do if your ordinary shares are not voted as you requested.
In
order to give you a reasonable opportunity to instruct the Depositary as to the exercise of voting rights relating to Deposited
Securities, if we request the Depositary to act, we agree to give the Depositary notice of any such meeting and details concerning
the matters to be voted upon at least 30 days in advance of the meeting date.
Fees
and Expenses
Persons
depositing or withdrawing ordinary shares or ADS holders must pay
:
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For
:
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$1.50 (or less)
per 100 ADSs (or portion of 100 ADSs)
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Issuance of ADSs,
including issuances resulting from a distribution of ordinary shares or rights or other property Cancellation of ADSs for
the purpose of withdrawal, including if the deposit agreement terminates
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$0.015 (or less)
per ADS
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Any cash distribution
to ADS holders
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A fee equivalent
to the fee that would be payable if securities distributed to you had been ordinary shares and the ordinary shares had been
deposited for issuance of ADSs
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Distribution
of securities distributed to holders of deposited securities which are distributed by the depositary to ADS holders
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$0.015 (or less)
per ADS per calendar year
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Depositary services
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Registration
or transfer fees
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Transfer and
registration of ordinary shares on our share register to or from the name of the depositary or its agent when you deposit
or withdraw ordinary shares
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Expenses of the
depositary
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Cable, telex
and facsimile transmissions (when expressly provided in the deposit agreement) converting foreign currency to U.S. dollars
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Taxes and other
governmental charges the depositary or the custodian has to pay on any ADSs or ordinary shares underlying ADSs, such as stock
transfer taxes, stamp duty or withholding taxes
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As necessary
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Any charges incurred
by the depositary or its agents for servicing the deposited securities
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As necessary
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The
depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering
ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions
to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the
fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing
investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its
fees by deduction from any cash distribution payable to ADS holders that are obligated to pay those fees. The depositary may generally
refuse to provide fee-attracting services until its fees for those services are paid.
From
time to time, the depositary may make payments to us to reimburse and/or share revenue from the fees collected from ADS holders,
or waive fees and expenses for services provided, generally relating to costs and expenses arising out of establishment and maintenance
of the ADS program. In performing its duties under the deposit agreement, the depositary may use brokers, dealers or other service
providers that are affiliates of the depositary and that may earn or share fees or commissions.
Payment
of Taxes
You
will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented
by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities
represented by your ADSs until such taxes or other charges are paid. It may apply payments owed to you or sell deposited securities
represented by your American Depositary Shares to pay any taxes owed and you will remain liable for any deficiency. If the depositary
sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any
proceeds, or send to ADS holders any property, remaining after it has paid the taxes.
Reclassifications,
Recapitalizations and Mergers
If
we:
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Then:
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Change
the nominal or par value of our shares
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The
cash, ordinary shares or other securities received by the depositary will become deposited securities. Each ADS will automatically
represent its equal share of the new deposited securities.
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Reclassify,
split up or consolidate any of the deposited securities
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Distribute
securities on the ordinary shares that are not distributed to you
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The
depositary may distribute new ADSs representing the new deposited securities or ask you to surrender your outstanding ADRs
in exchange for new ADRs identifying the new deposited securities.
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Recapitalize,
reorganize, merge, liquidate, sell all or substantially all of our assets, or take any similar action
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Amendment
and Termination
How
may the deposit agreement be amended?
We
may agree with the depositary to amend the deposit agreement and the ADSs without your consent for any reason. If an amendment
adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration
fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become
effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment.
At the time an amendment
becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs
and the deposit agreement as amended
.
How
may the deposit agreement be terminated?
The
depositary will terminate the deposit agreement at our direction by mailing notice of termination to the ADS holders at least
30 days prior to the date fixed in such notice for such termination. The depositary may also terminate the deposit agreement by
mailing notice of termination to us and the ADS holders if 60 days have passed from the date on which the depositary told us it
wants to resign but a successor depositary has not been appointed and accepted its appointment.
After
termination, the depositary and its agents will do the following under the deposit agreement but nothing else: collect distributions
on the deposited securities, sell rights and other property, and deliver ordinary shares and other deposited securities upon cancellation
of ADSs. Four months after termination, the depositary may sell any remaining deposited securities by public or private sale.
After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit
agreement for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will not invest the money and has
no liability for interest.
The
depositary’s only obligations will be to account for the money and other cash. After termination our only obligations will
be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.
Limitations
on Obligations and Liability
Limits
on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs
The
deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the
liability of the depositary. We and the depositary:
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are
only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;
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are
not liable if we are or it are prevented or delayed by law or circumstances beyond our or its control from performing our
or its obligations under the deposit agreement;
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are
not liable if we or it exercise discretion permitted under the deposit agreement;
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are
not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made
available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages
for any breach of the terms of the deposit agreement;
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have
no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf
or on behalf of any other person;
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are
not liable for the acts or omissions of any securities depository, clearing agency or settlement system; and
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may
rely upon any documents we believe or it believe in good faith to be genuine and to have been signed or presented by the proper
person.
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In
the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.
Requirements
for Depositary Actions
Before
the depositary will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of shares, the depositary
may require:
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payment
of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties
for the transfer of any ordinary shares or other deposited securities;
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satisfactory
proof of the identity and genuineness of any signature or other information it deems necessary; and
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compliance
with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer
documents.
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The
depositary may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the depositary or our transfer
books are closed or at any time if the depositary or we think it advisable to do so.
Your
Right to Receive the Ordinary Shares Underlying your ADSs
ADS
holders have the right to cancel their ADSs and withdraw the underlying ordinary shares at any time except:
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when
temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our transfer books; (ii)
the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting; or (iii) we are paying a dividend
on our shares;
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when
you owe money to pay fees, taxes and similar charges; or
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when
it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or
to the withdrawal of ordinary shares or other deposited securities.
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This
right of withdrawal may not be limited by any other provision of the deposit agreement.
Direct
Registration System
In
the deposit agreement, all parties to the deposit agreement acknowledge that DRS and the Profile Modification System, or Profile,
will apply to uncertificated ADSs upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC under which the
depositary may register the ownership of uncertificated ADSs, which ownership will be confirmed by periodic statements sent by
the depositary to the registered holders of uncertificated ADSs. Profile is a required feature of DRS that allows a DTC participant,
claiming to act on behalf of a registered holder of ADSs, to direct the depositary to register a transfer of those ADSs to DTC
or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior
authorization from the ADS holder to register that transfer.
In
connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement
understand that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS
holder in requesting registration of transfer and delivery described in the paragraph above has the actual authority to act on
behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties
agree that the depositary’s reliance on and compliance with instructions received by the depositary through the DRS/Profile
System and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.
Shareholder
communications; inspection of register of holders of ADSs
The
depositary will make available for your inspection at its office all communications that it receives from us as a holder of deposited
securities that we make generally available to holders of deposited securities. The depositary will send you copies of those communications
if we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose of contacting those holders
about a matter unrelated to our business or the ADSs.
Jury
Trail Waiver
The deposit agreement
provides that, to the extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against
us or the depositary arising out of or relating to our ordinary shares, the ADSs or the deposit agreement, including any claim
under the U.S. federal securities laws. If we or the depositary opposed a jury trial demand based on the waiver, the court would
determine whether the waiver was enforceable in the facts and circumstances of that case in accordance with applicable case law.
However, you will not, by agreeing to the terms of the deposit agreement, be deemed to have waived our or the depositary’s
compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder.
TAXATION
The
following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition
of our ordinary shares or ADSs (both referred to below as the Shares). You should consult your own tax advisor concerning the
tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local,
foreign, including Israeli, or other taxing jurisdiction
.
Israeli
Tax Considerations and Government Programs
The
following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material
Israeli income tax consequences concerning the ownership and disposition of our Shares. This summary does not discuss all the
aspects of Israeli income tax law that may be relevant to a particular investor in light of his or her personal investment circumstances
or to some types of investors subject to special treatment under Israeli law. Examples of this kind of investor include residents
of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that the
discussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot
assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. This summary
is based on laws and regulations in effect as of the date of this prospectus and does not take into account possible future amendments
which may be under consideration.
General
corporate tax structure in Israel
Taxable
income of Israeli companies was subject to tax at the rate of 26.5% in 2015, 25% in 2016, 24% in 2017 and 23% in 2018 and thereafter.
Capital gains derived by an Israeli resident company are generally subject to tax at the same rate as the corporate tax rate.
Under Israeli tax legislation, a corporation will be considered as an “Israeli Resident” if it meets one of the following:
(a) it was incorporated in Israel; or (b) the control and management of its business are exercised in Israel.
Capital
Gains Tax on Sales of Our Ordinary Shares
Israeli
law generally imposes a capital gains tax on the sale of any capital assets by residents of Israel, as defined for Israeli tax
purposes, and on the sale of assets located in Israel, including shares in Israeli companies, by both residents and non-residents
of Israel, unless a specific exemption is available or unless a tax treaty between Israel and the shareholder’s country
of residence provides otherwise. The Tax Ordinance distinguishes between real gain and inflationary surplus. The inflationary
surplus is a portion of the total capital gain equivalent to the increase of the relevant asset’s purchase price attributable
to an increase in the Israeli consumer price index, or a foreign currency exchange rate, between the date of purchase and the
date of sale. The real gain is the excess of the total capital gain over the inflationary surplus.
The
following discussion refers to the sale of our ordinary shares. However, the same tax treatment would apply to the sale of ADSs.
Taxation
of Israeli residents
As
of January 1, 2012, the tax rate generally applicable to the capital gains derived from the sale of shares, whether listed on
a stock market or not, is 25% for Israeli individuals, unless such shareholder is considered a “significant shareholder”
at any time during the 12-month period preceding such sale (
i.e.
, such shareholder holds directly or indirectly, including
jointly with others, at least 10% of any means of control in the company) in which case the tax rate will be 30%. Israeli companies
are subject to the corporate tax rate on capital gains derived from the sale of listed shares. However, different tax rates may
apply to dealers in securities and shareholders who acquired their shares prior to an initial public offering.
As
of January 1, 2013, shareholders that are individuals who have taxable income that exceeds NIS 800,000 in a tax year (linked to
the CPI each year), will be subject to an additional tax, referred to as Income Surtax, at the rate of 2% on their taxable income
for such tax year which is in excess of such threshold. Under an amendment enacted in December 2016 to the Tax Ordinance, for
tax year 2017 and thereafter the rate of High Income Tax was increased to 3% and will be applicable to annual income exceeding
NIS 640,000 (linked to the CPI each year). For this purpose, taxable income will include taxable capital gains from the sale of
our shares and taxable income from dividend distributions.
Taxation
of Non-Israeli Residents
Non-Israeli
residents are generally exempt from Israeli capital gains tax on any gains derived from the sale of shares publicly traded provided
such gains did not derive from a permanent establishment of such shareholders in Israel. Non-Israeli residents are also exempt
from Israeli capital gains tax on any gains derived from the sale of shares of Israeli companies publicly traded on a recognized
stock market outside of Israel, provided such shareholders did not acquire their shares prior to the issuer’s initial public
offering (in which case a partial exemption may be available), that the gains did not derive from a permanent establishment of
such shareholders in Israel. However, non-Israeli corporations will not be entitled to such exemption if Israeli residents (i)
have a controlling interest of more than 25% in such non-Israeli corporation, or (ii) are the beneficiaries of or are entitled
to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.
In
addition, the sale, exchange or disposition of our ordinary shares by a shareholder who is a U.S. resident (for purposes of the
U.S.-Israel Tax Treaty), and who holds ordinary shares as a capital asset, is also exempt from Israeli capital gains tax under
the U.S.-Israel Tax Treaty unless either (i) the shareholder holds, directly or indirectly, shares representing 10% or more of
our voting power during any part of the 12-month period preceding such sale or (ii) the capital gains arising from such sale are
attributable to a permanent establishment of the shareholder located in Israel. If the above conditions are not met, the U.S.
resident would be subject to Israeli tax, to the extent applicable. However, under the U.S.-Israel Tax Treaty, the gain would
be treated as foreign source income for United States foreign tax credit purposes and such U.S. resident would be permitted to
claim a credit for such taxes against the United States federal income tax imposed on such sale, exchange or disposition, subject
to the limitations under the United States federal income tax laws applicable to foreign tax credits.
Taxation
of Dividends Paid on our Ordinary Shares
The
following discussion refers to dividends paid on our ordinary shares. However, the same tax treatment would apply to dividends
paid on ADSs.
Taxation
of Israeli Residents
Israeli
resident individuals are generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares, other
than bonus shares (share dividends) or stock dividends. As of January 1, 2012, the tax rate applicable to such dividends is 25%
or 30% for a shareholder that is considered a significant shareholder at any time during the 12-month period preceding such distribution.
Dividends paid out of profits sourced from ordinary income are subject to withholding tax at the rate of 25% or 30%.
All
dividend distributions to Israeli resident corporations are not subject to a withholding tax.
For
information with respect to the applicability of Income Surtax on distribution of dividends, please see “Capital Gains Tax
on Sales of Our Ordinary Shares” and “Taxation of Israeli Residents” above in this Item.
Taxation
of Israeli Resident Corporations on Receipt of Dividends
Israeli
resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.
Taxation
of Non-Israeli Residents
Non-residents
of Israel, both companies and individuals, are generally subject to Israeli income tax on the receipt of dividends paid on our
ordinary shares, at the aforementioned rates applicable to Israeli residents, which tax will be withheld at source, unless a different
rate is provided in a treaty between Israel and the shareholder’s country of residence.
Under
the U.S.-Israel Treaty, the maximum Israeli withholding tax on dividends paid by us is 25%. The U.S.-Israel Tax Treaty further
provides for a 12.5% Israeli dividend withholding tax rate on dividends paid by an Israeli company to a U.S. corporation owning
at least 10% or more of such Israeli company’s issued voting power for, in general, the part of the tax year which precedes
the date of payment of the dividend and the entire preceding tax year. The lower 12.5% rate applies only to dividends paid from
regular income (and not derived from an Approved, Privileged or Preferred Enterprise) in the applicable period and does not apply
if the company has more than 25% of its gross income derived from certain types of passive income (if the conditions mentioned
above are met, dividends from income of an Approved, Privileged or Preferred Enterprise are subject to a 15% withholding tax rate
under the U.S.-Israel Tax Treaty). Residents of the United States generally will have withholding tax in Israel deducted at source.
They may be entitled to a credit or deduction for United States federal income tax purposes in the amount of the taxes withheld,
subject to detailed rules contained in United States tax legislation.
A
non-resident of Israel who has dividend income derived from or accrued in Israel, from which tax was withheld at source, is generally
exempt from the duty to file tax returns in Israel with respect to such income, provided such income was not derived from a business
conducted in Israel by the taxpayer.
Estate
and gift tax
Israeli
law presently does not impose estate or gift taxes.
EACH
PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OF PURCHASING, HOLDING,
AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
U.S.
Federal Income Tax Consequences
The
following is a summary of the material U.S. Federal income tax consequences that apply to U.S. holders (defined below) who hold
ADSs as capital assets for tax purposes. This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”),
existing final, temporary and proposed regulations thereunder, judicial decisions and published positions of the Internal Revenue
Service and the U.S.-Israel income tax treaty in effect as of the date of this annual report, all of which are subject to change
at any time (including changes in interpretation), possibly with retroactive effect. On December 22, 2017, the United States enacted
the U.S. Tax Reform which alters significantly the U.S. Federal income tax system, generally beginning in 2018. Given the
complexity of this new law, U.S. holders should consult their own tax advisors regarding its potential impact on the U.S. Federal
income tax consequences to them in light of their particular circumstances.
This
summary does not address all U.S. Federal income tax matters that may be relevant to a particular prospective holder or all tax
considerations that may be relevant with respect to an investment in ADSs.
This
summary does not address tax considerations applicable to a holder of an ADS that may be subject to special tax rules including,
without limitation, the following:
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dealers
or traders in securities, currencies or notional principal contracts;
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financial
institutions;
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insurance
companies;
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real
estate investment trusts;
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banks;
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investors
subject to the alternative minimum tax;
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tax-exempt
organizations;
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regulated
investment companies;
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investors
that actually or constructively own 10 percent or more of our voting shares;
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investors
that will hold the ADSs as part of a hedging or conversion transaction or as a position in a straddle or a part of a synthetic
security or other integrated transaction for U.S. Federal income tax purposes;
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investors
that are treated as partnerships or other pass through entities for U.S. Federal income tax purposes and persons who hold
the ADSs through partnerships or other pass through entities;
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investors
whose functional currency is not the U.S. dollar; and
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expatriates
or former long-term residents of the United States.
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This
summary does not address the effect of any U.S. Federal taxation other than U.S. Federal income taxation. In addition, this summary
does not include any discussion of state, local or foreign taxation or the indirect effects on the holders of equity interests
in a holder of an ADS.
You
are urged to consult your own tax advisor regarding the foreign and U.S. Federal, state and local and other tax consequences of
an investment in ADSs.
For
purposes of this summary, a “U.S. holder” is a beneficial owner of ADSs that is, for U.S. Federal income tax purposes:
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an
individual who is a citizen or a resident of the United States;
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a
corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under
the laws of the United States or any political subdivision thereof;
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an
estate whose income is subject to U.S. Federal income tax regardless of its source; or
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(a)
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a
court within the United States is able to exercise primary supervision over administration of the trust; and
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(b)
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one
or more United States persons have the authority to control all substantial decisions of the trust.
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If
an entity that is classified as a partnership for U.S. federal tax purposes holds ADSs, the U.S. federal income tax treatment
of its partners will generally depend upon the status of the partners and the activities of the partnership. Entities that are
classified as partnerships for U.S. federal tax purposes and persons holding ADSs through such entities should consult their own
tax advisors.
In
general, if you hold ADSs, you will be treated as the holder of the underlying shares represented by those ADSs for U.S. Federal
income tax purposes. Accordingly, no gain or loss will be recognized if you exchange ADSs for the underlying shares represented
by those ADSs.
U.S.
Taxation of ADSs
Distributions
Subject
to the discussion under “Passive Foreign Investment Companies” below, the gross amount of any distribution, including
the amount of any Israeli taxes withheld from these distributions (see “Israeli Tax Considerations”), actually or
constructively received by a U.S. holder with respect to ADSs will be taxable to the U.S. holder as a dividend to the extent of
our current and accumulated earnings and profits as determined under U.S. Federal income tax principles. Distributions in excess
of earnings and profits will be non-taxable to the U.S. holder to the extent of, and will be applied against and reduce, the U.S.
holder’s adjusted tax basis in the ADSs. Distributions in excess of earnings and profits and such adjusted tax basis will
generally be taxable to the U.S. holder as a capital gain from the sale or exchange of property. We do not maintain calculations
of our earnings and profits under U.S. Federal income tax principles. If we do not report to a U.S. holder the portion of a distribution
that exceeds earnings and profits, the distribution will generally be taxable as a dividend even if that distribution would otherwise
be treated as a non-taxable return of capital or as a capital gain under the rules described above. The amount of any distribution
of property other than cash will be the fair market value of that property on the date of distribution. The U.S. holder will not,
except as provided by Section 245 of the Code, be eligible for any dividends received deduction in respect of the dividend otherwise
allowable to corporations.
Under
the Code, certain dividends received by non-corporate U.S. holders will be subject to a maximum income tax rate of 20%. This reduced
income tax rate is only applicable to dividends paid by a “qualified foreign corporation” that is not a “passive
foreign investment company” and only with respect to shares held by a qualified U.S. holder (i.e., a non-corporate holder)
for a minimum holding period (generally 61 days during the 121-day period beginning 60 days before the ex-dividend date). We should
be considered a qualified foreign corporation because (i) we are eligible for the benefits of a comprehensive tax treaty between
Israel and the U.S., which includes an exchange of information program, and (ii) the ADSs are readily tradable on an established
securities market in the U.S. In addition, based on our current business plans, we do not expect to be classified as a “passive
foreign investment company” (see “Passive Foreign Investment Companies” below). Accordingly, dividends paid
by us to individual U.S. holders on shares held for the minimum holding period should be eligible for the reduced income tax rate.
In addition to the income tax on dividends discussed above, certain non-corporate U.S. holders will also be subject to the 3.8%
Medicare tax on dividends as discussed below under “Medicare Tax on Unearned Income”.
The
amount of any distribution paid in a currency other than U.S. dollars (a “foreign currency”) including the amount
of any withholding tax thereon, will be included in the gross income of a U.S. holder in an amount equal to the U.S. dollar value
of the foreign currencies calculated by reference to the exchange rate in effect on the date of receipt, regardless of whether
the foreign currencies are converted into U.S. dollars. If the foreign currencies are converted into U.S. dollars on the date
of receipt, a U.S. holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend.
If the foreign currencies received in the distribution are not converted into U.S. dollars on the date of receipt, a U.S. holder
will have a basis in the foreign currencies equal to its U.S. dollar value on the date of receipt. Any gain or loss on a subsequent
conversion or other disposition of the foreign currencies will be treated as ordinary income or loss.
Generally,
dividends received by a U.S. holder with respect to ADSs will be treated as foreign source income for the purposes of calculating
that holder’s foreign tax credit limitation. Subject to certain conditions and limitations, any Israeli taxes withheld on
dividends at the rate provided by the U.S.-Israel tax treaty may be deducted from taxable income or credited against a U.S. holder’s
U.S. Federal income tax liability. The limitation on foreign taxes eligible for the U.S. foreign tax credit is calculated separately
with respect to “passive” income and “general” income. The rules relating to foreign tax credits and the
timing thereof are complex. U.S. holders should consult their own tax advisors regarding the availability of a foreign tax credit
under their particular situation.
Sale
or Other Disposition of ADSs
If
a U.S. holder sells or otherwise disposes of its ADSs, gain or loss will be recognized for U.S. Federal income tax purposes in
an amount equal to the difference between the amount realized on the sale or other disposition and such holder’s adjusted
tax basis in the ADSs. Subject to the discussion below under the heading “Passive Foreign Investment Companies,” such
gain or loss generally will be a capital gain or loss, and will be long-term a capital gain or loss if the holder had held the
ADSs for more than one year at the time of the sale or other disposition. Long-term capital gains realized by individual U.S.
holders generally are subject to a lower marginal U.S. Federal income tax rate (currently up to 20%) than the marginal tax rate
on ordinary income. In addition to the income tax on gains discussed above, certain non-corporate U.S. holders will also be subject
to the 3.8% Medicare tax on net gains as discussed below under “Medicare Tax on Unearned Income”. Under most circumstances,
any gain that a holder recognizes on the sale or other disposition of ADSs will be U.S. sourced for purposes of the foreign tax
credit limitation and any recognized losses will be allocated against U.S. source income.
If
a U.S. holder receives foreign currency upon a sale or exchange of ADSs, gain or loss, if any, recognized on the subsequent sale,
conversion or disposition of such foreign currency will be ordinary income or loss, and will generally be income or loss from
sources within the United States for foreign tax credit limitation purposes. However, if such foreign currency is converted into
U.S. dollars on the date received by the U.S. holder, the U.S. holder generally should not be required to recognize any gain or
loss on such conversion.
A
U.S. holder who holds shares through an Israeli stockbroker or other Israeli intermediary may be subject to Israeli withholding
tax on any capital gain recognized if the U.S. holder does not obtain approval of an exemption from the Israeli Tax Authorities
or claim any allowable refunds or reductions. U.S. holders are advised that any Israeli tax paid under circumstances in which
an exemption from (or a refund of or a reduction in) such tax was available will not give rise to a deduction or credit for foreign
taxes paid for U.S. federal income tax purposes. If applicable, U.S. holders are advised to consult their Israeli stockbroker
or intermediary regarding the procedures for obtaining an exemption or reduction.
Medicare
Tax on Unearned Income
Certain
U.S. holders that are individuals, estates or trusts are required to pay an additional 3.8% tax on all or a portion of their “net
investment income,” which includes dividends and net gains from the sale or other dispositions of ADSs (other than ADSs
held in a trade or business).
Passive
Foreign Investment Companies
For
U.S. Federal income tax purposes, we will be considered a passive foreign investment company (“PFIC”) for any taxable
year in which either 75% or more of our gross income is passive income, or at least 50% of the average value of all of our assets
for the taxable year produce or are held for the production of passive income. For this purpose, passive income includes dividend,
interest, royalty, rent, annuity and the excess of gain over losses from the disposition of assets which produce passive income.
If we were determined to be a PFIC for U.S. Federal income tax purposes, highly complex rules would apply to U.S. holders owning
ADSs.
We
have not determined whether we will be a PFIC in the year in which this offering is completed or in future years. Because the
PFIC determination is highly fact-intensive, there can be no assurance that we will not be a PFIC in the year in which this offering
is completed or any subsequent year.
Our
status in any taxable year will depend on our assets and activities in each year and because this is a factual determination made
annually at the end of each taxable year, there can be no assurance that we will not be considered a PFIC for any future taxable
year. If we were treated as a PFIC in any year during which a U.S. holder owns ADSs, certain adverse tax consequences could apply.
You
are urged to consult your own tax advisor regarding the possibility of us being classified as a PFIC and the potential tax consequences
arising from the ownership and disposition (directly or indirectly) of an interest in a PFIC.
The
U.S. federal income tax rules relating to PFICs, QEF elections, and mark-to market elections are complex. U.S. Investors are urged
to consult their own tax advisors with respect to the purchase, ownership and disposition of our Shares, any elections available
with respect to such Shares and the IRS information reporting obligations with respect to the purchase, ownership and disposition
of our Shares.
Certain
Reporting Requirements
Certain
U.S. Investors are required to file IRS Form 926, Return by U.S. Transferor of Property to a Foreign Corporation, and certain
U.S. Investors may be required to file IRS Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations,
reporting transfers of cash or other property to us and information relating to the U.S. Investor and us. Substantial penalties
may be imposed upon a U.S. Investor that fails to comply.
In
addition, recently enacted legislation requires certain U.S. Investors to report information on IRS Form 8938 with respect to
their investments in certain “foreign financial assets,” which would include an investment in our Shares, to the IRS.
Investors
who fail to report required information could become subject to substantial civil and criminal penalties. U.S. Investors should
consult their tax advisors regarding the possible implications of these reporting requirements on their investment in our Shares.
Disclosure
of Reportable Transactions
If
a U.S. Investor sells or disposes of the Shares at a loss or otherwise incurs certain losses that meet certain thresholds, such
U.S. Investor may be required to file a disclosure statement with the IRS. Failure to comply with these and other reporting requirements
could result in the imposition of significant penalties.
Backup
Withholding Tax and Information Reporting Requirements
Generally,
information reporting requirements will apply to distributions on our Shares or proceeds on the disposition of our Shares paid
within the United States (and, in certain cases, outside the United States) to U.S. Investors other than certain exempt recipients,
such as corporations. Furthermore, backup withholding (currently at 28%) may apply to such amounts if the U.S. Investor fails
to (i) provide a correct taxpayer identification number, (ii) report interest and dividends required to be shown on its U.S. federal
income tax return, or (iii) make other appropriate certifications in the required manner. U.S. Investors who are required to establish
their exempt status generally must provide such certification on IRS Form W-9.
Backup
withholding is not an additional tax. Amounts withheld as backup withholding from a payment may be credited against a U.S. Investor’s
U.S. federal income tax liability and such U.S. Investor may obtain a refund of any excess amounts withheld by filing the appropriate
claim for refund with the IRS and furnishing any required information in a timely manner.
THE
DISCUSSION ABOVE IS A GENERAL SUMMARY. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES
TO IT OF RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.
PLAN
OF DISTRIBUTION
We
are distributing our rights directly to holders of ADSs and our ordinary shares, on a pro rata basis, pursuant to the rights offering.
See – “The Rights Offering”.
We
will pay MacKenzie Partners, Inc., the information agent, an estimated fee of approximately $ ,
and The Bank of New York Mellon, the ADS rights agent, an estimated fee of approximately $
for their services in connection with the Rights Offering. We have also agreed to reimburse the information agent, the ADS rights
agent and our financial advisor their reasonable expenses in connection with the rights offering.
We
estimate that our total expenses in connection with the rights offering, including registration, legal, printing and accounting
fees, will be approximately $ .
We
have not employed any brokers, dealers or underwriters in connection with the solicitation or exercise of rights. Except as described
in this section, we are not paying any other commissions, fees or discounts in connection with the rights offering. Some of our
employees may solicit responses from you as a holder of rights, but we will not pay our employees any commissions or compensation
for such services other than their normal employment compensation.
BUSINESS
Overview
We
are a clinical stage biopharmaceutical company focused on developing and, ultimately, commercializing immunomodulation therapies
for infectious diseases. Our current product candidate, a universal influenza vaccine that we refer to as M-001, is a synthetic
peptide-based protein targeting both seasonal and pandemic strains of the influenza virus. Unlike existing influenza vaccines,
which offer only strain specific seasonal protection or pandemic prevention, M-001 is designed to provide long-lasting protection
against multiple existing and future influenza strains. As a result, we believe that M-001 has the potential to become an attractive
alternative to existing influenza vaccines.
M-001
is based on research initially conducted at the Weizmann Institute of Science in Israel, or the Weizmann Institute, over a period
of approximately 10 years prior to our inception in 2003. In 2003, we acquired from Yeda Research and Development Company Ltd.,
or Yeda, an affiliate of the Weizmann Institute, an exclusive worldwide license for the development, manufacture, use, marketing,
sale, distribution and importation of products based, directly or indirectly, on patents and patent applications filed pursuant
to the invention titled “Peptide Based Vaccine for Influenza”, developed on the basis of the research conducted by
Professor Ruth Arnon and her team at the Weizmann Institute. Since 2003, we have continued the research and development of M-001
under the supervision of our Chief Scientific Officer, Dr. Tamar Ben Yedidia and, at present, we own or license five families
of patents filed in a large number of jurisdictions, the latest of which is expected to be in force until 2035.
According
to the CDC, the estimated adjusted seasonal influenza vaccine effectiveness (VE) from 2005 to 2018 in the USA varied between 10%
during the 2004/2005 season to 60% during the 2010/2011 season. In the 2014/15 season, VE was estimated at only 19%. According
to this data, the average VE is about 40%. Most existing influenza vaccines are formulated based on weakened or dead strains of
the influenza virus that are predicted to be the most common circulating strains during the then upcoming influenza season or
that are perceived to have the greatest potential to cause a future pandemic outbreak. While the influenza virus frequently and
unpredictably mutates, resulting in novel strains, existing seasonal and pandemic influenza vaccines are strain-specific, and
only target those specific strains, and are not expected to protect against novel emerging influenza strains. In addition, the
production cycle of most existing influenza vaccines is long (approximately 5 to 6 months), considerably limiting the ability
to quickly immunize the population in case of a pandemic outbreak.
We
intend to seek regulatory approvals to market M-001 for the following indications: (i) as a universal influenza vaccine suitable
to be administered to the general population to provide protection against seasonal and pandemic strains of influenza; and (ii)
as a pre-pandemic influenza vaccine, or primer, for national stockpile, suitable to be administered to the general population,
prior to a strain specific pandemic vaccine, for enhanced pandemic preparedness.
We
are conducting a pivotal clinical efficacy Phase 3 trial in 54 clinical trial sites in four European countries, subject, among
other, to the regulation of the European Medicines Agency (EMA). In March 2018 we entered into a master service agreement and
work order with a European contract research organization, or CRO, to conduct the first pivotal clinical efficacy phase 3 trial
of M-001. Launched in August 2018, the
primary endpoints of this trial are to demonstrate
safety of M-001 and the clinical efficacy conferred by M-001 administration, measured by reduction of confirmed flu cases in the
vaccinated group versus placebo. A secondary endpoint will assess reduction in flu illness severity among those receiving M-001
versus placebo. In October 2018 we announced the successful enrollment of the last participant of the first cohort, consisting
of 4,094 participants, for the first season of this clinical trial. We expect the second cohort of at least approximately 6,000
or more participants to be enrolled prior to the 2019/2020 flu season. The Data Safety Monitoring Board, or DSMB, met in January
2019 in Warsaw, Poland, to review the safety data for our first cohort available at that time, and notified us that they have
no safety concerns and recommended that the study continue as planned.
In
addition, in November 2017 we entered into a clinical trial agreement with the
National
Institute of Allergy and Infection Diseases (NIAID) of the U.S. National Institutes of Health (NIH) for a Phase 2 clinical trial
in the U.S., for the administration of M-001 in participants, and in April 2018 we reported the first participant enrollment in
this clinical trial.
In
addition to these ongoing clinical trials, we have completed two Phase 1/2 clinical trials and three Phase 2 clinical trials in
Israel pursuant to clinical trial protocols approved by the Israeli Ministry of Health, and a Phase 2b clinical trial in Europe.
These clinical trials were designed for adults between the ages of 18 to 65 and older and included an aggregate of 698 participants.
Because our product candidate is a vaccine, we conducted our Phase 1/2 clinical trials on healthy participants to test both safety
of M-001 as our primary endpoint and the immunogenicity of M-001 as our secondary endpoint. Results from all our Phase 1/2 and
Phase 2 clinical trials indicated that M-001 was well tolerated and safe across all treatment groups within the trial population
and that M-001 was effective in causing an immune reaction in clinical trial participants administered with M-001.
In October 2015 we
entered into a Development and Manufacturing Agreement for the production of clinical batches of M-001 with a CMO, based in the
USA, for the purpose of upscaling the small-scale cGMP manufacturing process of M-001 for Phase 3 and commercial production. As
planned, on August 20, 2018, we announced our move to a new mid-sized factory in Jerusalem, with potential capacity to annually
produce up to forty million doses of M-001. The facility is planned for annual manufacturing capacity of 20 million doses in bulk
including up to 10 million doses in filled and finished (PFS packed) syringes. For this purpose, on July 18, 2017, we entered into
an agreement to lease approximately 1,800 square meters (20,000 square feet) in the Jerusalem BioPark, located in the Ein Kerem
Hadassah campus, next to Hadassah University Hospital and Hebrew University’s Medical School. We financed the costs of the
first stage of construction, in an amount of approximately $10 million, with funds and grants received by us, as well as with our
own financial resources. This first stage of construction included setting up laboratories, offices, and upstream and downstream
manufacturing suites for bulk production and limited capacity for single-dose syringe filling. We also completed setting up an
infrastructure to support our plans to be implemented upon successful Phase 3 results, when we intend to install additional equipment
such as a higher capacity syringe filling machine, automatic visual inspection, and packing machines in order to establish commercial
fill-and-finish capacity.
On June 19, 2017,
we entered into a Finance Contract with the EIB, for the financing of up to Euro 20 million
,
which was extended to Euro 24 million as described in this prospectus, and up to 50% of the Company’s expected cost of developing
and marketing the Company’s product candidate, M-001. To date, we have drawn down an amount of Euro 20 million and have
entered into a security agreement placing a first ranking floating charge over all our assets in favor of EIB, excluding assets
and/or intellectual property rights subject to the license agreement between the Company and YEDA.
The
Israeli Innovation Authority (IIA), formerly known as the Office of the Chief Scientist, has granted us since 2006 approximately
$5.5 million in funding, for the ongoing development of M-001. In addition, and subject to certain terms and conditions, we have
been approved by the Ministry of Economy and Industry of the State of Israel for a grant of approximately NIS 4 million to be
utilized towards the construction of a factory for the production of Phase 3 and commercial batches of M-001. See – “Business
– Research Grants”.
We
intend, subject to the successful results of our pivotal clinical efficacy Phase 3 clinical trial in Europe, to enter into discussions
with the FDA, regarding market approval of M-001 in the U.S., and to comply with the applicable requirements. Although we have
not yet submitted a Phase 3 IND to the FDA, we believe that the results of the Phase 2 clinical trials conducted by us so far
or to be conducted in the future, as well as of our ongoing pivotal clinical efficacy Phase 3 trial in Europe, will further expand
our data to provide greater support for any Phase 3 clinical trial of M-001 we may conduct in the U.S. in the future.
We
do not currently have sufficient financial resources to complete Phase 3 clinical trials of M-001 on our own. We may seek to establish
collaborations with large multinational pharmaceutical companies and/or national health authorities to finance Phase 3 clinical
trials of M-001. However, to the extent that we have sufficient capital to do so (whether through sales of debt or equity securities
or otherwise, including as a result of this rights offering), we may seek to conduct Phase 3 clinical trials of M-001 without
such collaborations.
Our
Market Opportunity
Influenza
is an infectious disease caused by different strains of the influenza virus. The disease is common around the world and appears
as seasonal or pandemic outbreaks. The various strains of influenza are classified into A and B groups according to the type of
proteins in the virus. According to information published by the WHO, the global annual attack rate of seasonal influenza is estimated
at 5% – 10% in adults and 20% – 30% in children, and up to 650,000 of those infected die as a result of influenza
and associated respiratory diseases. In the U.S., the CDC estimates that influenza was associated with nearly 49 million illnesses
during the 2017/18 flu season, including 959,000 hospitalizations and 79,400 deaths. Most severe morbidity and mortality was observed
in adults aged 65 years and older. In addition, during seasonal influenza epidemics from 1979/80 through 2000/01, the estimated
overall number of influenza-associated hospitalizations in the United States ranged from approximately 54,000 to 430,000 per epidemic,
and 63% of these cases occurred among persons over the age of 65. Infants, adults over the age of 50 and chronic disease patients
are most likely to contract influenza and suffer from complications.
The
influenza virus undergoes frequent mutations. These mutations decrease the effectiveness of the immune reaction of the human body.
If the mutations are very significant, the mutated virus strains may cause global pandemics. Over the last few years, new strains
of the influenza virus previously only existing in animals have appeared in humans, including Avian flu strains such as H5 and
H7. We believe that the appearance of new potentially pandemic strains is a growing concern among health authorities, as these
strains increase the risk of worldwide pandemics and high mortality and morbidity rates. Indeed, the WHO listed the threat of
global influenza pandemic as one of the “Ten threats to global health in 2019.” Furthermore, according to the scientific
journal
Vaccine
(Molinari et al. 2007), the direct financial loss attributed to the influenza disease in the USA was estimated
at a total of $87.1 billion annually, of which $55.7 billion related to incidents of the disease among adults aged 65 years or
older.
To
date, the most common therapeutic treatment methods for influenza focus on pain and symptom relief. While anti-viral treatments
may shorten the duration and severity of the disease, such treatments must be applied in the early stages of the course of the
disease to be effective. Many countries around the world, including the United States, provide preventative treatment in the form
of annual or seasonal influenza vaccines, which are especially recommended to patients in risk groups. Because seasonal vaccines
target only particular influenza strains predicted for the coming year, such vaccines may not be effective against the strains
that actually do appear (if different from those predicted) and may not protect against unexpected mutations of a particular influenza
strain that was predicted.
The
seasonal influenza vaccine market was dominated in 2017 by three large pharmaceutical companies Sanofi Pasteur, Seqirus, and GlaxoSmithKline
plc (GSK). According to GlobalData’s “Seasonal Influenza Vaccines – Global Drug Forecast and Market Analysis
to 2025” report, dated November 2016, sales of seasonal influenza vaccines in the seven major markets (US, France, Germany,
Italy, Spain, UK, and Japan), will rise from $3.1 billion in 2015 to $4.3 billion by 2025. A CNBC report dated October 19, 2015,
quoted estimated seasonal flu vaccine revenue in the U.S. alone at $1.61 billion in 2014, with total distribution of 147.8 million
doses. The same CNBC report quotes a vaccine manufacturer’s estimated global market in 2015 at $4 billion.
Our
Product Candidate M-001
Our
current product candidate, M-001, is comprised of nine peptides that activate the entire immune system (including both a humoral
reaction, an immune reaction causing the body to create antibodies against a pathogen or parts thereof, and a cellular immune
reaction, and immune reaction causing the body to kill or assist in killing pathogens), to prevent the spread of the influenza
disease within the body and shorten the duration of the illness. The selected peptides are from the HA, NP and M1 proteins of
both influenza Type A and Type B virus, and each peptide comprises up to 22 amino-acids. These peptides are common in the vast
majority of influenza virus strains and are combined into a single protein used in M-001.
In
order to produce M-001, we use an expression system that consists of bacteria and a DNA plasmid encoding for M-001. The DNA plasmid
encoding is inserted into a proprietary E. coli bacteria specifically designed for the production of peptide-based products. The
bacteria express M-001 synthetic protein from the DNA, and once expressed, M-001 is further purified from other non-related bacterial
proteins. M-001 is then formulated and filled into sterile vials or syringes (as in our new facility) that are kept in cooled
storage until used.
The
following image demonstrates the selection of certain peptides common in the influenza virus and the formulation of M-001:
M-001
is intended to be intramuscularly injected into the body. Once administered, M-001 is designed to be recognized by the immune
system, triggering both humoral and cellular immune reactions. This process is expected to result in the creation of new memory
cells which, upon influenza infection, secrete antibodies to fight the influenza virus.
Our
Competitive Strengths
We
believe our product candidate can potentially improve influenza protection by providing several distinct advantages, including:
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Multi-strain
flu protection
. We believe that the peptide-based structure of M-001 will allow our product to be effective against many
existing and future strains of the influenza virus and to remain effective in protecting against new strains without required
updates and alterations. To test this hypothesis, in January and July 2014, we conducted a sequence examination and when possible,
animal studies in our laboratories, to compare the structure of M-001 with new flu strains (H7N7, H6N1, H5N8, H7N9 and H10N8)
discovered in humans in recent years similarly to the H5N1 strain. Although these strains have not yet been classified as
pandemic, they are dangerous for humans and have caused morbidity and death in the past. The results of such examination and
studies demonstrated that M-001 was compatible against these strains. This data supports our claim of the universality of
M-001 for existing and future influenza virus strains.
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Long-lasting
flu protection
. M-001 is designed to enhance humoral and activate cellular reactions of the immune system. We therefore
believe that M-001, if approved for commercial sale, will be more effective and long-lasting compared to currently commercially
available vaccines that generally stimulate only humoral immune responses.
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Continuous
sales cycle not affected by seasonality
. Because M-001 is designed to provide a multi-strain flu protection that
is long lasting and is not expected to require updates for future virus strains or mutations, we do not expect future sales
of M-001 as a universal standalone vaccine or as a pandemic primer to be affected by the influenza season. Unlike traditional
influenza vaccines, which are sold and administered in western countries primarily during the period from September through
November, we believe that M-001 for these indications can be sold and administered or sold and stored throughout the entire
year.
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Shorter
production times
. We believe that the production time for M-001 will be only 6 to 8 weeks, as opposed to the 16 to
24 weeks (on average) required to produce most currently available seasonal influenza vaccines. We expect that shorter production
times will give manufacturers greater flexibility in their production planning, as well as the ability to execute large orders
of vaccine doses in a short timeframe in response to pandemics.
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Absence
of allergy inducing egg proteins
. Most influenza vaccines are produced in hen eggs and may therefore cause an allergic
reaction to those allergic to certain egg proteins. An epidemiological study performed by the European Food Safety Authority
(EFSA) in 2011 found that eggs are some of the most common allergens in the population. In contrast, M-001 is not produced
using eggs and does not cause egg protein allergic reactions.
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We
also believe the following key strengths provide us with competitive advantages relative to other companies seeking to develop
novel treatments for the prevention of influenza:
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M-001
is currently in advanced clinical stage (Phase 3).
We are currently conducting a Phase 3 clinical trial in Europe and
have completed two Phase 1/2 clinical trials and three Phase 2 clinical trials in Israel pursuant to clinical trial protocols
approved by the Israeli Ministry of Health, and an additional Phase 2b clinical trial Europe. Our Phase 1/2 and Phase 2 clinical
trial results indicated that M-001 was well tolerated and safe across all treatment groups within the trial population and
was effective in causing an immune reaction in clinical trial participants administered with M-001.
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Extensive
knowledge and expertise in the use of peptide-based vaccines
. We have extensive experience researching and developing
peptide-based compounds, including M-001. Our product candidate is based on years of research, including the research headed
by Professor Ruth Arnon at the Weizmann Institute during the 10 years prior to our inception. Over the course of that 10 year
period the scientific concept of a peptide-based influenza vaccine was established and confirmed in numerous preclinical and
clinical trials for various influenza virus strains. We believe that this knowledge and expertise gives us a competitive advantage
over other universal influenza vaccine developers with less significant experience and knowledge of these fields of study.
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In-house cGMP production capacity and advanced stage of construction for a commercial manufacturing capacity.
Our previous production facility in Ness Ziona was Phase 1 and 2 clinical trial audited and approved for production according to cGMP standards by a European qualified person. In October 2015 we entered into a Development and Manufacturing Agreement with a CMO based in the U.S. for the production of clinical batches of M-001 for our current Phase 3 clinical trial. As planned, on August 20, 2018, we announced our move to a new mid-sized manufacturing facility in Jerusalem, with potential capacity to annually produce up to forty million doses of M-001 for Phase 3 and commercial use.
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Indications
for our Product Candidate
M-001
is currently in advanced stages of a pivotal clinical efficacy Phase 3 clinical trial.
The
use of M-001 as a universal flu vaccine for the general population is intended to provide prolonged protection against existing
and future influenza strains for a period of at least one year, and may be extended to periods of three to five years, subject
to future regulatory approval. According to the US CDC, approximately 40% of the adult population and 60% of the elderly population
in the U.S. (ages 65 and up) is annually vaccinated against the influenza virus. Subject to competitive risks (including the risk
that our competitors may develop vaccines that are or are perceived by doctors to be more effective, longer lasting or less expensive),
we expect that M-001, if approved for commercial sale, will achieve a high penetration rate within its intended markets.
We
believe that the approval of M-001 will allow health authorities to more quickly and effectively protect the general population
or targeted groups from seasonal influenza and/or pandemic outbreaks, using national stockpiles.
Our
Business Strategy
Our
strategy is to complete development of, and, thereafter, manufacture and commercialize M-001 for use as a global influenza prevention
therapy. Key elements of our current strategy include the following:
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Receive
all required regulatory approvals for the commercialization of M-001 as a preventative therapy for influenza
. We have
launched a pivotal clinical efficacy Phase 3 clinical trial in Europe under the EMA, following the completion of several Phase
2 clinical trials conducted in Israel and Europe. We have also entered in a clinical trial agreement with the NIAID for a
Phase 2 clinical trial in the U.S. for the administration of M-001 in participants.
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Seek
attractive partnership opportunities
. We believe that the proprietary rights provided by M-001, together with the successful
clinical results and commercial scale manufacturing capacity, will create attractive partnership opportunities for large pharmaceutical
companies or health authorities in different countries around the world. We intend to seek to build a portfolio of commercially
attractive partnerships consisting of co-developments and licenses, which will allow us to commercialize M-001 worldwide.
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Further develop our independent production line.
Our previous production facility was Phase 1 and 2 clinical trial audited and approved for production according to cGMP standards, by a European qualified person. In October 2015 we entered into a Development and Manufacturing Agreement with a CMO located in the U.S. for the production of clinical batches of M-001 for our current Phase 3 clinical trial. As planned, on August 20, 2018, we announced our move to a new mid-sized manufacturing facility in Jerusalem, with potential capacity to annually produce up to forty million doses of M-001 for Phase 3 and commercial use. We intend to complete the construction of our independent production line of our facility. We intend to complete the construction of our independent production line of our facility by the end of 2021, subject to successfully completing the phase 3 pivotal clinical trial we are currently conducting in Europe.
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Results
of Our Clinical and Preclinical Trials
General
All
clinical trial protocols and their results, including preceding safety and efficacy data, are submitted to the regulatory authorities
in the country where the trial is being conducted. The regulatory authority may demand additional preliminary tests before approving
the clinical trial as well as changes to the submitted outline of the clinical trial. These changes may affect the planned timetables,
costs and method of performance of our trials. Furthermore, regulatory authorities in different countries may have different requirements.
The
course of the clinical trials and performance of the different stages of the trials is a process normally required in order to
receive approval for marketing pharmaceutical products in countries where the clinical trials are performed. Generally, it is
possible to market the product in a country only if such product was approved by that specific country, however in some countries
it is possible to market the product even if the trials were not performed in that territory.
We
are currently conducting a pivotal clinical efficacy Phase 3 trial in 54 clinical trial sites in four European countries, subject,
among other, to the regulation of the European Medicines Agency (EMA). Our Phase 3 clinical trial was initiated after we have
completed two Phase 1/2 clinical trials and three Phase 2 clinical trials in Israel pursuant to clinical trial protocols approved
by the Israeli Ministry of Health, and a Phase 2b clinical trial in Europe. We are assisted by professional advisers in examining
the possibilities of performing clinical trials in additional countries, taking into consideration the costs of the trials, speed
of receiving the approvals, and manner of performing the trials. We consider this information, together with marketing information
regarding future products in each country and whether each country regulatory authority consents to relying on prior approvals
and research performed in other countries, in choosing clinical trial sites.
Failure
of clinical trials at any stage may cause us to perform an additional trial or to cease the development of the product candidate
entirely for a specific indication. We make such decisions based on the nature of the results of the trials. In order to receive
the various approvals required in different countries, we set timetables, taking into account the seasonality of the influenza
disease.
Ongoing
Phase 3 Clinical trials
As planned, we
initiated a Phase 3 clinical trial in Europe starting at the 2018/2019 flu season. In this clinical trial, we are administering
M-001 for the following indication: as a universal influenza vaccine suitable to be administered to the general population to
provide protection against seasonal and pandemic strains of influenza. The placebo-controlled pivotal clinical efficacy Phase
3 trial plans to enroll a minimum of approximately 12,000 participants over two years, including 4,094 who were enrolled in the
trial’s first cohort prior to the 2018/19 flu season. Since assessment of clinical efficacy of influenza vaccines largely
depends on the attack rates of circulating influenza strains, the study features flexible enrollment to adjust the required number
of participants in the second year, and, optionally, the protocol allows us to extend the clinical trial to a third flu season
and a third cohort. The participants will be 50 years and older, with at least half over 65 years of age. The EMA’s Committee
for Medicinal Products for Human Use (CHMP) reviewed our Phase 3 trial plan, provided advice, and allowed us to proceed with the
Phase 3 clinical trial plan for M-001.
The Data Safety Monitoring Board, or DSMB, met in
January 2019 in Warsaw, Poland to review the safety data for our first cohort available at that time, and notified us they have
no safety concerns and recommended that the study continue as planned.
Clinical
trial number
|
|
Phase
|
|
Location
|
|
Regulatory
Authority
|
|
Trial
Design
|
|
Trial
Purpose
|
|
Population
|
|
Number
of Subjects
|
BVX-010
|
|
3
|
|
Europe
|
|
EMA
|
|
A
randomized, double-blind, placebo-controlled pivotal phase 3 trial
|
|
Primary
Endpoints: Safety and clinical efficacy Secondary Endpoint: reduction of severity of flu illness
|
|
Adults
ages 50 and older, at least 50% of participants are over 65 years old
|
|
A
minimum of approximately 12,000 (flexible enrollment, divided into cohorts)
|
Results
of our completed Clinical Trials
The
following table summarizes the structure, design and purpose of our completed Phase 2 clinical trials conducted in Israel and
Hungry, subject to the relevant regulatory approvals for each clinical trial:
Clinical
trial
number
|
|
Phase
|
|
Trial Design
|
|
Trial Purpose
|
|
Population
|
|
Number of
Subjects
|
|
Results
|
BVX-002
|
|
1/2
|
|
randomized, single-centered, single-blind, placebo-controlled escalating double-dose
|
|
|
|
Adults
(ages 18 to 49)
|
|
63
|
|
M-001
was well tolerated and a humoral and cellular immune reaction was observed.
|
BVX-003
|
|
1/2
|
|
randomized, single-blind, placebo-controlled escalating double-dose
|
|
|
|
Elderly
(ages 55 to 75)
|
|
60
|
|
|
BVX-004
|
|
2
|
|
randomized, two centered, two stage, double-blind, placebo controlled double-dose
|
|
Primary Endpoint: Safety
|
|
Adults
(ages 18 to 49)
|
|
200
|
|
|
BVX-005
|
|
2
|
|
multicenter, randomized, placebo-controlled
|
|
Secondary Endpoint: immunogenicity
|
|
Elderly
(ages 65+)
|
|
120
|
|
|
BVX-006
|
|
2
|
|
Randomized, Placebo-Controlled, Double-Blind
|
|
Primary Endpoint: Safety Secondary Endpoint: immunogenicity
|
|
adults between ages of 50 to 64
|
|
36
|
|
|
BVX-007
Phase 2b
|
|
2
|
|
Randomized, Placebo-Controlled, Double-Blind
|
|
Primary Endpoint: Safety and cell mediated immunity
|
|
adults between ages of 18 to 60
|
|
219
|
|
Safety and cellular immune response of M-001 confirmed.
|
BVX-002
We
completed our BVX-002 Phase 1/2 clinical trial during the third quarter of 2009. This Phase 1/2 study was a single-center, single-blind,
placebo-controlled, first-in-man trial, intended to test the safety of M-001 as our primary endpoint and the immunogenicity of
M-001 as our secondary endpoint. More specifically, the study was aimed at assessing the safety of repeated intramuscular administration
of two different doses of the influenza-targeted M-001 vaccine prepared with or without an adjuvant. Three subjects designated
as “pre-pioneer”, were vaccinated once with a low dose (125 mcg) of M-001 and monitored for 7–9 days thereafter
to ensure the vaccine’s relative safety before exposing further subjects to higher doses. Only after evaluation of the responses
of these three subjects, and a minimum 72-hour observation window after release of the third subject, were further vaccinations
and doses authorized. In the remaining cohorts, three subjects of each cohort were always treated before the remainder of the
cohort to ensure basic vaccine safety. In addition, a dose escalation was only allowed after a 10-day observation period between
the last dosing of the lower dose cohorts and the first vaccination of the higher dose cohorts. The appropriate dosage of M-001
was intramuscularly administered on days 0 and 21 of the clinical trial. Blood was drawn on vaccination days and on day 42 to
assess safety and immune parameters. Follow-up and recording of any adverse events extended up to three weeks after administration
of the second vaccine dose.
The
broadest immune response was recorded among subjects vaccinated with two doses of 250mcg or 500mcg of M-001 with or without an
adjuvant formulation. M-001 exhibited a positive safety profile, in that no serious or severe adverse events were reported and
no adverse events were defined as probably or definitely related to treatment. The fewest number of adverse events were reported
for the experimental group administered with the 500mcg of M-001 with an adjuvant. Of the adverse events described as possibly-related
to treatment regimen, 92.6% were graded mild and 61% were overcome within one day of appearance. Only four participants suffered
from fever above 100.4°F.
BVX-003
We
completed our BVX-003 Phase 1/2 clinical trial in April 2010. This study was a single-center, single-blind, placebo-controlled
trial, intended for further testing the safety of M-001 as our primary endpoint and the immunogenicity of M-001 as our secondary
endpoint. More specifically, the study was aimed at assessing the safety and tolerability of two successive intramuscular administrations
of M-001, prepared with or without an adjuvant, in elderly volunteers (ages 55 to 75). Subjects were randomly allocated to one
of two dosing cohorts, with 30 subjects per cohort, and treated with either 250mcg or 500 mcg active vaccines. An optional third
vaccination with the commercial trivalent seasonal influenza 2009/10 vaccine (TIV) (Vaxigrip, Sanofi-Pasteur or equivalent product)
was supplied to those interested subjects not immunized prior to the study.
The
strongest immune reactions, both humoral and cellular, were detected among subjects receiving the M-001-based vaccines in 250
or 500 mcg doses with or without an adjuvant, compared to those receiving placebo with an adjuvant. Humoral responses to M-001
were most significant among subjects primed with either of the adjuvanted or non adjuvanted M-001-based formulations and subsequently
boosted with the TIV, when compared to the combined control groups that were not previously primed with M-001. All variations
of M-001 administration (with an adjuvant or in different doses) proved safe and tolerable among the participants. The number
of subjects reporting adverse events after treatment with active vaccines was similar to their respective placebo cohorts, showing
that the M-001 was well tolerated and safe.
BVX-004
We
completed our BVX-004 Phase 2 clinical trial in June 2011. This Phase 2 study was a multi-center, randomized, two stage, double-blind,
placebo-controlled, double-dosed administration study, intended for further testing the safety of M-001 as our primary endpoint
and the immunogenicity of M-001 as our secondary endpoint. More specifically, the study was aimed at assessing the safety and
tolerability of intramuscular administration of 500 mcg M-001, prepared with an adjuvant, in younger adult volunteers. 200 subjects
of the study were randomized to receive either: (i) two doses of adjuvanted 500 mcg M-001 vaccine (ii) two doses of the placebo
(iii) two doses of the adjuvanted placebo, and (iv) a single co-administration of adjuvanted M-001. The groups were then treated
with a third administration of TIV in different doses approximately 60 days from the second administration.
The
results showed increased humoral and cellular responses after two immunizations with adjuvanted M-001 as compared to after immunization
with adjuvanted placebo. In addition, increased humoral and cellular responses were detected after co-administration of adjuvanted
M-001 with TIV as compared to after co-administration of placebo and TIV. M-001 was found to be well tolerated and safe in all
treatment groups and no relation was found between adverse events and the administration of M-001.
BVX-005
We
completed our BVX-005 Phase 2 clinical trial in February 2012. This Phase 2 clinical trial was intended for further testing the
safety of M-001 as our primary endpoint and the immunogenicity of M-001 as our secondary endpoint. Within the framework of this
BVX-005 Phase 2 clinical trial, 120 subjects received two injections of 500 mcg M-001, with or without an adjuvant, or placebo
followed by TIV. Accordingly, subjects were randomly allocated to the following treatment groups: (i) two administrations of M-001
followed by a third administration of TIV (ii) one administration of M-001 followed by TIV (iii) one administration of adjuvanted
M-001 followed by TIV, and (iv) one administration of placebo followed by TIV.
Results
revealed a significant increase in the proportions of Interferon Gamma secreting cells and influenza infection-fighting antibodies,
or influenza antigens, which indicated an anti-viral immune response that was not observed in the placebo groups. A humoral immunity
reaction was strongest in participants treated with M-001 as a primer and boosted with TIV compared to the placebo group. In addition,
all formulations of M-001 were well tolerated and safe across all treatment groups.
We
exposed the blood plasma samples from the BVX-005 participants (taken following the completion of the trial in 2012) to the current
influenza flu epidemic H3N2, which in 2012 did not yet exist, and examined the immunogenicity (HAI) antibodies in each blood plasma
sample. We found significantly increased level of protective antibodies against the H3N2 strain in the samples taken from participants
that received the M-001 vaccine in comparison to the control group. An average of 50% or greater of the participants in the experimental
group receiving M-001 showed immunogenicity against this new strain versus only 10% on average in the control group, a result
which has statistically high significance. This concurs with the similar results found in our recent BVX-006 phase 2 trial showing
increased antibody response to the H3N2 epidemic flu strain in those that received our universal vaccine, although it was not
included in the commercially available seasonal flu vaccine of the 2014/15 season. We believe this data confirms the universal
nature of M-001, effective against all types of flu strains.
BVX-006
We
completed our BVX-006 Phase 2 clinical trial in June 2015. This Phase 2 clinical trial was intended for further testing the safety
and immunogenicity of M-001 at regular and higher doses (0.5 mg and 1 mg, respectively) and after three consecutive administrations.
Within the framework of this BVX-006 Phase 2 clinical trial, 36 subjects between the ages of 50-65, divided into three groups,
were intramuscularly injected three times with M-001 or placebo, followed by an administration of the 2014/2015 season trivalent
influenza vaccine (TIV) 3 weeks later. Accordingly, subjects were randomly allocated to the following treatment groups: (i) three
administrations of 0.5mg of M-001 followed by an administration of TIV (ii) three administrations of 1.0 mg of M-001 followed
by an administration of TIV (iii) three administrations of placebo followed by TIV.
Clinical
trial results indicated that the administration of M-001 is safe and efficient against many strains of the influenza virus when
administered at 1mg for participants at the age of 50-65. M-001 in 1mg dose primed for immune responses in a manner consistent
with previous data in this age group. M-001 also elevated the immune response to other strains that were not included in the current
influenza seasonal vaccine, including against the drifted H3N2 strain of influenza that has caused 2014/2015 season’s epidemic
in the United States. In addition, cell mediated immunity which is specific to different pandemic strains (bird-flu strains) was
elicited after immunization with M-001 alone. These results support our claim that M-001 provides a broadened and improved protection
against multiple influenza type A and B virus strains.
BVX-007
We
completed our BVX-007 Phase 2b clinical trial in September 2016. This Phase 2b clinical trial was conducted in Budapest, Hungry,
as part of our membership in the UNISEC Consortium that focused on development and evaluation of promising concepts for a universal
influenza vaccine. Prior to commencement, we received the requisite regulatory approvals for the clinical trial from the EMA and
the relevant Hungarian Regulatory Authority. BVX-007 was designed to evaluate the safety and immunogenicity of M-001 when used
ahead of a sub optimal dose of H5N1, an avian influenza vaccine, provided by a Hungarian supplier of seasonal and H5N1 flu vaccines.
BVX-007 was conducted in adults between the ages 18 to 60, initially including 222 participants. Following the withdrawal of three
participants, the clinical trial was completed with the participation of 219 participants. In July 2017, we announced positive
results for the Phase 2b BVX-007 clinical trial: The safety of M-001 (primary endpoint) was confirmed: no treatment related severe
adverse events were observed. The primary immunogenicity endpoint was also achieved, a significant cell mediated immunity was
observed in the group immunized with 1mg dose of M-001. The secondary immunogenicity endpoint aimed to show enhance HAI antibodies
to the H5N1 viruses. Such enhancement was observed towards 1 out of 4 strains tested. It should be noted that the sub optimal
dose of the H5N1 vaccine alone induced minimal responses and hence, it might be the reason that the priming effect conferred by
the M-001 vaccine was not observed in all H5N1 strains tested in this study.
Ongoing
Phase 2 Clinical Trial by the NIAID
On
November 20, 2017 we announced the signing of a clinical trial agreement with the NIAID of the U.S. National Institutes of Health
for a Phase 2 clinical trial in the U.S. using our product candidate, M-001. The primary endpoint of this clinical trial focuses
on cell-mediated immunity to the M-001, in addition, it will assess the ability of M-001 in humans to serve as a primer to the
QIV seasonal vaccine by enhancing protective immunity to these influenza strains. in April 2018 we reported the first participant
enrollment in this clinical trial.
The
following table summarizes the structure, design and purpose of this clinical trial:
Clinical
trial number
|
|
Phase
|
|
Location
|
|
Regulatory
Authority
|
|
Trial
Design
|
|
Trial
Purpose
|
|
Population
|
|
Number
of Subjects
|
BVX-008
|
|
2
|
|
United
States
|
|
FDA
|
|
A
randomized, double-blind, active-controlled phase 2 trial in collaboration with NIAID
|
|
Primary
Endpoint: Safety & immunogenicity (CMI) Secondary Endpoint:
Safety
& immunogenicity (HAI)
|
|
Adults
between ages 18-49
|
|
120
|
Safety
and Efficacy Preclinical Trials
We
have conducted safety and efficacy preclinical trials in rats and mice. These preclinical trials have demonstrated that M-001
provides an effective flu protection, and an immune reaction against different flu virus strains. During these preclinical trials
both humoral and cellular immune reactions were recorded. The preclinical trials provided a proof of concept for all indications.
While these results are encouraging, we cannot determine the safety and efficacy of M-001 in human participants based on such
preclinical trials.
At
a pre-IND meeting held with the FDA in 2012, the FDA indicated that our preclinical trials conducted to that date were sufficient
to continue our Phase 2 and Phase 3 clinical trials.
Future
Phase 3 Clinical trials
We
intend, subject to the successful results of our Phase 3 clinical trial in Europe, to enter into discussions with the U.S. Food
and Drug Administration, or FDA, regarding market approval of M-001 in the U.S., and to comply with the applicable requirements.
Although we have not yet submitted a Phase 3 Investigational New Drug Application, or IND, to the FDA, we believe that the results
of the Phase 2 clinical trials conducted by us so far or to be conducted in the future, as well as of our ongoing pivotal clinical
efficacy Phase 3 trial in Europe, will further expand our data to provide greater support for any Phase 3 clinical trial of M-001
we may conduct in the U.S. in the future.
We
do not currently have sufficient financial resources to complete Phase 3 clinical trials of M-001 on our own. We intend to seek
to establish collaborations with large multinational pharmaceutical companies and/or national health authorities to finance Phase
3 clinical trials of M-001. However, to the extent that we have sufficient capital to do so (whether through sales of debt or
equity securities or otherwise), we may seek to conduct Phase 3 clinical trials of M-001 without such collaborations.
Upon
completion of Phase 3 clinical trials for some or all our indications, we may initiate Phase 4 post-marketing clinical trials
to validate the clinical efficacy of our product candidate. We also intend to use future revenues accrued from the commercialization
of M-001 (if approved for commercial sale) for a specific indication to finance Phase 3 clinical trials for additional indications.
Competition
Currently
marketed flu vaccines are strain-specific. There are many vaccine candidates in development that feature either improved production
processes and/or broadened coverage against drifted vaccine strains. BiondVax’s M-001 is unique in that it is (i) A single
formulation designed to be effective against seasonal and pandemic influenza strains, including Influenza A and Influenza B and
(ii) Most advanced universal flu candidate (6 completed clinical trials, including four Phase 2, and in an ongoing NIH-sponsored
Phase 2 trial in the USA and an ongoing Phase 3 trial in Europe), and (iii) Manufactured in E.coli, resulting in significantly
shorter production times and cost efficiency, and finally (iv) shelf-life of up to 24 months in refrigerated conditions (testing
ongoing), and 6 months at approximately 25°C (room temperature) enabling stockpiling for proactive preparedness.
Currently
marketed Influenza Vaccines
Current
influenza vaccines are mostly produced and marketed by large fully integrated pharmaceutical companies such as Sanofi Pasteur
(FluZone, FluZone High-dose, Vaxigrip, Intanza, Mutagrip, Istivac, and FluBlok following the 2017 acquisition of Protein Sciences
Corporation), GlaxoSmithKline (Fluarix, FluLaval, Alpharix , Influsplit ), Seqirus (Afluria, Fluvirin, Fluad, Flucelvax,
Agrippal), AstraZeneca (FluMist, Fluenz tetra), and Abbott (Influvac, Imuvac). (Note that some of these are the same vaccine but
marketed under different names in different jurisdictions). Flublok is a recombinant protein strain-based influenza vaccine. All
currently marketed influenza vaccines are strain-specific, with each vaccine targeting three or four strains.
Influenza
Vaccine Candidates in Development
To
our knowledge, there are a number of companies and academic labs attempting to develop new influenza vaccines. Our information
as to the identity of our competitors, the nature of the competing product candidate and the development stage of such competing
product candidates relies solely on publicly available information that we are aware of. The following is a summary of known competitors
and competing product candidates:
Imutex
Limited, a joint venture between SEEK, a privately held UK-based company, and hVIVO PLC, is developing a vaccine based on six
specific peptides to induce cellular immunity. In 2011 SEEK published Phase 2 challenge clinical trial results in 28 people which
indicated that its vaccine stimulated the immune system and was found to be safe. In April 2016, it was reported that SEEK and
hVIVO invested approximately $20 million to create Imutex, a startup with a “Phase 2a ready” universal flu vaccine
candidate. In March 2018 and January 2019, Imutex reported their Phase2b challenge trial achieved the primary endpoint of a statistically
significant reduction in mild to moderate influenza.
In
Q1 2018 Vaccitech Limited raised £20m ($27.1m) in Series A financing by investors including GV, Sequoia China, and Oxford
Sciences Innovation. In Q3 Vaccitech decided to stop a Phase 2 trial in which its MVA encoding NP+M1 which is designed to induce
a T-cell response against Influenza A virus strains was co-administered with a currently recommended seasonal influenza vaccine.
The company announced its intention to continue development of the vaccine.
AltImmune’s
NasoVax is an intransally delivered broad seasonal and pandemic T-cell booster recombinant candidate. Results of a Phase 2 trial
were reported in Q3 2018. Inovio is developing synthetic DNA vaccines. In May 2012 Inovio reported that in Phase 1 clinical trial
the avian influenza vaccine SynCon caused a protective antibody reaction against six strains of H5N1, and in Q1 2018 reported
successful results in a pre-clinical challenge study in ferrets. In Q3 2018, the company reported positive immune responses in
mice to the Company’s H3N2 influenza DNA vaccine. FluGen is developing REDEE, a vaccine based on a live virus which cannot
multiply or cause illness. The U.S. based company has raised $22m from investors and received $13m in federal funds. In 2018,
the company announced results of a Phase 1a trial and initiated a challenge trial. Medicago, majority owned by Mitsubishi Tanabe
Pharma, manufactures strain-specific vaccines in tobacco, which enables high capacity production compared to current egg-based
vaccines. In Q3 2018, the company announced the start of a Phase 3 trial. Vivaldi Biosciences reported two completed Phase 1 and
one Phase 1/2 clinical trial of their deltaFLU LAIV vaccine. Vivaldi reports deltaFLU has been shown to stimulate coverage against
non-vaccine strains. Vaxart reported results from a Phase 2 trials of its oral adenovirus-based influenza vaccine in Q4 2018.
It has been reported that companies including Sanofi and Johnson & Johnson are also working to improve upon currently marketed
influenza vaccines. As well, a number of academic laboratories across the world are in the early stages of research of additional
potential influenza vaccines including a “chimeric” vaccine at the Icahn School of Medicine at Mount Sinai, New York.
Marketing
and Sales
We
do not currently have any marketing or sales capabilities. We intend to license to, or enter into strategic alliances, with governments,
health systems or companies in the pharmaceutical business, which are equipped to market and/or sell our products, if any. We
may seek to establish marketing and/or sales forces in the future in addition to any such licensing arrangements or strategic
alliances.
Seasonal
Effect
Generally,
influenza vaccines sales mostly occur during the months of September through November of each year. However, because M-001 is
designed to provide long-lasting (multi-year) protection and not just seasonal protection, we believe that M-001 as a universal
standalone vaccine, if approved, will not be subject to the seasonality experienced by current (seasonal) influenza vaccines on
the market.
Manufacturing
M-001 is produced using
modified, non-pathogenic,
E.coli
bacteria. We produce M-001 in a standard, robust and low cost manufacturing process according
to cGMP standard. Our previous production facility was Phase 1 and 2 clinical trial audited and approved for production according
to cGMP, by a European qualified person. In October 2015 we entered into a Development and Manufacturing Agreement with a CMO based
in the U.S. for the production of clinical batches of M-001 for our current Phase 3 clinical trial. As planned, on August 20, 2018,
we announced our move to a new mid-sized factory in Jerusalem, with potential capacity to annually produce up to forty million
doses of M-001 for Phase 3 and commercial use. Although we contracted with a CMO for the manufacturing of M-001 for Phase
3 clinical trial and commercialization, subject to the completion of our independent production line in our new facility and obtaining
the necessary funding and resources, we may decide to manufacture M-001 in-house.
Properties
Office
Leasing Agreement
Since
August 2018, our principal executive offices and main laboratory are located at Jerusalem BioPark, 2nd floor, Hadassah Ein Kerem
Campus Jerusalem, Israel, next to Hadassah University Hospitals and Hebrew University’s Medical School. We lease this space,
which presently consists of a total area of approximately 1,845 square feet, from an unaffiliated third party as of July 18, 2017.
The lease period is 10 years with an option for an additional 5 years at our discretion.
We
believe this existing property is sufficient for our needs in the foreseeable future and that we have the ability to renew our
lease at market terms and expand if required.
Fixed
assets
Our fixed assets
are comprised of Factory leasehold improvements, laboratory equipment, furniture, software and improvements in the leased property.
The accumulated depreciation as stated in our financial reports is deducted from the fixed assets value. Our fixed assets, less
deduction for the accumulated depreciation, were at NIS 28.2 million ($7.5 million) for the year ended on December 31, 2018
and at NIS 5.5 million ($1.46 million) for the year ended on December 31, 2017.
Our
Main Laboratory
Our
Ness Ziona laboratory was audited and approved according to the Good Manufacturing Practice standard pursuant to the European
QP directive. Our new facility in Jerusalem consists of laboratories, manufacturing suites, and offices. The laboratories include
(i) an analytical lab, which conducts quality tests on our products using our designated analytical methods; (ii) virology lab;
and (iii) research and development lab. The manufacturing suites, defined as “clean rooms”, include a fermentation
suite (“upstream”), a protein purification suite (“downstream”) and formulation suite.
The
analytical lab is equipped with advanced equipment and machinery including computerized analytical devices for qualitative and
quantitative analysis, equipment for measuring light absorption properties for identifying substances, equipment for measuring
weight, acidity and temperature, and equipment for identifying replication of DNA sequences.
Our
laboratory also includes a separate technician room which contains our computers and software used to collect the data received
from our different devices for the purpose of analyzing it. The lab also contains refrigerators and freezers which are consistently
monitored and that are connected to a computerized control system. The production rooms are equipped with a fermentation facility,
machinery for filtering and concentrating proteins, a computerized system for the characterization and separation of proteins,
as well as equipment allowing us to work under sterile conditions.
The
virology lab is equipped with microscopes, incubators for growing bacteria, animal cells and viruses, and equipment enabling us
to work under sterile conditions. The work performed at the virology lab involves various virus strains and therefore mandates
strict safety conditions and is subject to Israeli environmental regulation.
The
facility also includes a Water for Injection (WFI) water purification system. The WFI system is controlled and monitored continuously.
Research
Grants
Grants
under the Israeli Encouragement of Industrial and Development Law
On
July 29, 2015, the Israeli parliament amended the Research Law to establish the Israel Innovation Authority, or IIA, which replaced
the OCS. The IIA is intended to have greater power and freedom than the OCS in launching creative funding tracks and instituting
new guidelines that will govern the transferability and licensing of the resulting technology. IIA was formed as of January 1,
2016, and new grant tracks and guidelines are published from time to time. Under the amendment, the IIA was granted vast authority
to regulate rules and procedures pertaining to obligations of recipients towards the IIA especially in the matters listed in this
memorandum. The following is a summary of OCS regulations that apply to us following the receipt of grants since 2006:
Under
the Research Law, research and development programs which meet specified criteria and are approved by the research committee of
IIA, are eligible for grants. The grants awarded are typically for up to 50% of the project’s expenditures, as determined
by the research committee. The grantee is required to pay royalties to the State of Israel on income generated from the sale of
products (and related services associated with such products), whether received by the grantee or any affiliated entity (as defined
in the Royalty Regulations), developed, in whole or in part, within the framework of an IIA--funded project or deriving therefrom.
In accordance with the provisions of the Royalty Regulations, royalties are paid at rates ranging between 3% to 6% of the revenues
generated by the product, depending on the applicable criteria, and are payable until the repayment of the full amount of the
total IIA funding (linked to the US Dollar) and accrued interest (LIBOR). The terms of the IIA support also require that products
developed using such grants be manufactured in Israel and that the technology developed thereunder may not be transferred outside
of Israel, unless approval is received from the IIA. Nothing in the foregoing restricts the export of products that incorporate
the funded technology. Should the Research Committee of the IIA approve the transfer of manufacturing rights outside of Israel,
the royalty payments will be subject to an increase of up to a cap of 120%, 150% or 300% of the total IIA funding and accrued
interest (LIBOR) (depending upon the portion of manufacture outside of Israel), and the royalty rates will be subject to an increase
as well. Such approval is not required for the transfer of a portion of the manufacturing capacity which does not exceed, in the
aggregate, 10% of the portion declared to be manufactured abroad in the applications for funding, in which case there is a notification
requirement, and the IIA has the discretion to forbid the transfer.
Ordinarily,
as a condition to obtaining approval to manufacture outside Israel, we would be required to pay increased royalties, as set forth
in the Research Law. The total amount to be repaid to the IIA would also be adjusted to between 120% and 300% of the grants, depending
on the volume of manufacturing that is carried out outside Israel.
The
Research Law restricts the transfer of know-how funded by the IIA outside of Israel. Transfer of IIA-funded know-how outside of
Israel requires prior IIA approval and is subject to certain payments to the IIA calculated according to formulae provided under
the Research Law. A transfer for the purpose of the Research Law means an actual sale of the IIA-funded know-how, any license
to further develop the IIA-funded know-how or the products resulting from the IIA-funded know-how or any other transaction, which,
in essence, constitutes a transfer of the IIA-funded know-how. A mere license solely to market products resulting from the IIA-funded
know-how would not be deemed a transfer for the purpose of the Research Law. It should be noted that there are specific regulations
regarding licensing of IIA-funded know-how which allow for payments to the IIA which are pro rata to amounts received by the licensor.
published.
If we wish to transfer
IIA-funded know-how, the terms for approval will be determined according to the nature of the transaction and the consideration
paid to us for such transfer. The IIA approval to transfer know-how created, in whole or in part, in connection with an IIA-funded
project to a third party outside Israel where the transferring company remains an operating Israeli entity is subject to payment
of a redemption fee to the OCS calculated according to a formula provided under the Research Law that is based, in general, on
the ratio between the aggregate IIA grants to the company’s aggregate investments in the project that was funded by these
IIA grants, multiplied by the transaction consideration. The transfer of such know-how to a party outside Israel where the transferring
company ceases to exist as an Israeli entity is subject to a different redemption fee formula that is based, in general, on the
ratio between the aggregate amount of IIA grants received by the company and the company’s aggregate research expenses,
multiplied by the transaction consideration. As per current regulations, a maximum payment of the redemption fee paid to the IIA
under the above mentioned formulas and differentiates between two situations: (i) in the event that the company sells its IIA-funded
know-how, in whole or in part, or is sold as part of certain merger and acquisition transactions, and subsequently ceases to conduct
business in Israel, the maximum redemption fee under the above mentioned formulas will be no more than six times the amount received
(plus annual interest) for the applicable know-how being transferred, or the entire amount received, as applicable; (ii) in the
event that following the transactions described above, under contract with the acquiror, the company continues to conduct its
research activity in Israel (for at least three years following such transfer and retains on staff at least 75% of the number
of research employees it had for the six months before the know-how was transferred), then the company is eligible for a reduced
cap of the redemption fee of no more than three times the amounts received (plus annual interest) for the applicable know-how
being transferred, or the entire amount received, as applicable. There are specific caps that are applicable to licensing
transactions, which also result in a cap of no more than six times the amount received (plus annual interest).
Subject to prior consent of the IIA, the
company may transfer the IIA-funded know-how to another Israeli company. If the IIA-funded know-how is transferred to another
Israeli entity, the transfer would still require IIA approval but will not be subject to the payment of the redemption fee (we
note that there will be an obligation to pay royalties to the IIA from the income of such sale transaction as part of the royalty
payment obligation). In such case, the acquiring company would have to assume all of the selling company’s responsibilities
towards the IIA as a condition to IIA approval.
Our
research and development efforts have been financed, partially, through grants that we have received from the IIA. We therefore
must comply with the requirements of the Research Law and related regulations. As of December 31, 2018, we have received a total
of $5.5 million in IIA grants.
We
have not received additional OCS grants from December 31, 2018 through the date of this prospectus.
Finance
Contract – European Investment Bank
We
entered into a finance contract, or the Finance Contract, with the European Investment Bank, or EIB, for the financing of up to
Euro 20 million, which was extended to Euro 24 million as described in this prospectus, and up to 50% of the Company’s expected
cost of developing and marketing the Company’s product candidate, M-001. The finance contract is subject to the Horizon
2020 framework programme of the European Union for Research and Technological Development (2014-2020) (Horizon 2020 Framework
EU Programme), which provides that the financing shall be used rationally and in the interest of the European Bank.
On
April 22, 2019 the European Investment bank (EIB) announced a € 4,000 extension to its 2017 financing agreement with the
Company in support of the ongoing pivotal Phase 3 clinical trial of the Company M-001 Universal Influenza Vaccine candidate. The
extension will allow an increase of up to 8,000 participants, bringing the planned total size of the trial to approximately 12,000
participants. The conditions for the disbursement of the additional Euro 4 million are enrollment of the first participant in
the clinical trial’s second season and $US 10 million of funds to be disbursed pro rata being made available by the Company.
Prior
to its extension to Euro 24 million, the EIB financing was made available in three tranches, all subject to receiving evidence
that the Company has funding available to it in an amount equal to the amount of the respective tranche, as follows: (i) the first
tranche shall be available during the 12 months following the date of the finance contract, in an amount of Euro 4-6 million;
(ii) the second tranche shall be available during the 24 months following the date of the Finance Contract, in an amount of Euro
4-6 million, and subject to receiving evidence of the manufacturing of the first clinical batch for the planned phase 3 clinical
trials; (iii) the third tranche shall be available during the 36 months following the date of the Finance Contract, in amount
that together with the first and second tranche shall be equal to up to Euro 20 million, and shall be paid subject to receipt
of authorization to launch the phase 3 clinical trials. To date, we have drawn down all three tranches of the loan made available
prior to its extension to Euro 24 million and have received Euros 20 million.
The
EIB financing shall be provided interest free and shall be repayable, per each tranche, in a single instalment five years following
the date of payment for each tranche. A failure to pay any amount payable under the Finance Contract shall cause interest to accrue
on each unduly paid amount, at an annual rate equal to EURIBOR plus 2%.
In
the event the Company elects to prepay the EIB financing, or in the event the EIB shall demand prepayment following certain events,
including a change of control, senior management change or merger events, the Company shall be required to pay EIB the principal
amount of the tranches already paid, or the Prepayment Amount, plus the greater of: (i) the amount, as determined by EIB required
in order for the EIB to realize an internal rate of return on the relevant amount prepaid of 20%; and (ii) the Prepayment Amount.
The finance contract also stipulates that in the event EIB demands prepayment of the loan due to any prepayment event to non-EIB
lenders, the Company shall be obligated to pay the Prepayment Amount plus an additional reduced amount.
In
addition, and as consideration to the EIB financing, EIB shall be entitled to 3% of any annual M-001 sales revenues as reported
in the Company’s annual financial statements, for a period of twelve years, or for a period longer than twelve years and
subject to EIB realizing a cash-on-cash multiple of 2.8.
As
of December 31, 2018, we have drawn a sum of Euro 20 million ($23 million) in EIB loan.
The
Finance Contract includes certain representations and warranties provided by the Company. The Company shall pay all taxes, duties,
fees and other impositions applied in connection with this Finance Contract. The Finance Contract shall be governed by the laws
of England and Wales and the courts of England shall have exclusive jurisdiction to settle any dispute.
The
Finance Contract shall be subject to a security agreement, or the Security Agreement, creating a first ranking floating charge
over all assets of the Company in favor of EIB, which will exclude assets and/or intellectual property rights subject to the license
agreement between the Company and YEDA.
Grant
from the European Union - UNISEC
We are a member
of the UNISEC Consortium. The UNISEC Consortium has received a grant in the amount of Euro 6 million from the European Union,
of which we expect to receive approximately Euro 0.5 million (approximately $0.6 million) to finance our BVX-007 clinical trial.
In June 2013, we entered into a framework agreement with the Department of Pharmaceutical Technology and Biopharmacy of Groningen
University, or the Coordinator, and the 11 other members of the Consortium. The framework agreement, which has a term of four
years, defines the rules of conduct of the Consortium as well as the conditions of our grant, based upon Regulation (EC) No 1906/2006
of the European Parliament and the council of 18 December 2006. Pursuant to the framework agreement, we undertook to lead and
coordinate the research of cellular immune reaction as a possible indicator for the effectiveness of a universal influenza vaccine.
Results, including information, whether or not they can be protected, that are generated under the project, and including rights
related to copyright, design rights, plant variety rights or similar forms of protection, or Foreground, shall be owned by the
party carrying the work under the framework agreement. The Foreground shall be transferrable or published only by the owner with
a written prior notice to the parties of the framework agreement. Where Foreground is capable of industrial or commercial application,
its owner must provide for adequate and effective protection. If the owner does not intend to proceed with filing the necessary
intellectual property protections, it must provide notice to the European Commission, who then may file the protection itself.
According to the framework agreement, we may enter into a subcontract agreement with a third party; however, we will remain solely
responsible for the implementation and compliance under the framework agreement. In addition, we are solely liable for the use
of any proprietary rights of third parties. We will not be responsible to any other party to this framework agreement for any
indirect or consequential loss or similar damage, provided such act was not caused by a willful act or by a breach of confidentiality.
We will not be considered in breach of the framework agreement in the event that the breach is caused by Force Majeure, defined
as any unforeseeable and exceptional event affecting the fulfillment of any obligation under this framework agreement by the parties,
which is beyond their control and cannot be overcome despite their reasonable endeavors. The framework agreement sets the terms
and conditions by which the parties may make joint decisions, and, under certain provisions, allows us to cast veto vote on a
specific decision. All payments shall be paid to us by the Coordinator according to a payment schedule and following the submission
of a financial management report. Should we spend less than the grant we received, we shall be funded according to our actual
expenditures. If we terminate the framework agreement, we will be obligated to return all payments received and bear any reasonable
and justifiable additional costs occurring to the other Parties in order to perform its and their tasks, except the amount of
contribution accepted by the European Commission or another contributor. The framework agreement is subject to European Union
Law and the laws of Belgium, and the Court of Justice of the European Union shall have sole jurisdiction.
Grant
for the Construction of a Manufacturing Facility in Jerusalem
On
March 28, 2017, we received an approval from the Investment Center of the Ministry of Economy and Industry of the State of Israel,
for a grant representing 20% of NIS 20 million budget, to be utilized towards the construction for the production of Phase 3 and
commercial batches of the Company product candidate, M-001.
The
receipt of the Grant is subject to certain terms and conditions, including those outlined under the Israeli Encouragement of Capital
Investment Law, 1959. The terms and conditions include, inter alia, the following: (a) at least 24% of the investments in the
planned manufacturing facility’s fixed assets will be financed by additional share capital; (b) the Company will maintain
its intellectual property and manufacturing facility in Israel for a period of at least 10 years following receipt of the grant;
(c) subject to the EIB’s approval, a floating charge over our assets (excluding assets and/or intellectual property rights
subject to the license agreement between the Company and YEDA.
Raw
Materials and Supplies
Our
suppliers provide us with equipment, materials and services used for the research and development of M-001. The main raw materials
required for producing M-001 are standard bacteria culture mediums. The equipment, materials and services we use for research
varies in accordance with the specific research and development we perform. We believe that the raw materials that we require
to manufacture M-001, as well as the raw materials that we require for our research and development operations relating to M-001,
are widely available from numerous suppliers and are generally considered to be generic pharmaceutical materials and supplies.
However, replacing approved suppliers may incur delays and require additional efforts.
Government
Regulation
United
States
FDA
Regulations
In
the United States, the FDA regulates pharmaceuticals and biologics under the Food, Drug & Cosmetics Act, and the Public Health
Service Act, and their implementing regulations. These products are also subject to other federal, state, and local statutes and
regulations, including federal and state consumer protection laws, laws protecting the privacy of health-related information,
and laws prohibiting unfair and deceptive acts and trade practices.
The
process required by the FDA before a new drug product may be marketed in the United States generally involves the following: completion
of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA’s Good
Laboratory Practice, or GLP, regulations; submission to the FDA of an IND, which the FDA must allow to become effective before
human clinical trials may begin and must be updated annually; performance of adequate and well-controlled human clinical trials
to establish the safety and efficacy of the product candidate for each proposed indication; and submission to the FDA of an NDA
for a drug, and Biologic License Application for biological product, after completion of all pivotal clinical trials.
An
IND application is a request for authorization from the FDA to administer an investigational drug product to humans. Although
none of our clinical trials protocols were conducted pursuant to an FDA approval, we have had two pre-IND meetings in 2008 and
2012 with FDA representatives on various aspects of M-001 and the clinical development program. The 2012 meeting served as the
basis for our IND application submission in June 2013. In June 2013 we submitted an IND application to the FDA for a contemplated
Phase 2 clinical trial intended to be conducted in the U.S. This Phase 2 clinical trial was designed to test the safety and efficacy
of M-001 when administered as a primer for the H5N1 Avian flu pandemic vaccine, by administering M-001 to participants prior to
the administration of the H5N1 vaccine. This IND application included data, reports and summaries from our previously conducted
Israeli preclinical and clinical trials. The FDA reviewed and commented on our IND application and requested, among other things,
that we provide to the FDA, prior to the commencement of the proposed clinical trial, information regarding the H5N1 vaccine selected
for use in this proposed clinical trial and a summary of the toxicological effect of M-001.We provided the information regarding
the toxicology of M-001 as requested; however, we were unable to locate a source for or otherwise acquire the H5N1 vaccine (which
was not publicly available) from a manufacturer approved for the purpose of performing clinical trials in the U.S. As a result,
we were not able to satisfy the FDA’s request for information regarding such vaccine (including information as to manufacturing,
dosage, formulation, etc.). Without such information, we could not complete our IND application and the FDA placed a clinical
hold on the trial. In light of these events, we elected to convert our IND application into a Drug Master File. In the future,
we intend to submit an IND application to the FDA for initiating Phase 3 clinical trials in the U.S., either with one or more
future collaborators, or, subject to available funds, on our own, in support of FDA approval to market M-001 in the U.S.
Clinical
trials involve the administration of the investigational drug to human subjects under the supervision of qualified investigators
in accordance with current Good Clinical Practices, or GCP, which include the requirement that all research subjects provide their
informed consent for their participation in any clinical trial. A protocol for each clinical trial and any subsequent protocol
amendments must be submitted to the FDA as part of the IND. Additionally, approval must also be obtained from each clinical trial
site’s IRB, before the trials may be initiated, and the IRB must monitor the trial until completed. There are also requirements
governing the reporting of ongoing clinical trials and clinical trial results to public registries.
Generally
three phases of clinical trials are conducted prior to receiving regulatory marketing approval: Phase 1 clinical trials are normally
conducted in small groups of healthy volunteers to assess safety and find the potential dosing range. After a safe dose has been
established, the drug is administered to small populations of eligible participants (Phase 2) to look for initial signs of efficacy
in treating the targeted disease or condition and to continue to assess safety. In the case of vaccines, the participants are
healthy and the signs of efficacy can be obtained in early Phase 1, therefore this Phase is defined as Phase 1/2. Phase 3 clinical
trials are usually multi-center, double-blind controlled trials in hundreds or even thousands of subjects at various sites to
assess as fully as possible both the safety and effectiveness of the drug.
The
FDA, the IRB, or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including
a finding that the research subjects are being exposed to an unacceptable health risk. Additionally, some clinical trials are
overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring
board or committee. This group reviews unblinded data from clinical trials and provides authorization for whether or not a trial
may move forward at designated check points based on access to certain data from the trial. We may also suspend or terminate a
clinical trial based on evolving business objectives and/or the competitive climate.
Assuming
successful completion of all required testing in accordance with all applicable regulatory requirements, detailed investigational
drug product information is submitted to the FDA in the form of a BLA requesting approval to market the product for one or more
indications. The application includes all relevant data available from pertinent preclinical and clinical trials, including negative
or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry,
manufacturing, controls and proposed labeling, among other things.
Once
the BLA submission has been accepted for filing, the FDA’s goal is to review applications within 10 months of filing. However,
the review process is often significantly extended by FDA requests for additional information or clarification. The FDA may refer
the application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved.
The FDA is not bound by the recommendation of an advisory committee, but it typically follows such recommendations.
After
the FDA evaluates the BLA and conducts inspections of manufacturing facilities where the drug product will be formulated and where
the drug will be produced, it may issue an approval letter or, instead, a Complete Response Letter. An approval letter authorizes
commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates
that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter
may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant, expensive
and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. Even if such additional information
is submitted, the FDA may ultimately decide that the BLA does not satisfy the criteria for approval. The FDA could also approve
the BLA with a risk evaluation and mitigation strategy to mitigate risks, which could include medication guides, physician communication
plans, or elements to assure safe use, such as restricted distribution methods, participant registries and other risk minimization
tools. The FDA also may condition approval on, among other things, changes to proposed labeling, development of adequate controls
and specifications, or a commitment to conduct one or more post-market studies or clinical trials. Such post-market testing may
include Phase 4 clinical trials and surveillance to further assess and monitor the product’s safety and effectiveness after
commercialization.
After
regulatory approval of a drug product is obtained, the drug producer is required to comply with a number of post-approval regulations.
As a holder of an approved BLA, we would be required to report, among other things, certain adverse reactions and production problems
to the FDA, to provide updated safety and efficacy information, and to comply with requirements concerning advertising and promotional
labeling for any of our products. These promotion and advertising requirements include, among others, standards for direct-to-consumer
advertising, prohibitions against promoting drugs for uses or in participant populations that are not described in the drug’s
approved labeling (known as “off-label use”), rules for conducting industry-sponsored scientific and educational activities
and other promotional activities. Failure to comply with FDA requirements can have negative consequences, including the immediate
discontinuation of noncomplying materials, adverse publicity, enforcement letters from the FDA, mandated corrective advertising
or communications with doctors, and civil or criminal penalties. Such enforcement may also lead to scrutiny and enforcement by
other government and regulatory bodies. Although physicians may prescribe legally available drugs for off-label uses, manufacturers
may not market or promote such off-label uses.
Also,
quality control and manufacturing procedures must continue to conform to cGMP after approval to ensure and preserve the long term
stability of the drug product. The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes
extensive procedural, substantive, and record keeping requirements. In addition, changes to the manufacturing process are strictly
regulated and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations
also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon
us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money
and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.
Future
FDA and state inspections may identify compliance issues at our facilities or at the facilities of our CMOs or licensees that
may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of previously unknown
problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer
or holder of an approved BLA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated
or judicial action that could delay or prohibit further marketing. Newly discovered or developed safety or effectiveness data
may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and
also may require the implementation of other risk management measures. Also, new government requirements, including those resulting
from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval
of our current product candidate or any product candidate we may develop in the future (if any).
The
FDA also may require post-marketing testing, or Phase 4 testing, as well as risk minimization action plans and surveillance to
monitor the effects of an approved product or place conditions on an approval that could otherwise restrict the distribution or
use of the product.
Other
U.S. Healthcare Laws and Compliance Requirements
For
products distributed in the United States, we will also be subject to additional healthcare regulation and enforcement by the
federal government and the states in which we conduct our business.
Efforts
to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations could be costly.
Although we believe our business practices are structured to be compliant with applicable laws, it is possible that governmental
authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law
involving applicable fraud and abuse or other healthcare laws and regulations. If our future operations are found to be in violation
of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal
and administrative penalties, damages, fines, exclusion from third party payor programs, such as Medicare and Medicaid, and the
curtailment or restructuring of our operations. If any of the physicians, providers or entities with whom we may do business with
will be found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions,
including exclusion from government funded healthcare programs.
Many
aspects of these laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions
are open to a variety of subjective interpretations which increases the risk of potential violations. In addition, these laws
and their interpretations are subject to change. Any action against us for violation of these laws, even if we successfully defend
against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of
our business, and damage our reputation.
In
addition, from time to time in the future, we may become subject to additional laws or regulations administered by the FDA, the
Federal Trade Commission, or by other federal, state, local or foreign regulatory authorities, to the repeal of laws or regulations
that we generally consider favorable, or to more stringent interpretations of current laws or regulations. We are not able to
predict the nature of such future laws, regulations, repeals or interpretations, and we cannot predict what effect additional
governmental regulation, if and when it occurs, would have on our business in the future. Such developments could, however, require
reformulation of certain products to meet new standards, recalls or discontinuance of certain products not able to be reformulated,
additional record-keeping requirements, increased documentation of the properties of certain products, additional or different
labeling, additional scientific substantiation, additional personnel, or other new requirements. Any such developments could have
a material adverse effect on our business.
Israel
Israeli
regulations regarding clinical trials
Before
an entity or person can conduct clinical testing on humans in Israel, such entity or person must receive special authorization
from the ethics committee and general manager of the institution in which such entity or person intends to conduct its study,
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 also require
authorization from the Israeli Ministry of Health, except in certain circumstances, and in the case of genetic trials, special
fertility trials and similar trials, an additional authorization of the overseeing institutional ethics committee. 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 our clinical studies on certain of our therapeutic
candidates in Israel, we will be required to obtain authorization from the ethics committee and general manager of each institution
in which we intend to conduct our clinical trials, and in most cases, from the Israeli Ministry of Health.
To
date, all but one of our completed clinical trials were conducted in Israel.
The
Encouragement of Industrial Research and Development Law, 5744-1984
We
received grants from the IIA and are therefore subject to the provisions of the R&D Law and a number of related restrictions.
See “Business — Research Grants — Grants under the Israeli Encouragement of Industrial
and Development Law.”
Europe/Rest
of World
Whether
or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of
foreign countries before we can commence clinical trials or marketing of the product in those countries. For example, in the European
Union, a clinical trial application, or CTA, must be submitted to each member state’s national health authority and an independent
ethics committee. The CTA must be approved by both the national health authority and the independent ethics committee prior to
the commencement of a clinical trial in the member state. The approval process varies from country to country and the time frame
may be longer or shorter than that required for FDA approval. In addition, the requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary greatly from country to country. In all cases, clinical trials are conducted
in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Helsinki
Declaration.
To
obtain marketing approval of a drug under European Union regulatory systems, we may submit marketing authorization applications
under a centralized procedure. The centralized procedure provides for the grant of a single marketing authorization that is valid
for all European Union member states. The centralized procedure is compulsory for medicines produced by certain biotechnological
processes, products designated as orphan medicinal products, and products with a new active substance indicated for the treatment
of certain diseases, and optional for those products that are highly innovative or for which a centralized process is in the interest
of participants. Under the centralized procedure in the European Union, the maximum time frame for the evaluation of a marketing
authorization application is 210 days (excluding clock stops, when additional written or oral information is to be provided by
the applicant in response to questions asked by the Scientific Advice Working Party of the Committee of Medicinal Products for
Human Use, or CHMP). Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is expected
to be of a major public health interest, defined by three cumulative criteria: the seriousness of the disease, such as heavy disabling
or life-threatening diseases, to be treated; the absence or insufficiency of an appropriate alternative therapeutic approach;
and anticipation of high therapeutic benefit. In this circumstance, the EMA ensures that the opinion of the CHMP is given within
150 days.
The
decentralized procedure provides for approval by one or more other, or concerned, member states of an assessment of an application
performed by one member state, known as the reference member state. Under this procedure, an applicant submits an application,
or dossier, and related materials, including a draft summary of product characteristics, and draft labeling and package leaflet,
to the reference member state and concerned member states. The reference member state prepares a draft assessment and drafts of
the related materials within 120 days after receipt of a valid application. Within 90 days of receiving the reference member state’s
assessment report, each concerned member state must decide whether to approve the assessment report and related materials. If
a member state cannot approve the assessment report and related materials on the grounds of potential serious risk to public health,
the disputed points may eventually be referred to the European Commission, whose decision is binding on all member states.
For
other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing
the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again,
the clinical trials are conducted in accordance with GCPs and the applicable regulatory requirements and the ethical principles
that have their origin in the Helsinki Declaration.
If
we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension
or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
Intellectual
Property
Our
success depends, at least in part, on our ability to protect our proprietary technology and intellectual property, and to operate
without infringing or violating the proprietary rights of others. We have rights pertaining to registered patents and patent applications
awaiting acceptance, which cover our know-how and product candidate. The patents portfolio covers patents and applications owned
and developed by us, as well patents and applications owned by Yeda, for which we have exclusive rights of usage. Our management,
in consultation with our professional advisors, periodically determines our intellectual property policy protection.
Patents
As
of December, 31, 2018, we exclusively licensed two families of patents and own three additional families to use within our field
of business. Such patents were granted in various countries, including the United States, Israel, China, Canada, Australia, New
Zealand, Mexico, South Korea, Hong Kong, France, Germany, Spain, Switzerland, Ireland, the United Kingdom, Russia, Japan and other
countries. There are also pending patent applications relating to these patent families in various jurisdictions, including Brazil,
all of which are active applications that have yet to be approved. Our patents and patent applications generally relate to influenza
vaccines, particularly M-001, and to their manufacture and use. Our patents and patent applications are expected to expire in
Europe between 2019 and 2035 and in United States between 2020 and 2035.
The
tables below summarize material information regarding our patent families, including expected expiration date by territory:
Title:
PEPTIDE-BASED VACCINE FOR INFLUENZA
Assignee:
YEDA RESEARCH AND DEVELOPMENT CO. LTD.
Priority:
Israel 127331 filed: 30-Nov-1998
PCT:
WO 00/032228 filed 28-Nov-1999
Country
|
|
Application
No.
|
|
Filing
Date
|
|
Patent
No.
|
|
Expiration
Date
|
|
Status
|
Australia
|
|
200014066
|
|
28-Nov-1999
|
|
766883
|
|
28-Nov-2019
|
|
granted
|
Belgium
|
|
10003160.8
|
|
28-Nov-1999
|
|
2204187
|
|
28-Nov-2019
|
|
granted
|
Canada
|
|
2352454
|
|
28-Nov-1999
|
|
2352454
|
|
28-Nov-2019
|
|
granted
|
Europe
|
|
10003160.8
|
|
28-Nov-1999
|
|
2204187
|
|
|
|
granted
|
France
|
|
10003160.8
|
|
28-Nov-1999
|
|
2204187
|
|
28-Nov-2019
|
|
granted
|
Germany
|
|
10003160.8
|
|
28-Nov-1999
|
|
69944207.9
|
|
28-Nov-2019
|
|
granted
|
Hong
Kong
|
|
10111907.7
|
|
28-Nov-1999
|
|
1145448
|
|
28-Nov-2019
|
|
granted
|
Israel
|
|
143367
|
|
28-Nov-1999
|
|
143367
|
|
28-Nov-2019
|
|
granted
|
Italy
|
|
10003160.8
|
|
28-Nov-1999
|
|
2204187
|
|
28-Nov-2019
|
|
granted
|
Korea
|
|
10-2001-7006639
|
|
28-Nov-1999
|
|
0703571
|
|
28-Nov-2019
|
|
granted
|
Mexico
|
|
PA/A/2001/005398
|
|
28-Nov-1999
|
|
262260
|
|
28-Nov-2019
|
|
granted
|
Netherlands
|
|
10003160.8
|
|
28-Nov-1999
|
|
2204187
|
|
28-Nov-2019
|
|
granted
|
New
Zealand
|
|
511918
|
|
28-Nov-1999
|
|
511918
|
|
28-Nov-2019
|
|
granted
|
Spain
|
|
10003160.8
|
|
28-Nov-1999
|
|
2204187
|
|
28-Nov-2019
|
|
granted
|
Switzerland
|
|
10003160.8
|
|
28-Nov-1999
|
|
2204187
|
|
28-Nov-2019
|
|
granted
|
UK
|
|
10003160.8
|
|
28-Nov-1999
|
|
2204187
|
|
28-Nov-2019
|
|
granted
|
USA
|
|
09/856920
|
|
28-Nov-1999
|
|
6740325
|
|
28-Nov-2019
|
|
granted
|
USA-1
Div.
|
|
10/846548
|
|
28-Nov-1999
|
|
7192595
|
|
31-Aug-2020*
|
|
granted
|
*
Due to patent term adjustment of 277 days
Title:
IMPROVED INFLUENZA VACCINE
Assignee:
YEDA RESEARCH AND DEVELOPMENT CO. LTD.
Priority:
US Prov. 60/742574 filed: 06-Dec-2005
PCT:
WO2007/066334 filed 06-Dec-2006
Country
|
|
Application
No.
|
|
Filing
Date
|
|
Patent
No.
|
|
Expiration
Date
|
|
Status
|
Australia
|
|
2006322907
|
|
06-Dec-2006
|
|
2006322907
|
|
06-Dec-2026
|
|
granted
|
Austria
|
|
06821622.5
|
|
06-Dec-2006
|
|
552846
|
|
06-Dec-2026
|
|
granted
|
Belgium
|
|
06821622.5
|
|
06-Dec-2006
|
|
1968632
|
|
06-Dec-2026
|
|
granted
|
Canada
|
|
2632483
|
|
06-Dec-2006
|
|
2632483
|
|
06-Dec-2026
|
|
granted
|
Denmark
|
|
06821622.5
|
|
06-Dec-2006
|
|
1968632
|
|
06-Dec-2026
|
|
granted
|
Europe
|
|
06821622.5
|
|
06-Dec-2006
|
|
1968632
|
|
|
|
granted
|
France
|
|
06821622.5
|
|
06-Dec-2006
|
|
1968632
|
|
06-Dec-2026
|
|
granted
|
Germany
|
|
602006028848.4
|
|
06-Dec-2006
|
|
1968632
|
|
06-Dec-2026
|
|
granted
|
Greece
|
|
06821622.5
|
|
06-Dec-2006
|
|
1968632
|
|
06-Dec-2026
|
|
granted
|
Ireland
|
|
06821622.5
|
|
06-Dec-2006
|
|
1968632
|
|
06-Dec-2026
|
|
granted
|
Israel
|
|
191977
|
|
06-Dec-2006
|
|
191977
|
|
06-Dec-2026
|
|
granted
|
Italy
|
|
06821622.5
|
|
06-Dec-2006
|
|
1962632
|
|
06-Dec-2026
|
|
granted
|
Luxembourg
|
|
06821622.5
|
|
06-Dec-2006
|
|
1968632
|
|
06-Dec-2026
|
|
granted
|
Netherlands
|
|
06821622.5
|
|
06-Dec-2006
|
|
1968632
|
|
06-Dec-2026
|
|
granted
|
Portugal
|
|
06821622.5
|
|
06-Dec-2006
|
|
1968632
|
|
06-Dec-2026
|
|
granted
|
Spain
|
|
06821622.5
|
|
06-Dec-2006
|
|
1968632
|
|
06-Dec-2026
|
|
granted
|
Sweden
|
|
06821622.5
|
|
06-Dec-2006
|
|
1968632
|
|
06-Dec-2026
|
|
granted
|
Switzerland
|
|
06821622.5
|
|
06-Dec-2006
|
|
1968632
|
|
06-Dec-2026
|
|
granted
|
UK
|
|
06821622.5
|
|
06-Dec-2006
|
|
1968632
|
|
06-Dec-2026
|
|
granted
|
USA
|
|
12/096322
|
|
06-Dec-2006
|
|
7914797
|
|
22-Jan-2027**
|
|
granted
|
**
Due to patent term adjustment of 47 days
Title:
MULTIMERIC MULTIEPITOPE INFLUENZA VACCINES
Assignee:
BiondVax Pharmaceuticals Ltd.
Priority:
US Prov. 60/953498 filed 02-Aug-2007
PCT
WO2009/016639 filed: 03-Aug-2008
Country
|
|
Application
No.
|
|
Filing
Date
|
|
Patent/Publication
No.
|
|
Expiration
Date
|
|
Status
|
Australia
|
|
2008281384
|
|
03-Aug-2008
|
|
2008281384
|
|
03-Aug-2028
|
|
granted
|
Brazil
|
|
PI
0815008-7
|
|
03-Aug-2008
|
|
PI0815008-7
|
|
03-Aug-2028
|
|
examination
|
Canada
|
|
2695399
|
|
03-Aug-2008
|
|
2965399
|
|
03-Aug-2028
|
|
granted
|
China
|
|
200880101581.0
|
|
03-Aug-2008
|
|
ZL200880101581.017
|
|
03-Aug-2028
|
|
granted
|
EURASIA
(RUSSIA)
|
|
201070219
|
|
03-Aug-2008
|
|
017887
|
|
03-Aug-2028
|
|
granted
|
Europe
Austria
Belgium
Croatia
Czech Republic
Denmark
Finland
France
Germany
Hungary
Ireland
Italy
Luxembourg
Netherlands
Poland
Portugal
Romania
Spain
Sweden
Switzerland
Turkey
UK
|
|
08789738.5
|
|
03-Aug-2008
|
|
2173376
|
|
03-Aug-2028
|
|
granted
|
Hong
Kong
|
|
10109239.0
|
|
03-Aug-2008
|
|
1142809
|
|
03-Aug-2028
|
|
granted
|
India
|
|
670/DELNP/2010
|
|
03-Aug-2008
|
|
290866
|
|
03-Aug-2028
|
|
granted
|
Israel
|
|
203508
|
|
03-Aug-2008
|
|
203508
|
|
03-Aug-2028
|
|
granted
|
Japan
|
|
2010-518815
|
|
03-Aug-2008
|
|
5654345
|
|
03-Aug-2028
|
|
granted
|
Korea
|
|
10-2010-7003351
|
|
03-Aug-2008
|
|
10-1580660
|
|
03-Aug-2028
|
|
granted
|
Mexico
|
|
MX/A/2010/001284
|
|
03-Aug-2008
|
|
302245
|
|
03-Aug-2028
|
|
granted
|
USA
|
|
12/671617
|
|
03-Aug-2008
|
|
8747861
|
|
18-Aug-2031***
|
|
granted
|
USA
|
|
14/263359
|
|
03-Aug-2008
|
|
US2014/02886982
|
|
03-Aug-2028
|
|
granted
|
***
Due to patent term adjustment of 1110 days
Title:
MULTIMERIC MULTIEPITOPE POLYPEPTIDES AS ENHANCERS FOR SEASONAL AND PANDEMIC INFLUENZA VACCINES
Assignee:
BiondVax Pharmaceuticals Ltd.
PCT
WO2012/114323 filed: 22-Feb-2011
Country
|
|
Application
No.
|
|
Filing
Date
|
|
Patent/Publication
No.
|
|
Expiration
Date
|
|
Status
|
Australia
|
|
2011360572
|
|
22-Feb-2011
|
|
2011360572
|
|
22-Feb-2031
|
|
granted
|
Canada
|
|
2828068
|
|
22-Feb-2011
|
|
|
|
22-Feb-2031
|
|
allowed
|
USA
|
|
14/000815
|
|
22-Feb-2011
|
|
9303070
|
|
13-May-2031*
|
|
granted
|
*
Due to patent term adjustment of 80 days
Title:
VACCINE COMPOSITIONS OF MULTIMERIC-MULTIEPITOPE INFLUENZA POLYPEPTIDES AND THEIR PRODUCTION
Assignee:
BiondVax Pharmaceuticals Ltd.
PCT
WO2015/151103 filed: 01-April-2015
Priority:
US Prov. 61/974449 filed 03-Apr-2014
Country
|
|
Application
No.
|
|
Filing
Date
|
|
Publication
No.
|
|
|
Expiration
Date
|
|
Status
|
|
Australia
|
|
2015242154
|
|
01-Apr-2015
|
|
|
|
|
|
01-Apr-2035
|
|
|
examination
|
|
Canada
|
|
2944768
|
|
01-Apr-2015
|
|
|
|
|
|
01-Apr-2035
|
|
|
filed
|
|
China
|
|
201580017121X
|
|
01-Apr-2015
|
|
|
CN106163553
|
|
|
01-Apr-2035
|
|
|
filed
|
|
Europe
|
|
15773045.8
|
|
01-Apr-2015
|
|
|
3125931
|
|
|
01-Apr-2035
|
|
|
filed
|
|
Hong
Kong
|
|
17101579.8
|
|
01-Apr-2015
|
|
|
1227739
|
|
|
01-Apr-2035
|
|
|
filed
|
|
India
|
|
201627032852
|
|
01-Apr-2015
|
|
|
|
|
|
01-Apr-2035
|
|
|
filed
|
|
Israel
|
|
248055
|
|
01-Apr-2015
|
|
|
|
|
|
01-Apr-2035
|
|
|
filed
|
|
Japan
|
|
2016-559415
|
|
01-Apr-2015
|
|
|
|
|
|
01-Apr-2035
|
|
|
examination
|
|
USA
|
|
15/300529
|
|
01-Apr-2015
|
|
|
20170173142
|
|
|
01-Apr-2035
|
|
|
examination
|
|
We
do not know of any oppositions filed, difficulties or delays in connection with applications submitted by us for the registration
of the above-mentioned material patents, including claims submitted against the aforementioned patents that may adversely affect
the registration of the patent.
We
do not know whether any of our pending patent applications will result in the issuance of any future patents. Our issued patents
and those that may be issued in the future, or patents that we exclusively license, 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. We cannot be certain that we were the first to invent
the inventions claimed in patents or patent applications owned by or assigned to us, nor can we be certain that the scientists
of the Weizmann Institute were the first to invent the invention claimed in the patents that we exclusively license from Yeda.
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.
Yeda
License Agreement
At
present, among other patents, we have an exclusive worldwide license to two families of patents from Yeda pursuant to a license
agreement entered into with Yeda in 2003, as amended in 2005.
Pursuant
to the license agreement, Yeda granted us an exclusive worldwide license for the development, manufacturing, marketing, sale,
distribution and importing of products based, directly or indirectly, on patents and patent applications to be approved or submitted
pursuant to the invention titled “Peptide Based Vaccine for Influenza” and the invention titled “Improved Influenza
Vaccine”, developed by research headed by Prof. Ruth Arnon.
Unless
terminated earlier in accordance with the terms described below, the license granted will remain in effect in each county and
for each product developed based on the invention until the earliest of: (i) if a patent was granted in a specific county, the
patent expiration date in such country of the last of the patents; (ii) 15 years from the date of first commercial sale of a product,
by us or a sublicenses, in either the U.S or Europe, after obtainment of FDA New Drug Approval or equivalent approval in any European
country, if there is no patent covering such product in such country but there is however know how that is identifiable as a secret
and is not in the public domain which relates to such product, provided that such know how remains secret and of value.
In
exchange for the license grant, we or our future sub licensers will be obligated to pay royalties equaling 3% of the total amount
invoiced by us or a sub licensee in connection with the sale of products based on Yeda’s patents, or 2% of such amounts
if they originated from a country which did not grant a patent in connection with such products. All sales of products in connection
with the license agreement for any purpose other than for the purpose of clinical trials are required to be made for monetary
consideration.
We
are not permitted to assign the license agreement to third parties without Yeda’s prior consent, unless in the framework
of our merger with another entity, as a result of which we are not the surviving entity, subject to certain conditions and requirements
under the license agreement. We are however entitled to grant sublicenses under the license agreement, subject to Yeda’s
prior written approval, provided, among other things, that any sublicense shall expire upon termination of the license agreement
and that the licensee (s) shall be bound by confidentiality obligations similar to our confidentiality obligations under the license
agreement. The sublicense shall not be transferable or sub licensable. To date we have yet to enter such sublicense agreement.
If we sublicense our products we will be obligated to pay Yeda the following royalties: (i) 45% of consideration received (whether
monetary or otherwise) by us for the grant of or pursuant to sublicenses or in connection with sublicense options executed prior
to the completion of Phase 1 clinical trials; (ii) 35% of consideration received by us up to the first $20 million and 25% of
any consideration received by us exceeding such first $20 million, for the grant of or pursuant to sublicenses or in connection
with sublicense options executed after the completion of Phase 1 clinical trials and prior to the completion of Phase 2 clinical
trials; (iii) 20% of consideration received by us up to the first $20 million and 15% of any consideration received by us exceeding
such first $20 million, for the grant of or pursuant to sublicenses or in connection with sublicense options executed after the
completion of Phase 2 clinical trials. We are not obligated to pay Yeda any royalties or other payments with respect to (a) the
use or disposal of a product, without consideration, for the sole purpose of conducting clinical trials in respect of such product;
or (b) any product in any country after the expiry of the license in such country with respect to the product.
We
maintain the patents and patent applications licensed from Yeda, and we are obligated to submit to Yeda a development plan for
each potential product.
The
license agreement will terminate upon the later of: (i) the expiration date of the last patent licensed under the license agreement;
(ii) in the event only one product will be developed and/or commercialized by utilizing the licensed intellectual property, 15
years from the date of first commercial sale of such product in either the U.S or Europe, following receipt of New Drug Approval
from the FDA or equivalent approval in any European country for such product; (iii) in the event that more than one product will
be developed and/or commercialized by utilizing the licensed intellectual property, following the receipt of New Drug Approval
from the FDA or equivalent approval in any European country for such product the expiry of a 20 year period during which there
shall not have been a sale of any such products in either the U.S. or Europe. However, Yeda shall be entitled, at its option and
without our consent, to modify the license so that it is non-exclusive or to terminate the license with 30 days prior written
notice to us, if any of the following occurs: (1) we fail to commence the commercial sale of at least one product based on the
licenses intellectual property, in at least one country, within six months following receipt of after receipt of an FDA or similar
foreign regulatory approval for commercial marketing of such product and taking into account the seasonal nature of the products;
or (2) we fail to sell any product based on the licenses intellectual property, during a period of one year after commercial sale
of a product has commenced, during which no sales of the product take place (in both cases, except as a result of force majeure
or other factors beyond our control). In addition, Yeda is permitted to terminate our license agreement by written notice (a)
in the event we materially breach any of our obligations under the license agreement, provided that such material breach is un-curable
or, if curable, is not cured by us within thirty days (or in the case of failure by us to make payments due to Yeda in connection
with the license agreement, ten days) from receipt of notice of such breach; or (b) in the event of the appointment of a temporary
or permanent liquidator to our Company or a resolution is passed to voluntary wind up our Company, or if an order or act is granted
for the winding up of our Company, provided that if such order or act was initiated by any third party, such order or act is not
cancelled within 120 days; or (c) if we contest the validity of one of the patents registered by Yeda. Upon termination of the
license agreement, other than pursuant to (i) through (iii) above, all rights and documents will be returned to Yeda, and we will
grant Yeda an exclusive world-wide irrevocable license to our know-how and products which are based on the intellectual property
licensed from Yeda or that were discovered or occur or arise from the performance of our development work pursuant to the license
agreement. In the event that Yeda terminates the license agreement due to any reason other than termination in accordance with
(1), (2) and (a) through (c) above, we will be entitled to receive royalty payments equal to 25% of net proceeds received by Yeda
from the grant to third parties, within the five years following the termination of the license agreement, of a license or other
rights, which include our developments, up to the aggregate amount of research funds actually expended by us for development.
Material
Agreements
Other
than the license agreement with Yeda, the finance agreement with the European Investment Bank, our lease agreement for the new
mid-sized factory in Jerusalem, all referred to elsewhere in this prospectus, the agreement with our CMO and CRO, the ATM Agreement
and the investment agreement described below, we have not entered into any other material agreements (other than agreements entered
into in the ordinary course of business) in the two years immediately preceding the date of this prospectus.
Master
Service Agreement with a CRO
On
March 8, 2018, we entered into a Master Service Agreement with a contract research organization, or CRO, engaged in the business
of providing clinical research, data management and related services in the pharmaceuticals, biotechnology and medical device
industries, to assist with our current phase 3 pivotal clinical trial in Europe.
The
CRO’s responsibilities will include preparing and maintaining a complete and accurate written and/or electronic records,
accounts, materials and all other data and reports, continuous contact with the Company’s representative, monitoring the
performance of the study sites and investigational terms, conducting audits of the study and conducting an audit, control or inspection
of the study and to monitor and audit the activities of the investigators and members of the study team during the study.
In
exchange for the services provided by the CRO, we have agreed to pay cash consideration. The agreement may be terminated with
an immediate effect in case of a material breach by the other party, if such breach is not cured within 30 days from the date
of delivery of a written notice on the discovered breach to the other party. In addition, we may terminate the agreement by giving
a 45 day written notice.
Master
Service Agreement with a CMO
On
September 24, 2015, we entered into a Master Service Agreement with a CMO for the manufacture of M-001 for phase 3 clinical trial
at the CMO’s facility located in the U.S.
Pursuant
to this agreement, the CMO will be responsible for performing all necessary tests to the components and raw materials supplied,
as well as for procuring, testing, releasing and maintaining the inventory of all raw materials necessary to perform the services
and shall maintain adequate stockpile. In addition, the CMO will be responsible to manufacture, package, ship, store and test
the product and raw materials, maintain any state or local licenses required to operate a facility performing and management controls
in place to track and trend investigations and commitments.
We
may terminate this agreement by provide at least 30 days written notice to the CMO without penalty. In addition, the agreement
may be terminated with a 30 day notice of a material breach, if such breach has not been cured within the time allotted under
this agreement.
Investment
Agreement
On
January 1, 2017, we entered into an Investment Agreement with Angles Investments in Hi Tech Ltd., or the Investor, a private Israeli
company controlled by Mr. Marius Nacht, an Israeli Investor, for the issuance of ordinary shares of the Company. Pursuant to the
terms of the Agreement, the Investor invested in the Company amount equal to NIS 10,904,749 (approximately $2.83 million), or
the Investment Amount. In consideration for the Investment Amount, the Company issued to the Investor 33,760,832 ordinary shares
of the Company, NIS no par value (equivalent to approximately 844,000 ADSs). The Investment Amount represented a price per share
that is equal to the closing share price on TASE as of December 29, 2016, which was NIS 0.323 per share, 19.99% of the Company’s
issued and outstanding capital, and 12.08% of the Company’s issued and outstanding capital on a fully diluted basis.
The
issued shares have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States or
to a U.S. Persons (other than distributors) unless registered under the Securities Act or an exemption therefrom is available.
The issued shares contain a legend indicating that the transfer is prohibited except in accordance with the provisions of Regulation
S or pursuant to registration under the Securities Act or an available exemption therefrom, and hedging transaction involving
the Shares may not be conducted unless in compliance with the Securities Act.
The
Investment Amount was utilized by us for working capital, operating expenses and other general corporate purposes.
In
addition, following the closing of this investment transaction, and as part of this transaction, Mr. Isaac Devash was appointed
as a director of the Company, commencing on February 14, 2017.
ATM
Agreement
On
November 4, 2016, we entered into an At-the-Market Agreement with FBR Capital Markets & Co., or FBR, that was terminated as
of September 13, 2017. Pursuant to the ATM agreement, FBR was authorized, at our discretion and at such times as it shall determine
from time to time, sell ADSs, or the Placement Shares, through an “at the market offering” program, or the ATM Program,
pursuant to Instruction I.B.5. of the Registration Statement on Form F-3.
Any
sales of Placement Shares were sold under the Registration Statement on Form F-3 filed by us and declared effective on December
15, 2016. We have paid FBR a commission equal to 3.0% of the gross sales price of the Placement Shares sold pursuant to the ATM
Agreement and reimburse FBR for its reasonable out-of-pocket expenses, in connection with the offering. We have provided FBR with
customary representations and warranties, and indemnification rights. In addition, the Company has agreed to pay Aegis Capital
Corp., or Aegis, a fee equal to up to 2.0% of the gross sales price of the Placement Shares sold on our behalf by FBR through
and including May 11, 2017, for Aegis’ waiver of its right of first refusal in accordance with the underwriting agreement
entered by us and Aegis on May 11, 2015 in connection with our initial public offering.
We
have raised a total of $3.2 million in gross proceeds from at the market offerings and issued a total of 366,666 ADSs. We terminated
the ATM agreement effective as of September 13, 2017.
Employees
As
of December 31, 2018, we have 21 employees, 3 of whom are employed in finance and administration and 18 of whom were employed
in research, development, and manufacturing. These employees are in Israel.
Israeli
labor laws principally govern the length of the workday, minimum wages for employees, procedures for hiring and dismissing employees,
determination of severance pay, annual leave, sick days, advance notice of termination of employment, equal opportunity and anti-discrimination
laws and other conditions of employment. Subject to certain exceptions, Israeli law generally requires severance pay upon the
retirement, death or dismissal of an employee, and requires us and our employees to make payments to the National Insurance Institute,
which is similar to the U.S. Social Security Administration. Our employees have defined benefit pension plans that comply with
applicable Israeli legal requirements, which also include the mandatory pension payments required by applicable law and allocations
for severance pay.
While
none of our employees are party to any collective bargaining agreements, certain provisions of the collective bargaining agreements
between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (including
the Industrialists’ Associations) are applicable to our employees by extension orders issued by the Israel Ministry of Economy
(previously the Israeli Ministry of Trade, Industry and Labor). These provisions primarily concern the length of the workweek,
pension fund benefits for all employees and for employees in the industry section, insurance for work-related accidents, travel
expenses reimbursement, holiday leave, convalescent payments and entitlement for vacation days. We generally provide our employees
with benefits and working conditions beyond the required minimums. We have never experienced any employment-related work stoppages
and believe our relationship with our employees is good.
Insurance
The
Israeli Companies Law provides that an Israeli company may, under certain circumstances, exculpate an office holder from liability
with respect to a breach of his duty of care toward the company if appropriate provisions allowing such exculpation are included
in its articles of association. Our articles of association permit us to maintain directors’ and officers’ liability
insurance and to indemnify our directors and officers for actions performed on behalf of us, subject to specified limitations.
Therefore,
we have obtained directors’ and officers’ liability insurance with maximum coverage of $10 million in the aggregate
for the benefit of our office holders and directors. Such directors’ and officers’ liability insurance does and will
contain certain standard exclusions.
We
also maintain an insurance policy for our equipment and lease improvements protecting against risk of loss (fire, natural hazard
and allied perils, excluding damage from inventory theft). In addition, we maintain the following insurance: employer liability
with coverage of $5,500,000 million; for occurrence and in the aggregate third-party liability with coverage of $5,500,000 million
for occurrence and in the aggregate;
We
also procure additional insurance for each specific clinical trial which covers a certain number of trial participants and which
varies based on the particular clinical trial. We believe our insurance policies are adequate and customary for a business of
our kind. However, because of the nature of our business, we cannot assure you that we will be able to maintain insurance on a
commercially reasonable basis or at all, or that any future claims will not exceed our insurance coverage.
Environmental
Matters
We
are subject to various environmental, health and safety laws and regulations, including those governing 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. Our laboratory personnel have ongoing communication with the Israeli Ministry of Environmental
Protection in order to verify compliance with relevant instructions and regulations. In addition, all of our laboratory personnel
participate in instruction on the proper handling of chemicals, including hazardous substances before commencing employment, and
during the course of their employment, with us. In addition, all information with respect to any chemical substance that we use
is filed and stored as a Material Safety Data Sheet, as required by applicable environmental 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.
Legal
Proceedings
From
time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.
Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that
may harm our business. As of the date of this prospectus, there are no pending material legal proceedings against us or our property,
and we are currently not aware of any legal proceedings or claims against us or our property that we believe will have any significant
effect on our business, financial position or operating results. None of our officers or directors is a party against us in any
legal proceeding.
Historical
Background and Corporate Structure
BiondVax
Pharmaceuticals Ltd. was incorporated in Israel on July 22, 2003 as a private Israeli company. On June 7, 2007, we successfully
completed an initial public offering on the TASE. In May 2015, we successfully completed an initial public offering on the NASDAQ
Capital Markets. In January 2018 we voluntarily delisted our securities from TASE. We do not have any subsidiaries and do not
hold any investments in other entities.
MANAGEMENT
Executive Officers
and Directors
We are managed by
a board of directors, which is currently comprised of eight members, and our executive officers. Each of our executive officers
is appointed by our board of directors. The table below sets forth our directors and executive officers. The business address
for each of our executive officers and directors is c/o BiondVax Pharmaceuticals Ltd., Jerusalem BioPark, 2nd floor, Hadassah
Ein Kerem Campus, Jerusalem, Israel.
Name
|
|
Age
|
|
Position
|
Avner Rotman
|
|
74
|
|
Chairman of the Board of Directors
|
Mark Germain
|
|
68
|
|
Vice Chairman of the Board of Directors
|
Ron Babecoff
|
|
56
|
|
Chief Executive Officer and Director
|
Tamar Ben Yedidia
|
|
55
|
|
Chief Scientist
|
Uri Ben Or
|
|
48
|
|
Chief Financial Officer
|
Michal Marom Brikman
(1)
|
|
48
|
|
Director
|
George H. Lowell
|
|
72
|
|
Director
|
Morris Laster
(1)
|
|
53
|
|
Director
|
Ruth Ben Yakar
(1)
|
|
48
|
|
Director
|
Isaac Devash
|
|
56
|
|
Director
|
|
(1)
|
Member of the Audit
Committee and of the Compensation Committee.
|
Executive Officers
Dr. Ron Babecoff
co-founded us in 2003, and has served as our President and Chief Executive Officer since our inception. Prior to our founding,
Dr. Babecoff served as Marketing Manager at Omrix Biopharmaceuticals Ltd. from 2000 to 2003. Dr. Babecoff holds a D.V.M. degree
from the University of Liège (ULg), Belgium and a Master of Entrepreneurship and Innovation (MEI) from the Swinburne University
of Technology of Melbourne, Australia. We believe that Dr. Babecoff is qualified to serve on our board of directors based on his
many years of service as our President and CEO, his extensive knowledge of our company and his intimate knowledge of our business
plans and strategies as a co-founder of our business, and his experience within our industry.
Dr. Tamar Ben Yedidia
has served as our Chief Scientist since 2004. Dr. Ben-Yedidia began her career at Biotechnology General (Israel) Ltd., BTG
(Rehovot), where she was employed as lab manager from 1991 to 1994. Dr. Ben-Yedidia joined the Department of Immunology at the
Weizmann Institute of Science from 1994 – 2004. Dr. Ben-Yedidia was involved in two European Consortium projects related
to the evaluation of different approaches for vaccination, has been invited to address conferences worldwide and is published
in various scientific journals. Dr. Ben-Yedidia received her Ph.D. in immunology from the Weizmann Institute after completion
of her doctoral thesis titled “A Peptide-Based Vaccine Against Influenza”.
Mr. Uri Ben Or
has served as our Chief Financial Officer since 2007. In January, 2007, Mr. Ben Or founded CFO Direct, in which he has served
as the Chief Executive Officer and through which he provides his services to our company. Mr. Ben-Or holds a B.A. degree in Business
from the College of Administration, and a M.B.A degree from the Bar Ilan University and is a certified public accountant in Israel.
Directors
Professor Avner Rotman
has been Chairman of our board of directors since 2005. Prof. Rotman founded in 2000, and has served since then and continues
to serve as the Chief Executive Officer and Chairman of the Board of Directors of Rodar Technologies Ltd. Prof. Rotman also founded
Bio-Dar Ltd. in 1984, and served as its President and CEO from 1985 until 2000. Prof. Rotman was also the chairman of the I-Tech
incubator at Kyriat Weizmann. Prof. Rotman is the Founder and Chairman of the Foundation of Cardiovascular Research in Israel.
Prof. Rotman holds a PhD in chemistry from the Weizmann Institute of Science, Israel, and an M.Sc and B.Sc in chemistry from the
Hebrew University of Jerusalem, Israel. We believe that Prof. Rotman is qualified to serve on our board of directors based on
his extensive experience and knowledge in the field of biotechnology and as an executive officer and director of multiple biotechnology
companies. On August 31, 2017, Following the European Investment Bank (EIB)’s significant €20 million funding
agreement, and as we progress towards Phase 3 clinical trials and construction of its commercial mid-size manufacturing facility,
our board of directors decided that we will focus its efforts on the international scene. In that regard, it was decided, inter
alia, to identify a new chairman of the board of directors with relevant global experience to guide us through the anticipated
upcoming international Phase 3 trials and global commercialization. On February 17, 2019 our board of directors extended Professor
Rotman’s terms as director and chairman until June 30, 2019.
Mr. Mark Germain
has been involved as a founder, director, chairman of the board of, and/or investor in, over twenty companies in the biotech
field and assisted many of them in arranging corporate partnerships, acquiring technology, entering into mergers and acquisitions,
and executing financings and going public transactions. He graduated from New York University School of Law in 1975, Order
of the Coif, and was a partner in a New York law firm practicing corporate and securities law before leaving in 1986. Since then,
and until he entered the biotech field in 1991, he served in senior executive capacities, including as president of a public company
that was sold in 1991. In addition to being a director of BiondVax, Mr. Germain is a Managing Director at The Aentib Group,
a boutique merchant bank, and has served as a director on the board of Pluristem Therapeutics since 2007, including time as Co-Chairman.
Mr. Germain also serves or served as a director of the following companies that were reporting companies in the past: ChromaDex,
Inc., Stem Cell Innovations, Inc., Omnimmune Corp. and Collexis Holdings, Inc. He is also a co-founder and director of a
number of private companies in and outside the biotech field.
Ms. Michal Marom
Brikman
is a certified public accountant in Israel since 1994. She holds an M.A. degree in business from the Israeli College
of Business in Rishon Letziyon, Israel, and a M.S.F from the Baruch College of Business in New York City, NY. Since 2011, Ms.
Brikman has been serving as the Chief Financial Officer of Linkury Ltd., an Israeli private company. In addition, Ms. Brikman
serves as an external director, as defined under Israeli Companies law, in a number of Israeli public companies, including: Union
Bank of Israel Ltd. (TLV:UNON), Ado Group Ltd. (TLV:ADO), Arko Holdings, Ltd. (TLV:ARKO), Spectronix Ltd. (TLV:SPCT), Algomizer
Ltd. (TLV:ALMO), Naaman Vardinon Ltd. (TLV:NAMN) and Dan Hotels Ltd. (TLV: DANH).
Prof. George H.
Lowell, M.D.
has served as a member of our board of directors since 2008. Prior to joining our company, Prof. Lowell served
as Chief Scientific Officer for BioDefense at GlaxoSmithkline Biologicals (GSK) from 2006 to 2007 and CSO of ID Biomedical Corp.
(IDB) from 2001 to 2006. Prof. Lowell served as President and CSO of the vaccine R&D companies he founded, Intellivax, Inc.
in Baltimore and Intellivax International Inc. in Montreal from 1995 until 2001. From 1974, Prof. Lowell served on active duty
in the US Army Medical R&D Command, retiring in 1994 with the rank of Colonel. During this period he served as consultant
in pediatric infectious diseases at The Walter Reed Army Medical Center and director of his laboratories at The Walter Reed Army
Institute of Research in Washington, D.C. Prof. Lowell has held a number of academic posts, including Visiting Scientist at the
Weizmann Institute of Science (Israel) and Visiting Professor, Hebrew University-Hadassah Medical Center (Israel). Prof. Lowell
holds a B.A. from Yeshiva University, NY, NY, and an M.D. from the Albert Einstein College of Medicine of Yeshiva University,
NY, NY. Prof. Lowell performed three years of post-doctoral training in pediatrics and pediatric infectious diseases and immunology
at NYU-Bellevue Medical Center, NY, NY and The Mount Sinai Medical Center, NY, NY. We believe that Prof. Lowell is qualified to
serve on our board of directors based on his extensive experience and knowledge in the field of health care and years of executive
leadership in the biomedical industry.
Dr. Ruth Ben Yakar,
PhD
. is currently CEO and member of the Board of Directors at BioSight Ltd., a private biopharmaceutical company focused on
research and development of innovative cancer targeted pro-drugs. She has over 20 years of experience in the biomedical fi eld,
including 15 years of management in the biotech industry, leading diverse corporate, business, operational, fi nancial, clinical
and regulatory activities. Dr. Ben Yakar also serves as a Director at SHL Telemedicine and Cellect Biomed boards of directors.
Dr. Ben Yakar formerly served as the CEO of Procognia, a public biotech company, a Director at IATI, the CEO of Thrombotech, where
she led a multi-center clinical trial and led the company towards acquisition, the Chief Business Offi cer of YEDA, the technology
transfer company of the Weizmann Institute of Science, and a Vice President in several Biotech companies. Dr. Ben Yakar holds
a PhD Cum Laude in molecular cell biology from the Weizmann Institute of Science.
Mr. Isaac Devash
is
a business and social entrepreneur with over twenty years of experience in venture capital and private equity investments, and
several years of experience as an investment banker in mergers and acquisitions at Credit Suisse First Boston in New York, London,
and Tokyo. Mr. Devash established a number of private equity funds and assisted a variety of Israeli companies in their international
development and a number of leading international investors in their investments in Israel. Mr. Devash is a partner at www.amoon.com
in which Mr. Marius Nacht is the anchor investor. Mr. Devash was a member of the Goshen Committee for formulating the standards
of corporate governance for Israeli public companies. Mr. Devash founded and serves as the Chairman and President, respectively,
of the Wharton and Harvard Business School alumni clubs of Israel. Mr. Devash holds a bachelor’s degree, summa cum laude,
from the Wharton School of the University of Pennsylvania and an MBA from Harvard University.
Dr. Morris C. Laster
has
served as a member of our board of directors since November 2017. Dr. Laster possesses over 25 years of experience in the Biomed
industry, with expertise in identification, evaluation, finance and management of biomedical innovations in both public and private
companies. Dr. Laster is a Venture Partner at OurCrowd a world leading crowd funding platform and is the CEO of Clil Medical Ltd.,
a biomedical consultancy company. He is also the CEO of Vital Spark Inc., a new company developing novel dual action cannabinoids
licensed from the NIH. Previously, he served as the founding CEO and director of BioLineRx Ltd. (NASDAQ/TASE: BLRX) from 2003 and
until 2010. Dr. Laster is also one of the founders of Kitov Pharmaceuticals Holdings Ltd. (NASDAQ: KTOV; TASE: KTOV) and has served
as a director in Kitov from 2010 and until 2014. Dr. Laster holds an M.D. degree from SUNY Health Science Center At Brooklyn (SUNY
HSCB) and B.S. in Biology, Magna Cum Laude, from State University of New York at Albany.
There are no family relationships
between any members of our executive management and our directors.
Our Scientific Advisory Board
Our Scientific Advisory Board
(SAB) includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medical
research. Our SAB plays an active role in advising us with respect to our products, technology development, clinical trials and
safety. Pursuant to their respective appointment letters, our advisory team members are entitled to receive the following compensation:
(i) a per diem cash payment of $1,000 plus VAT (aside from Professor Ruth Arnon who is entitled to receive $1,400 plus VAT), for
SAB meetings attended in Israel or consultation services provided during a period longer than 4 consecutive hours, or a proportion
of such amount for a partial day of less than 4 consecutive hours (aside from Professor Ruth Arnon, who shall be entitled to a
full day amount or any proportion of such full day amount based on a full day being 8 hours); (ii) a per diem cash payment of
$2,000 plus VAT (aside from Professor Ruth Arnon who is entitled to receive $2,400 plus VAT), per full day of SAB meetings
or full session consultation attended outside of Israel, provided, that, in the event travel time exceeds 48 hours, additional
compensation will be provided at a rate of $1,000 per each 24 hours; and (iii) with respect to Professor Michel Revel,
for occasional consultations (less than 4 consecutive hours per each consultation) which do not fall under any of the above categories,
the compensation shall be calculated based on a fee of $250 per full hour of consultation. In addition, Prof. Arnon is also employed
by us on a part time (5%) basis in exchange for a monthly salary of $1,800. Each member of our SAB was granted options to purchase
ordinary shares of our Company pursuant to their respective appointment letters. According to the appointment letters, we granted
a total of 666,050 options that expired during November and December 2015.
In September 2016 Professor
Shai Ashkenazi was appointed to serve as a member of our Scientific Advisory Board. Professor Ashkenazi will receive a compensation
for his services under similar terms and conditions to those granted to previous members appointed to serve in the Advisory Board
in the past, as follows: as compensation for his services, Professor Ashkenazi will be paid $1,000 per day (or part thereof)
on which he provides consultation services to the Company. Professor Ashkenazi will be reimbursed for all out-of-pocket expenses.
In addition, Professor Ashkenazi will receive unregistered options exercisable for up to 54,000 ordinary shares, no par value
each, representing 1,350 ADSs, under the Company’s option plan, intended to be approved at the upcoming annual general shareholders
meeting, at a per share exercise price of $0.12. The Options are scheduled to vest in four equal installments, 13,500 shares,
commencing on the first anniversary date of the appointment and on each anniversary thereafter until all Options are vested at
the fourth anniversary. In August 2018 Prof. Ashkenazi was appointed as BiondVax’s Medical Director prior to the pivotal
clinical efficacy phase 3 trial and therefore resigned from the SAB.
The following paragraphs
set forth certain biographical information with respect to our Scientific Advisory Board members:
Professor Ruth
Arnon
is the inventor of the new synthetic influenza vaccine and head of BiondVax’s Scientific Advisory Board. Formerly
Vice-President of the Weizmann Institute of Science (1988-1997), Professor Arnon is an internationally acclaimed immunologist.
Along with Prof. Michael Sela, she conceptualized and developed Copaxone®, a drug for the treatment of multiple sclerosis
which was approved by the U.S. Food and Drug Administration and is presently marketed worldwide. Prior to her appointment as Vice-President,
Prof. Arnon served as Head of the Department of Chemical Immunology and as Dean of the Faculty of Biology. From 1985 to 1994,
Prof. Arnon was Director of the Institute’s McArthur Center for Molecular Biology of Tropical Diseases. Prof. Arnon has
made significant contributions in the fields of vaccine development, cancer research and to the study of parasitic diseases. She
has served as President of the European Federation of Immunological Societies (EFIS), and as Secretary-General of the International
Union of Immunological Societies (IUIS). Dr. Arnon is the recipient of numerous international and Israeli awards including the
prestigious Israel Prize. Prof. Arnon is also the Advisor for Science to the President of Israel and a member of the Israel Academy
of Sciences, where she presently chairs its Science Division. Prof. Arnon is the incumbent of the Paul Ehrlich Chair in Immunochemistry
at the Weizmann Institute. Prof. Arnon is also employed by us on a part time (5%) basis in exchange for a monthly salary of $1,800.
Prof. Michel Revel
,
Professor of Biochemistry and Molecular Genetics at the Weizmann Institute of Science is well known for his contributions to the
field of immunology. Prof. Revel’s research on Interferon, its mechanisms of action and the isolation of the human Interferon-beta
gene, have led to the biotechnological development of Interferon-beta and its application in medicine. Prof. Revel also discovered
the human gene for the cytokine Interleukin-6 which was developed at his laboratory and at InterPharm-Serono based on its activity
for protecting nerve cells and the nerve myelin coating.
Alongside his research
and development activity, Prof. Revel is deeply involved in the ethics of science and biotechnology, and serves as chairman of
the Bioethics Advisory Committee of the Israel Academy of Sciences and as a member of the International Bioethics Committee of
UNESCO. He integrates his work in science with traditional Judaism and Jewish philosophy in addressing bioethical issues such
as use of human embryo stem cells, genetic intervention in man and cloning. Prof. Revel was the recipient of the Israel Prize
for medical research and the Michael Landau Prize for biotechnology. He has been a member of Israel’s National Committee
for Biotechnology since its establishment, serving for three years as its chairman.
Professor Shai Ashkenazi
,
is a clinical and regulatory vaccine expert, with significant contributions to flu and other infectious disease vaccine research
and development. He has served on the clinical trial advisory boards for the development of a pediatric flu vaccine, vaccines
for enteric infections, as well as other infectious diseases. Also, Professor Ashkenazi has a deep understanding and experience
with the Company’s universal flu vaccine as he served as the head of the data and safety monitoring board (DSMB) in all
of the Company’s phase 1 and phase 2 clinical trials in Israel and abroad. In addition, Professor Ashkenazi is an editorial
board member of several international medical journals, has served on numerous national and international committees, authored
over 200 medical publications and is editor of the Israeli Textbook of Pediatrics. In August 2018 Prof. Ashkenazi was appointed
as BiondVax’s Medical Director prior to the pivotal clinical efficacy phase 3 trial and therefore resigned from the SAB.
NASDAQ Capital Market listing rules and Home Country Practices
In accordance with
Israeli law and practice, and subject to the exemption set forth in Rule 5615 of the listing rules of the NASDAQ Capital Market,
we intend to follow the provisions of the Companies Law, rather than the listing rules of the NASDAQ Capital Market, with respect
to the following requirements:
Distribution
of certain reports to shareholders.
As opposed to the listing rules of the NASDAQ Capital Market, which require listed
issuers to make certain reports, such as annual reports, interim reports and quarterly reports, available to shareholders in
one of a number of specific manners, Israeli law does not require us to distribute periodic reports directly to shareholders,
and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make such
reports available through a public website. In addition to making such reports available on a public website, we plan to make
our audited financial statements available to our shareholders at our offices and will only mail such reports to shareholders
upon request. As a foreign private issuer, we are generally exempt from the SEC’s proxy solicitation rules.
Nomination of
directors.
With the exception of our external directors and directors elected by our board of directors due to vacancy,
our directors are elected by an annual meeting of our shareholders to hold office until the next annual meeting following his
or her election. On February 12, 2015, our annual general shareholders meeting approved the staggering and extension of the
term of our board members in accordance with the Company’s articles of association and divided the members of our board
of directors among the three classes, so that the term of office of only one class of directors will expire in each upcoming
annual shareholders meeting. See “Management — Board Practices.” The nominations for directors, which are
presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance
with the provisions of our articles of association and the Companies Law. One or more shareholders of a company holding at
least 1% of the voting power of the company may nominate a currently serving external director for an additional three year
term. Nominations need not be made by a nominating committee of our board of directors consisting solely of independent
directors or by independent directors constituting a majority of independent directors, as required under the listing rules
of the NASDAQ Capital Market.
Compensation of
officers.
We follow the provisions of the Companies Law with respect to matters in connection with the composition and
responsibilities of our compensation committee, office holder compensation and any required approval by the shareholders of such
compensation. Israeli law and our articles of association do not require that the independent members of our board of directors,
or a compensation committee composed solely of independent members of our board of directors, determine an executive officer’s
compensation, as is generally required under the listing rules of the NASDAQ Capital Market with respect to the Chief Executive
Officer and all other executive officers of a company. However, generally, Israeli law and our articles of association do require
that our audit and compensation committee each contain two external directors (as defined in the Companies Law. A recent
amendment to the Israeli law waives such requirement if there is no controlling shareholder in the company, as define in the Companies
Law, and if such company complies with the NASDAQ Capital Market. We intend to apply such waiver, subject to the aforementioned
conditions. (See “Management — Board Practices — External Directors.”). In addition, Israeli law requires
that additional members of the compensation committee and the external directors be compensated equally. Our compensation committee
has been established and conducts itself in accordance with the provisions governing the composition of and the responsibilities
of a compensation committee as set forth in the Companies Law. Furthermore, compensation of office holders is determined and approved
by our compensation committee, and in general, by our board of directors as well, and in certain circumstances by our shareholders,
as detailed below under the caption “—Shareholder Approval.” Thus, we will seek shareholder approval for all
corporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief
Executive Officer) requiring such approval under the requirements of the Companies Law, including seeking prior approval of the
shareholders for the compensation policy and for certain office holder compensation, rather than seeking approval for such corporate
actions in accordance with listing rules of the NASDAQ Capital Market. See “— Compensation Committee and Compensation
Policy” below.
Compensation
Committee
. Pursuant to the Companies Law, we established a compensation committee as detailed below. Since the
consummation of the offering, our board of directors has affirmatively determined that each member of our compensation
committee qualifies as “independent” under applicable NASDAQ Capital Market and SEC rules.
Annual Shareholders
Meeting.
The Company shall convene an annual shareholders meeting under the requirements (including required dates) of the
Companies Law, rather than as required under rule NASDAQ Capital Market Rule 5620(a).
Shareholder
approval
. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of
the Companies Law, rather than seeking approval for corporate actions in accordance with NASDAQ Capital Market Listing Rule
5635. In particular, under this NASDAQ Capital Market rule, shareholder approval is generally required for: (i) an
acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares
or voting rights or if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the
consideration to be received; (ii) the issuance of shares leading to a change of control; (iii) adoption or amendment of
equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights (including securities
convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors,
officers or 5% shareholders) if such equity is issued (or sold) at below the greater of the book or market value of shares.
By contrast, under the Companies Law, shareholder approval is required for, among other things: (a) transactions with
directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for any
other position that they may hold at a company), for which approvals of the compensation committee, board of directors and
shareholders are all required, (b) extraordinary transactions with controlling shareholders of publicly held companies, which
require the special approval described below under “Disclosure of personal interests of controlling shareholders and
approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling
shareholder, if any, or such controlling shareholder’s relative, which require the special approval described below
under “Disclosure of personal interests of controlling shareholders and approval of certain transactions, (d)
approval of transactions with Company’s Chief Executive Officer with respect to his or hers compensation, whether in
accordance with the approved compensation policy of the Company or not in accordance with the approved compensation policy of
the Company, or transactions with officers of the Company not in accordance with the approved compensation policy, and (e)
approval of the compensation policy of the Company for office holders. In addition, under the Companies Law, a merger
requires approval of the shareholders of each of the merging companies. See also “Description of Share Capital —
Acquisitions under Israeli Law — Merger” below.
Quorum for
shareholder meetings
. As permitted under the Companies Law, pursuant to our articles of association, the quorum required
for an ordinary meeting of shareholders will consist of one or more shareholders present in person, by proxy or by other
voting instrument in accordance with the Companies Law, who hold, in the aggregate, at least 10% of the voting power of our
shares (and in an adjourned meeting, any number of shareholders), instead of 33 1/3% of the issued share capital required
under the NASDAQ Capital Market corporate governance rules.
Other than the foregoing
home country practices, we otherwise intend to comply with the rules generally applicable to U.S. domestic companies listed on
the NASDAQ Capital Market. We may in the future decide to use the foreign private issuer exemption with respect to some or all
of the other NASDAQ Capital Market corporate governance rules. Following our home country corporate governance practices as opposed
to the requirements that would otherwise apply to a U.S. company listed on the NASDAQ Capital Market may provide less protection
to you than what is accorded to investors under the listing rules of the NASDAQ Capital Market applicable to domestic U.S. issuers.
Board practices
Board of Directors
Under the Companies
Law and our articles of association, our board of directors shall direct the Company’s policy and shall supervise the performance
of the Company’s Chief Executive Officer. Our board of directors may exercise all powers and may take all actions that are
not specifically granted to our shareholders or to management. Our executive officers are responsible for our day-to-day management
and have individual responsibilities established by our board of directors. Our Chief Executive Officer is appointed by, and serves
at the discretion of our board of directors, subject to a services agreement entered into with Ron Executive Ltd., a company solely
owned Dr. Ron Babecoff. All other executive officers are also appointed by our board of directors, and are subject to the terms
of any applicable employment or services agreements that we may enter into with them or with certain entities through which we
receive their services. Other than Dr. Babecoff, who is entitled to certain termination payments under his employment agreement
with us, none of our directors are entitled to benefits upon termination of their service. See – “
Executive Compensation
”.
Our board of directors
has affirmatively determined that a majority of our directors are independent, in compliance with the NASDAQ Capital Market rules.
The definition of independent director includes a set of statutory criteria that must be satisfied, including criteria whose aim
is to ensure that there is no factor which would impair the ability of the independent director to exercise independent judgment
in addition to the requirement that the board consider any factor which would impair the ability of the independent director to
exercise independent judgment. independent directors may be elected by an ordinary majority.
Under our articles
of association, our board of directors must consist of at least three and not more than nine directors. Our board of directors
currently consists of eight members, including our non-executive Chairman of the board of directors. Our directors are divided
into three classes with staggered three-year terms. Class I, Class II and Class III shall each consist of two directors, constituting
our entire board of directors (other than the external directors).
In addition, our articles
of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office
ending on the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance
with our articles or any applicable law, subject to the maximum number of directors allowed under the articles of association.
Under the Companies
Law, our board of directors must determine the minimum number of directors who are required to have accounting and financial expertise.
In determining the number of directors required to have such expertise, our 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 the
minimum number of directors of our company who are required to have accounting and financial expertise is two. Our board of directors
has determined that Michael Marom Brikman and Isaac Devash have accounting and financial expertise and possess professional qualifications
as required under the Companies Law.
Chairman of the Board
Our articles of association
provide that the chairman of the board is appointed by the members of the board of directors and serves as chairman of the board
throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the chief executive
officer or a relative of the chief executive officer may not serve as the chairman of the board of directors, and the chairman
or a relative of the chairman may not be vested with authorities of the chief executive officer without shareholder approval by
special majority and for periods of time not exceeding three years each.
In addition, a person
subordinated, directly or indirectly, to the chief executive officer may not serve as the chairman of the board of directors;
the chairman of the board may not be vested with authorities that are granted to those subordinated to the chief executive officer;
and the chairman of the board may not serve in any other position in the company or a controlled company, except as a director
or chairman of a controlled company.
External Directors
We have elected to
take advantage of an exception under the Companies Law, requiring us to elect at least two members who qualify as external directors,
one of whom has accounting and financial expertise, subject to the following conditions: (i) none of our shareholders is a controlling
shareholder; (ii) we comply with NASDAQ rules and regulations with respect to the composition of our audit and compensation committees;
(iii) we comply with NASDAQ rules and regulations with respect to the requirements of independent directors. For so long as we
meet the requisite requirements, we intend to apply the exemption from appointing at least two external directors under the Companies
Law.
An external director
is elected for a period of three years. The provisions of the Companies Law set forth special approval requirements for the election
of external directors. External directors must be elected by a majority vote of the shares present and voting at a shareholders
meeting, provided that either:
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such
majority includes at least a majority of the shares held by all shareholders who are
non-controlling shareholders and do not have a personal interest in the election of the
external director (other than a personal interest not deriving from a relationship with
a controlling shareholder) that are voted at the meeting, excluding abstentions, to which
we refer as a disinterested majority; or
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the
total number of shares voted by non-controlling shareholders and by shareholders who
do not have a personal interest in the election of the external director, against the
election of the external director, does not exceed 2% of the aggregate voting rights
in the company.
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The term control,
when referring to a controlling shareholder, is defined in the Companies Law as a person or entity with the ability to direct
the activities of the company, excluding such ability deriving solely from his or her position as a director of the company or
from any other position with the company. In addition, a person or entity is presumed to possess control if he or she holds or
controls by himself or together with others, one half or more or more of any one of the Means of Control of a company. The term
“Means of Control” is defined as any one of the following: (i) the right to vote at a general meeting of a company,
or (ii) the right to appoint directors or the general manager of a company. In addition, with respect to certain matters (mainly
pertaining interested parties’ transactions), a controlling shareholder is deemed to include a shareholder that holds 25%
or more of the voting rights in a public company if no other shareholder holds more than 45% of the voting rights in the company
(with respect to such holding by two shareholders or more – such shareholders be deemed to be holding together, if each
has a personal interest in approving a certain transaction being brought for the approval of the general meeting of the shareholders).
Audit Committee
Our audit committee
consists of Ms. Michal Brikman, Ms. Ruth Ben Yakar and Mr. Morris Laster. Ms. Michal Brikman also serves as the chairman of the
audit committee.
Under the NASDAQ Capital
Market corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors,
each of whom is financially literate and one of whom has accounting or related financial management expertise.
All members of our
audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQ
Capital Market corporate governance rules. Our board of directors has affirmatively determined that Ms. Michal Brikman is an audit
committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the NASDAQ Capital
Market corporate governance rules.
Each of the members
of the audit committee are deemed “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act,
which is different from the general test for independence of board and committee members.
Audit Committee Role
Our board of directors
adopted an audit committee charter effective upon the listing of the ADSs and warrants on the NASDAQ Capital Market that set forth
the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of the NASDAQ Capital Market,
as well as the requirements for such committee under the Companies Law, including the following:
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oversight of our
independent registered public accounting firm and recommending the engagement, compensation or termination of engagement of
our independent registered public accounting firm to the board of directors in accordance with Israeli law;
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recommending the
engagement or termination of the person filling the office of our internal auditor; and
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recommending the
terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our
board of directors.
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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 that it
deems necessary to satisfy itself that the accountants are independent of management.
Compensation Committee and Compensation
Policy
Our compensation committee
currently consists of Ms. Michal Brikman, Ms. Ruth Ben Yakar and Mr. Morris Laster. Ms. Michal Brikman also serves as the Chairman
of the Compensation committee. The duties of the compensation committee include the recommendation to the company’s board
of directors of a policy regarding the terms of engagement of office holders, to which we refer as a compensation policy. That
policy must be adopted by the company’s board of directors, after considering the recommendations of the compensation committee,
and will need to be brought for approval by the company’s shareholders, which approval requires a special approval for Compensation
as described below under “Approval of Related Party Transactions Under Israeli Law — Fiduciary Duties of Directors
and Executive Officers”.
Under the Companies
Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy.
The Compensation Policy
must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth in
the Companies Law. The Compensation Policy must be approved by the company’s board of directors after considering the recommendations
of the compensation committee. In addition, the Compensation Policy needs to be approved by the company’s shareholders by
a simple majority, provided that (i) such majority includes a majority of the votes cast by the shareholders who are not controlling
shareholders and who do not have a personal interest in the matter, present and voting (abstentions are disregarded) or (ii) the
votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter who were
present and voted against the Compensation Policy, constitute two percent or less of the voting power of the company. Such majority
determined in accordance with clause (i) or (ii) is hereinafter referred to as the Compensation Majority.
To the extent a Compensation
Policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company may override
the resolution of the shareholders following a re-discussion of the matter by the board of directors and the compensation committee
and for specified reasons, and after determining that despite the rejection by the shareholders, the adoption of the Compensation
Policy is for the benefit of the company.
A Compensation Policy
that is for a period of more than three years must be approved in accordance with the above procedure every three years.
Notwithstanding the
above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholders
and their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee
determines that the amendment is not material in relation to its existing terms.
Pursuant to the Companies
Law amendment, following the recommendation of our compensation committee, our board of directors approved our Compensation Policy,
and our shareholders, in turn, approved the Compensation Policy at our annual general meeting of shareholders that was held in
January 2014. On March 1, 2015, following the approval of the compensation committee and our board of directors, our general shareholders
meeting approved an amendment to the compensation policy increasing the maximum amounts of bonuses and the scope of liability
insurance policies permitted under such compensation policy in connection with our directors and officers.
The Compensation Policy
must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, including
exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement.
The Compensation Policy must relate to certain factors, including advancement of the Company’s objectives, the Company’s
business plan and its long-term strategy, and creation of appropriate incentives for office holders. It must also consider, among
other things, the Company’s risk management, size and the nature of its operations. The Compensation Policy must furthermore
consider the following additional factors:
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the knowledge, skills,
expertise and accomplishments of the relevant office holder;
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the office holder’s
roles and responsibilities and prior compensation agreements with him or her;
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the ratio between
the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of the company,
including those employed through manpower companies, in particular the ratio between such cost and the average and median
compensation of the other employees of the company, as well as the impact such disparities may have on the work relationships
in the company;
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the possibility
of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit
on the exercise value of non-cash variable equity-based compensation; and
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as to severance
compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service
period, the company’s performance during that period of service, the person’s contribution towards the company’s
achievement of its goals and the maximization of its profits, and the circumstances under which the person is leaving the
company.
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The Compensation Policy
must also include:
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a link between variable
compensation and long-term performance and measurable criteria;
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the relationship
between variable and fixed compensation, and the ceiling for the value of variable compensation;
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the conditions under
which an office holder would be required to repay compensation paid to him or her if it was later shown that the data upon
which such compensation was based was inaccurate and was required to be restated in the company’s financial statements;
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the minimum holding
or vesting period for variable, equity-based compensation; and
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maximum limits for
severance compensation.
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The compensation committee
is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (and subsequent
approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office
holders as well as functions previously fulfilled by a company’s audit committee with respect to matters related to approval
of the terms of engagement of office holders, including:
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recommending whether
a compensation policy should continue in effect, if the then-current policy has a term of greater than three years (approval
of either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three
years);
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recommending to
the board of directors periodic updates to the compensation policy;
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assessing implementation
of the compensation policy; and
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determining whether
the compensation terms of the chief executive officer of the company need not be brought to approval of the shareholders.
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Compensation Committee Role
Our compensation committee’s
responsibilities include:
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reviewing and recommending
overall compensation policies with respect to our Chief Executive Officers and other executive officers;
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reviewing and approving
corporate goals and objectives relevant to the compensation of our Chief Executive Officers and other executive officers including
evaluating their performance in light of such goals and objectives;
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reviewing and approving
the granting of options and other incentive awards; and
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reviewing, evaluating
and making recommendations regarding the compensation and benefits for our non-employee directors.
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Internal Auditor
Under the Companies
Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation
of the audit committee. An internal auditor may not be:
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a person (or a relative
of a person) who holds more than 5% of the company’s outstanding shares or voting rights;
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a person (or a relative
of a person) who has the power to appoint a director or the general manager of the company;
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an office holder
(including a director) of the company (or a relative thereof); or
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a member of the
company’s independent accounting firm, or anyone on his or her behalf.
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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
review the internal auditor’s work plan. On October 22, 2014, we appointed Mr. Gewirtz Yisrael as our internal auditor.
Mr. Gewirtz Yisrael is a certified internal auditor and a partner at Fahn Kanne & Co. Grant Thornton Israel, a certified
public accounting firm in Israel.
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The board of directors
shall determine the direct supervisor of the internal auditor. The internal auditor is required to submit his findings to
the audit committee, unless specified otherwise by the board of directors.
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Approval of Related Party Transactions
under Israeli Law
Fiduciary Duties of Directors and
Executive Officers
The Companies Law
codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Executive Officers
and Directors” is an office holder under the Companies Law.
An office holder’s
fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level
of care with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of
loyalty requires that an office holder act in good faith and in the best interests of the company.
The duty of care includes
a duty to use reasonable means to obtain:
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information on the
advisability of a given action brought for his or her approval or performed by virtue of his or her position; and
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all other important
information pertaining to any such action.
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The duty of loyalty
includes a duty to:
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refrain from any
conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;
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refrain from any
activity that is competitive with the company;
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refrain from exploiting
any business opportunity of the company to receive a personal gain for himself or herself or others; and
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disclose to the
company any information or documents relating to the company’s affairs which the office holder received as a result
of his or her position as an office holder.
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Disclosure of Personal Interests of
an Office Holder and Approval of Certain Transactions
The Companies Law
requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of
and all related material information or documents concerning any existing or proposed transaction with the company. An interested
office holder’s disclosure must be made promptly and in any event no later than the first meeting of the board of directors
at which the transaction is considered. A personal interest includes an interest of any person in an act or transaction of a company,
including a personal interest of such person’s relative or of a corporate body in which such person or a relative of such
person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one
director or the general manager, but excluding a personal interest stemming from one’s ownership of shares in the company.
A personal interest furthermore includes the personal interest of a person for whom the office holder holds a voting proxy or
the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or she holds a proxy
even if such shareholder has no personal interest in the matter. An office holder is not however, obligated to disclose a personal
interest if it derives solely from the personal interest of his or her relative in a transaction that is not considered an extraordinary
transaction. Under the Companies Law, an extraordinary transaction is defined as any of the following:
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a transaction other
than in the ordinary course of business;
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a transaction that
is not on market terms; or
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a transaction that
may have a material impact on a company’s profitability, assets or liabilities.
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If it is determined
that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction,
unless the company’s articles of association provide for a different method of approval. Our articles of association do
not provide otherwise. Further, so long as an office holder has disclosed his or her personal interest in a transaction, the board
of directors may approve an action by the office holder that would otherwise be deemed a breach of the 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. An extraordinary transaction in which an office holder has a personal interest requires approval
first by the company’s audit committee and subsequently by the board of directors. The compensation of, or an undertaking
to indemnify or insure, an office holder who is not a director requires approval first by the company’s compensation committee,
then by the company’s board of directors, and, if such compensation arrangement or an undertaking to indemnify or insure
is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart
from a number of specific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present
and voting at a shareholders meeting, provided that either: (a) such majority includes at least a majority of the shares held
by all shareholders who are not controlling shareholders and do not have a personal interest in such compensation arrangement
(excluding abstaining shareholders); or (b) the total number of shares of non-controlling shareholders and shareholders who do
not have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s
aggregate voting rights. We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification
or insurance of a director require the approval of the compensation committee, board of directors and shareholders by ordinary
majority, in that order, and under certain circumstances, a Special Approval for Compensation.
Generally, a person
who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may
not be present at such a meeting or vote on that matter unless the chairman of the relevant committee or board of directors, as
applicable, determines that he or she should be present in order to present the transaction that is subject to approval. Generally,
if a majority of the members of the audit committee or the board of directors, as applicable, have a personal interest in the
approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,
as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a
transaction, then the approval thereof shall also require the approval of the shareholders.
Disclosure of Personal Interests of
Controlling Shareholders and Approval of Certain Transactions
Pursuant to Israeli
law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controlling
shareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder
also includes a shareholder who holds 25% or more of the voting rights in the company if no other shareholder holds more than
45% of the voting rights in the company. For this purpose, the holdings of all shareholders who have a personal interest in the
same transaction will be aggregated. The approval of the audit committee or the compensation committee, as the case may be, the
board of directors and the shareholders of the company, in that order is required for (a) extraordinary transactions with a controlling
shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or
his or her relative, directly or indirectly, for the provision of services to the company, (c) the terms of engagement and compensation
of a controlling shareholder or his or her relative who is not an office holder or (d) the employment of a controlling shareholder
or his or her relative by the company, other than as an office holder (collectively referred as Transaction with a Controlling
Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:
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at least a majority
of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting
at the meeting approving the transaction, excluding abstentions; or
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the shares voted
against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at
the meeting do not exceed 2% of the voting rights in the company.
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To the extent that
any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every
three years, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction
is reasonable given the circumstances related thereto.
Arrangements regarding
the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require
the approval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may
not be inconsistent with the company’s stated compensation policy.
Pursuant to regulations
promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,
or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval
upon certain determinations of the audit committee and board of directors.
Shareholder Duties
Pursuant to the Companies
Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders and to
refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder
class meetings with respect to the following matters:
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an amendment to
the company’s articles of association;
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an increase of the
company’s authorized share capital;
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a merger; or
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the approval of
related party transactions and acts of office holders that require shareholder approval.
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In addition, a shareholder
also has a general duty to refrain from discriminating against other shareholders.
Certain shareholders
also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows
that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting
and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the company or other power
towards the company. The Companies Law does not define the substance of the 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.
Exculpation, Insurance and Indemnification
of Directors and Officers
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. The company may not exculpate in advance a director from liability arising out
of a prohibited dividend or distribution to shareholders.
Under the Companies
Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed
by him or her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided
its articles of association include a provision authorizing such indemnification:
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financial liability
imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award
approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in
advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be reasonably
foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according
to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail
the abovementioned foreseen events and amount or criteria;
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reasonable litigation
expenses, including attorneys’ fees, incurred by the office holder (i) as a result of an investigation or proceeding
instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (A) no
indictment was filed against such office holder as a result of such investigation or proceeding; and (B) no financial liability,
such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation
or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require
proof of criminal intent; and (ii) in connection with a monetary sanction; and
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reasonable litigation
expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against
him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office
holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent.
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Under the Companies
Law and the Israeli Securities Law 5728-1968, or the Israeli Securities Law, a company may insure an office holder against the
following liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s
articles of association:
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a breach of the
duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe
that the act would not harm the company;
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a breach of duty
of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office
holder; and
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a financial liability
imposed on the office holder in favor of a third party.
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Under our articles
of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:
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a breach of duty
of care to the company or to a third party.
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any other action
against which we are permitted by law to insure an office holder;
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expenses incurred
and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law including
the Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 5771-2011 and the Israeli
Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigation expenses
and attorney fees; and
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a financial liability
in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.
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Under the Companies
Law, a company may not indemnify, exculpate or insure an office holder against any of the following:
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a breach of the
duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent
that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;
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a breach of duty
of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office
holder;
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an act or omission
committed with intent to derive illegal personal benefit; or
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a fine, civil fine,
administrative fine or ransom or levied against the office holder.
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Under the Companies
Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensation committee
and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders.
See “— Approval of Related Party Transactions under Israeli Law.”
Our articles of association
permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by the Companies
Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative
Enforcement Procedure.
We have entered into
agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our
articles of association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association.
This indemnification is limited to events determined as foreseeable by the board of directors based on our activities, and to
an amount or according to criteria determined by the board of directors as reasonable under the circumstances.
The maximum indemnification
amount set forth in such agreements is limited to an amount which shall not exceed 25% of our net assets based on our most recently
audited or reviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition
to any amount paid (if paid) under insurance and/or by a third-party pursuant to an indemnification arrangement
In the opinion of
the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act of 1933, however, is
against public policy and therefore unenforceable.
We have obtained directors’
and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage
and pay all premiums thereunder to the fullest extent permitted by the Companies Law. In addition, we entered into agreements
with each of our office holders undertaking to indemnify them to the fullest extent permitted by the Companies Law, including
with respect to liabilities resulting from the initial public offering in the U.S., to the extent that these liabilities are not
covered by insurance.
Code of Ethics
We
have adopted a written code of ethics that applies to our officers and employees, including our principal executive officer, principal
financial officer, principal controller and persons performing similar functions as well as our directors. Our Code of Business
Conduct and Ethics is posted on our website at
www.biondvax.com
. Information contained on, or that can be accessed through,
our website does not constitute a part of this prospectus and is not incorporated by reference herein. We have not granted any
waivers under our Code of Business Conduct and Ethics.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read
the following discussion along with our financial statements and the related notes included in this prospectus. The following
discussion contains forward-looking statements that are subject to risks, uncertainties and assumptions, including those discussed
under “Risk Factors.” U.S. dollar amounts herein have been translated for the convenience of the reader from the original
NIS amounts at the representative rate of exchange as of December 31, 2018 (NIS 3.748 = $1.00). Our actual results, performance
and achievements may differ materially from those expressed in, or implied by, these forward-looking statements. See “Special
Note About Forward-Looking Statements.” We have prepared our financial statements in accordance with IFRS, as issued by
the IASB.
Overview
We
are a clinical stage biopharmaceutical company focused on developing and, ultimately, commercializing immunomodulation therapies
for infectious diseases. Our current product candidate, M-001, is a synthetic peptide-based protein targeting both seasonal and
pandemic strains of the influenza virus. Unlike existing influenza vaccines, which offer only strain specific seasonal protection
or pandemic prevention, M-001 is designed to provide long-lasting protection against multiple existing and future influenza strains.
As a result, we believe that M-001 has the potential to become an attractive alternative to existing influenza vaccines.
M-001
is based on research initially conducted at the Weizmann Institute over a period of approximately 10 years prior to our inception
in 2003. In 2003, we acquired from Yeda an exclusive worldwide license for the development, manufacture, use, marketing, sale,
distribution and importation of products based, directly or indirectly, on patents and patent applications filed pursuant to the
invention titled “Peptide Based Vaccine for Influenza”, developed on the basis of the research conducted by Professor
Ruth Arnon and her team at the Weizmann Institute. Since 2003, we have continued the research and development of M-001 under the
supervision of our Chief Scientific Officer, Dr. Tamar Ben-Yedidia and, at present, we own or license five families of patents
filed in a large number of jurisdictions, the latest of which is expected to be in force until 2035 For information regarding
our material patents, including the expected expiration dates by jurisdiction, see “Business – Intellectual Property
–
Patents
”.
According
to the Centers for Disease Control and Prevention (CDC), an agency of the U.S. Department of Health & Human Services (HHS),
the estimated adjusted seasonal influenza vaccine effectiveness (VE) from 2005 to 2018 in the USA varied between 10% during the
2004/2005 season to 60% during the 2010/2011 season. In the 2014/15 season, VE was estimated at only 19%. According to this data,
the average VE is about 40%. Most existing influenza vaccines are formulated based on weakened or dead strains of the influenza
virus that are predicted to be the most common circulating strains during the then upcoming influenza season or that are perceived
to have the greatest potential to cause a future pandemic outbreak. While the influenza virus frequently and unpredictably mutates,
resulting in novel strains, existing seasonal and pandemic influenza vaccines are strain-specific, and only target those specific
strains, and are not expected to protect against novel emerging influenza strains. In addition, the production cycle of most existing
influenza vaccines is long (approximately 5 to 6 months), considerably limiting the ability to quickly immunize the population
in case of a pandemic outbreak.
We
intend to seek regulatory approvals to market M-001 for the following indications: (i) as a universal influenza vaccine suitable
to be administered to the general population to provide protection against seasonal and pandemic strains of influenza; and (ii)
as a pre-pandemic influenza vaccine, or primer, for national stockpile, suitable to be administered to the general population,
prior to a strain specific pandemic vaccine, for enhanced pandemic preparedness.
History
of Losses
Since our inception,
we have generated significant losses in connection with our research and development, including the clinical development of M-001.
As of December 31, 2018, we had an accumulated deficit of NIS 211.1 million (approximately $56.3 million). We expect that we will
incur additional losses in the near future as a result of our research and development activities. Such research and development
activities will require us to obtain and expend further resources if we are to be successful. As a result, we expect to continue
to incur operating losses, and we will need to obtain additional funds to further develop our research and development programs
and our product candidate.
To
date, we have funded our operations primarily through the sale of equity securities (both in private placements, in public offerings
on the TASE and the NASDAQ Capital Market) and funding received from the IIA formerly known as the OCS. From our inception until
our initial public offering in Israel in June 2007, we raised approximately NIS 20.1 million (approximately $5.36 million) in
various private placements. We received approximately NIS 10.12 million (approximately $2.7 million) in net proceeds from our
initial public offering in Israel and have raised an additional NIS 49.6 million (approximately $13.23 million) from various public
offerings since June 2007 in Israel.
We
received gross proceeds of approximately $10.12 million from our initial public offering in the U.S. in May 2015, and approximately
$8.54 in net proceeds. Our expenses for the initial public offering in the U.S. amounted to $1.49 million, in addition to the
grant of options to our underwriter valued at $90,000, for no consideration. We have received gross proceeds of approximately
$2.8 million from a private placement transaction with Angels in January 2017, and $3.2 million from ADS issuance under our ATM
program, which was terminated as of September 13, 2017. We have also raised approximately $10.4 million in gross proceeds in a
public underwritten offering completed in September 2017.
Our
current operating expenses consist of two components, research and development expenses and general and administrative expenses.
Research
and Development Expenses:
Our
research and development expenses consist primarily of salaries and related personnel expenses, fees paid to consultants, patent-related
legal fees, costs of preclinical studies and clinical studies, drug and laboratory supplies, and costs for facilities and equipment.
We charge all research and development expenses to operations as they are incurred. We expect our research and development expense
to remain our primary expense in the near future as we continue to develop M-001. Increases or decreases in research and development
expenditures are attributable to the number and/or duration of the clinical studies that we conduct.
We
expect that a large percentage of our research and development expense in the future will be incurred in support of our current
and future clinical development projects. Due to the inherently unpredictable nature of clinical development processes, we are
unable to estimate with any certainty the costs we will incur in the continued development of M-001 for potential commercialization.
Clinical development timelines, the probability of success and development costs can differ materially from expectations. We expect
to continue to conduct additional clinical trials for M-001.
While
we are currently focused on advancing our product development, our future research and development expenses will depend on the
clinical success of M-001, as well as ongoing assessments of M-001’s, and any future product candidates’ commercial
potential. As we obtain results from clinical studies, we may elect to discontinue or delay clinical studies for M-001 and any
future product candidate in certain indications in order to focus our resources on more promising product candidates. Completion
of clinical studies may take several years or more, but the length of time generally varies according to the type, complexity,
novelty and intended use of a product candidate.
We
expect our research and development expenses to increase in the future from current levels as we continue the advancement of our
clinical product development. The lengthy process of completing clinical studies and seeking regulatory approval for M-001 requires
the expenditure of substantial resources. Any failure or delay in completing clinical studies, or in obtaining regulatory approvals,
could cause a delay in generating product revenue and cause our research and development expenses to increase and, in turn, have
a material adverse effect on our operations. Because of the factors set forth above, we are not able to estimate with any certainty
when we would recognize any net cash inflows from our projects.
Marketing,
General and Administrative Expenses:
Our general and administrative
expenses consist primarily of salaries and expenses related to employee benefits, including share-based compensation, for our general
and administrative employees, which includes employees in executive and operational roles, including finance and human resources,
as well as consulting, legal and professional services related to our general and administrative operations.
Financial Income and
Expenses
Financial income consists
primarily of foreign currency exchange income on our cash and cash equivalents and foreign currency exchange income. Financial
expenses consist primarily of expenses related to bank charges and of valuation expenses.
Results
of Operations
The table below
provides our results of operations for the year ended December 31, 2018 as compared to the years ended December 31, 2017, 2016
and 2015:
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
Convenience
translation into USD in thousands
(2)
|
|
Statements
of comprehensive loss data:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development expenses
|
|
|
10,736
|
|
|
|
9,397
|
|
|
|
19,423
|
|
|
|
72,056
|
|
|
|
19,225
|
|
Participation
by the IIA and UNISEC
|
|
|
(2,830
|
)
|
|
|
(1,603
|
)
|
|
|
(646
|
)
|
|
|
(143
|
)
|
|
|
(38
|
)
|
Research
and development, net of participations expenses
|
|
|
7,906
|
|
|
|
7,794
|
|
|
|
18,777
|
|
|
|
71,913
|
|
|
|
19,187
|
|
Marketing,
general and administrative expenses
|
|
|
3,397
|
|
|
|
4,106
|
|
|
|
4,879
|
|
|
|
5,154
|
|
|
|
1,375
|
|
Operating
loss
|
|
|
11,303
|
|
|
|
11,900
|
|
|
|
23,656
|
|
|
|
77,067
|
|
|
|
20,562
|
|
Financial
income
|
|
|
1,128
|
|
|
|
3,019
|
|
|
|
18
|
|
|
|
2,936
|
|
|
|
783
|
|
Financial
expenses
|
|
|
(24
|
)
|
|
|
(303
|
)
|
|
|
(10,913
|
)
|
|
|
(13,596
|
)
|
|
|
(3,628
|
)
|
Financial
income (expenses), net
|
|
|
1,104
|
|
|
|
2,716
|
|
|
|
(10,895
|
)
|
|
|
(10,660
|
)
|
|
|
(2,8445
|
)
|
Net
loss
|
|
|
10,199
|
|
|
|
9,184
|
|
|
|
34,551
|
|
|
|
87,727
|
|
|
|
23,407
|
|
Loss
from available-for-sale financial assets
|
|
|
5
|
|
|
|
6
|
|
|
|
6
|
|
|
|
-
|
|
|
|
-
|
|
Total
comprehensive loss
|
|
|
10,204
|
|
|
|
9,190
|
|
|
|
34,557
|
|
|
|
87,727
|
|
|
|
23,407
|
|
Basic
and Diluted net loss per share (NIS)
|
|
|
0.1
|
|
|
|
0.07
|
|
|
|
0.17
|
|
|
|
0.34
|
|
|
|
0.09
|
|
Weighted
average number of shares outstanding used to compute basic and diluted loss per share (in thousands)
|
|
|
105,523
|
|
|
|
135,097
|
|
|
|
201,031
|
|
|
|
261,420
|
|
|
|
261,420
|
|
Year Ended December 31, 2018 Compared
to Year Ended December 31, 2017
Research
and Development Expenses
, net
Our research and
development expenses, net for the year ended December 31, 2018 amounted to NIS 71.9 million (approximately $19.18 million) compared
to NIS 18.8 million (approximately $5 million) for the year ended December 31, 2017. The increase in 2018 compared to 2017 this
increase primarily resulted from a phase 3 clinical trials expenses that started on January 2018. The amount of IIA funding received
by the Company in the year ended December 31, 2018 was decreased compared to the prior year period due to the IIA policy of financing
companies in their early stages of research and development, phase 1 and phase 2.
Marketing, General
and Administrative Expenses
Our marketing,
general and administrative expenses for the year ended December 31, 2018 amounted to NIS 5.1 million (approximately $1.37 million)
compared to NIS 4.9 million (approximately $1.3 million) for the year ended December 31, 2017. This increase primarily resulted
from increasing in professional and legal expenses for the period offset by a decrease in share based compensation expenses.
Financial Expense
(Income), Net
Our financial expenses,
net for the year ended December 31, 2018 amounted to NIS 10.6 million (approximately $2.8 million) mainly from interest expenses
from liability measured at amortized cost, in total amount of NIS 13.5 million (approximately $3.6 million) and bank fee expenses
in the amount of NIS 0.05 million ($0.015 million), offset by financial income from valuation of warrants in total amount of
NIS 2 million (approximately $0.5 million) and exchange rate income of NIS 0.83 million (approximately $ 221 million). Our financial
expenses, net for the year ended December 31, 2017 amounted to NIS 10.9 million (approximately $2.9 million) primarily from exchange
differences on cash and cash equivalent and revaluation of the options
Net Loss
As a result of
the foregoing research and development, marketing general and administrative expenses, and as we have not yet generated revenues
since our inception, our net loss for the year ended December 31, 2018 was NIS 87.7 million (approximately $23.4 million),
compared to our net loss for the year ended December 31, 2017 of NIS 34.5 million (approximately $9.2 million). The increase in
2018 compared to 2017 primarily resulted from our research and development expenses and marketing, general and administrative
expenses as described above.
Year Ended December 31, 2017 Compared
to Year Ended December 31, 2016
Research
and Development Expenses, net
Our research and
development expenses, net for the year ended December 31, 2017 amounted to NIS 18.8 million (approximately $5 million) compared
to NIS 7.8 million (approximately $2.08 million) for the year ended December 31, 2016. The increase in 2017 compared to 2016 was
primarily a result of an increase in a liability with respect to government grants of NIS 10.3 (approximately $2.74 million) that
recorded as an expense due to revenues forecast for the year ended December 31, 2017.
Marketing, General
and Administrative Expenses
Our marketing,
general and administrative expenses for the year ended December 31, 2017 amounted to NIS 4.8 million (approximately $1.28 million)
compared to NIS 4.1 million (approximately $1.09 million) for the year ended December 31, 2016. The increase primarily results
from higher professional services and salaries expenses.
Financial
Expense (Income), Net
Our financial expenses,
net for the year ended December 31, 2017 amounted to NIS 10.9 million (approximately $2.9 million) primarily from exchange differences
on cash and cash equivalent and revaluation of the options. Our financial income, net for the year ended December 31, 2016 amounted
to NIS 2.7 million (approximately $0.72 million)
Net Loss
As a result of
the foregoing research and development, marketing general and administrative expenses, and as we have not yet generated revenues
since our inception, our net loss for the year ended December 31, 2017 was NIS 34.5 million (approximately $9.2 million),
compared to our net loss for the year ended December 31, 2016 of NIS 9.1 million (approximately $2.42 million). The increase in
2017 compared to 2016 primarily resulted from our research and development expenses and marketing, general and administrative
expenses as described above.
Year Ended December
31, 2016 Compared to Year Ended December 31, 2015
Research
and Development Expenses, net
Our research and
development expenses, net for the year ended December 31, 2016 amounted to NIS 7.8 million (approximately $2.08 million) compared
to NIS 7.9 million (approximately $2.1 million) for the year ended December 31, 2015. The decrease in 2016 compared to 2015 was
primarily a result of a decrease in subcontractor expenses, which were lower in 2016 as a result of our preparation for the cGMP
audit of our production facility by the European qualified person during 2015 for the year ended December 31, 2016.
Marketing, General
and Administrative Expenses
Our marketing,
general and administrative expenses for the year ended December 31, 2016, amounted to NIS 4.1 million (approximately $1.09 million)
compared to NIS 3.4 million (approximately $0.9 million) for the year ended December 31, 2015. The increase primarily results
from higher professional services and salaries expenses.
Financial
Expense (Income), Net
Our financial income,
net for the year ended December 31, 2016, amounted to NIS 2.7 million (approximately $0.72 million) primarily from exchange differences
on cash and cash equivalent and revaluation of the options. Our financial expenses, net for the year ended December 31, 2015 amounted
to NIS 1.1 million (approximately $0.29 million).
Net Loss
As a result of
the foregoing research and development, marketing general and administrative expenses, and as we have not yet generated revenues
since our inception, our net loss for the year ended December 31, 2016 was NIS 9.1 million (approximately $2.42 million), compared
to our net loss for the year ended December 31, 2015 of NIS 10.2 million (approximately $2.72 million). The increase
in 2016 compared to 2015 primarily resulted from our research and development expenses and marketing, general and administrative
expenses as described above.
Liquidity and Capital Resources
Since our inception,
we have funded our operations primarily through public and private offerings of our equity securities in Israel and the U.S. and
grants from the OCS, today known as the IIA, grants received by the Israeli Ministry of Economy and European grants under the UNISEC
consortium.
As of December
31, 2018, we had cash and cash equivalents of NIS 75.8 million ($20.24 million) as compared to cash and cash equivalents of NIS
71.3 million ($19.02 million) as of December 31, 2017. This increase is due to loan received from the European Investment bank
in the total of Euro 20 million ($23 million) is offset by ongoing research costs and clinical phase 3 trial.
Net cash used in
operating activities was NIS 57.19 million ($15.26 million) for the year ended December 31, 2018, compared with net cash used
in operating activities of NIS 10.05 million ($2.68 million) for the year ended December 31, 2017. Net cash used in investing
activities for the year ended December 31, 2018, was NIS 23.4 million ($6.2 million) compared with net cash provided by invest
activities of NIS 6.7 million ($1.78 million) for the year ended December 31, 2017, and primarily reflects purchase of fixed assets,
proceeds from sale of marketable securities and change in short term deposits.
Net cash
provided by financing activities for the year ended December 31, 2018 was NIS 84.3 million ($22.4 million) from loans received
from the European Investment bank EIB compared to net cash provided by financing activities for the year ended December 31, 2017
of NIS 61.8 million ($16.5 million) for the year ended December 31, 2015, derived from issuance of shares and options to the public
and private placements.
At December 31,
2018, our accumulated deficit amounted to $56.3 million. We had working capital of $14.6 million as of December 31, 2018. In the
future, we may raise additional capital from external sources in order to continue the longer term efforts contemplated under
our business plan. We expect to continue incurring losses for the foreseeable future and may need to raise additional capital
to pursue our product development initiatives, to penetrate markets for the sale of our product candidates and continue operations
as presently maintained. We cannot provide any assurance that we will raise additional capital. Management believes that we have
access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or
other means; however, we have not secured any commitment for new financing at this time nor can we provide any assurance that
new financing will be available on commercially acceptable terms, if at all. If the economic climate in the U.S. deteriorates,
our ability to raise additional capital could be negatively impacted. If we are unable to secure additional capital, we may be
required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve
its cash in amounts sufficient to sustain operations and meet our obligations. These measures could cause significant delays in
our efforts to commercialize our products, which is critical to the realization of our business plan and our future operations.
Current
Outlook
According to our estimates
and based on our budget, we believe our existing cash resources will be sufficient to fund out projected cash requirements for
at least the next 12 months. Even if we are able to raise funds in the offering contemplated herein, we believe we will need to
raise significant additional funds before we have any cash flow from operations, if at all. Developing drugs, conducting clinical
trials, obtaining commercial manufacturing capabilities and commercializing products is expensive and we will need to raise substantial
additional funds to achieve our strategic objectives. Although we believe that our existing cash resources will be sufficient
to fund our projected cash requirements for at least the next 12 months, we will require significant additional financing in the
future to fund our operations, including if and when we progress into additional clinical trials of our product candidate, obtain
regulatory approval for M-001, obtain commercial manufacturing capabilities and commercialize our product candidate. We currently
anticipate that, assuming consummation of the current offering, we will utilize approximately $15 million for clinical trial
activities over the course of the next 12 months. Our future capital requirements will depend on many factors, including:
|
●
|
the
progress and costs of our clinical trials and other research and development activities;
|
|
|
|
|
●
|
the
scope, prioritization and number of our clinical trials and other research and development programs;
|
|
●
|
the
amount of revenues and contributions we receive under future licensing, collaboration, development and commercialization arrangements
with respect to our product candidates;
|
|
|
|
|
●
|
the
costs of the development and expansion of our operational infrastructure;
|
|
|
|
|
●
|
the
costs and timing of obtaining regulatory approval for our product candidate;
|
|
|
|
|
●
|
the
ability of us, or our collaborators, to achieve development milestones, marketing approval and other events or developments under
our potential future licensing agreements;
|
|
|
|
|
●
|
the
costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;
|
|
|
|
|
●
|
the
costs and timing of securing manufacturing arrangements for clinical or commercial production;
|
|
|
|
|
●
|
the
costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities ourselves;
|
|
|
|
|
●
|
the
costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or platforms;
|
|
|
|
|
●
|
the
magnitude of our general and administrative expenses; and
|
|
|
|
|
●
|
any
cost that we may incur under future in- and out-licensing arrangements relating to one or more of our product candidates.
|
Until
we can generate significant recurring revenues, we expect to satisfy our future cash needs through the net proceeds from the current
offering, debt or equity financings. We cannot be certain that additional funding will be available to us on acceptable terms,
if at all. If funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans
for, or commercialization efforts with respect to, M-001 or any future product candidate.
Contractual Obligations
Our significant
contractual obligations as of December 31, 2018 included the following (in thousands):
|
|
1
– 3 Years
|
|
|
4
– 5 Years
|
|
|
More
than 5 Years
|
|
|
Total
|
|
Operating Lease Obligations in
NIS
|
|
|
3,369
|
|
|
|
2,179
|
|
|
|
5,385
|
|
|
|
10,932
|
|
Operating Lease Obligations in USD
|
|
|
947
|
|
|
|
612
|
|
|
|
1,513
|
|
|
|
3,073
|
|
We
did not have any material commitments for capital expenditures, including any anticipated material acquisition of plant and equipment,
as of December 31, 2018.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors.
Quantitative
and Qualitative Disclosure of Market Risk
We
are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our
financial position, results of operations or cash flows due to adverse changes in financial market prices and rates, including
interest rates and foreign exchange rates, of financial instruments. Our market risk exposure is primarily a result of interest
rates and foreign currency exchange rates.
Interest
Rate Risk
Following
the date of this prospectus, we do not anticipate undertaking any significant long-term borrowings. At present, our investments
consist primarily of cash and cash equivalents and financial assets at fair value. Following the date of this prospectus, we may
invest in investment-grade marketable securities with maturities of up to three years, including commercial paper, money market
funds, and government/non-government debt securities. 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 fluctuation in interest rates, which may affect our interest income and the fair market value
of our investments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the short-term
maturities, if any, of our investments to date, their carrying value has always approximated their fair value. If we decide to
invest in investments other than cash and cash equivalents, it will be our policy to hold such investments to maturity in order
to limit our exposure to interest rate fluctuations.
Foreign
Currency Exchange Risk
Our
foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting
currency, mainly against the U.S. dollar and the Euro. Although the NIS is our functional currency, a small portion of our expenses
are denominated in both U.S. dollar and Euro. Our U.S. dollar and Euro expenses consist principally of payments made to sub-contractors
and consultants for clinical trials and other research and development activities as well as payments made to purchase new equipment.
We anticipate that a sizable portion of our expenses will continue to be denominated in currencies other than the NIS. If the
NIS fluctuates significantly against either the U.S. dollar or the Euro, it may have a negative impact on our results of operations.
To date, fluctuations in the exchange rates have not materially affected our results of operations or financial condition for
the periods under review.
To
date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease
the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures,
however, may not adequately protect us from the material adverse effects of such fluctuations.
Trend
Information
We
are a clinical stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research
and development efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties,
demands, commitments or events that are reasonably likely to have a material effect on our net loss, liquidity or capital resources,
or that would cause financial information to not necessarily be indicative of future operating results or financial condition.
However, to the extent possible, certain trends, uncertainties, demands, commitments and events are in this “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
Application
of Critical Accounting Policies and Estimates
Our
management’s discussion and analysis of our financial condition and results of operations is based on our financial statements,
which we have prepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us
to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods.
Actual results may differ from these estimates under different assumptions or conditions.
While
our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in
this prospectus, we believe that the accounting policies discussed below are critical to our financial results and to the
understanding of our past and future performance, as these policies relate to the more significant areas involving
management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to
make assumptions because information was not available at the time or it included matters that were highly uncertain at the
time we were making our estimate; and (2) changes in the estimate could have a material impact on our financial condition or
results of operations.
Research
and development expenses
Research
expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets
as of the date as of which it can be established that it is probable that future economic benefits attributable to the asset will
flow to us considering its commercial feasibility. This is generally the case when regulatory approval for commercialization is
achieved and costs can be measured reliably. Given the current stage of the development of our products, no development expenditures
have yet been capitalized. Intellectual property-related costs for patents are part of the expenditure for the research and development
projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project
concerned does not meet the criteria for capitalization.
Equity-based
compensation
We
account for our equity-based compensation for employees in accordance with the provisions of IFRS 2 “Share-based Payment,”
which requires us to measure the cost of equity-based compensation based on the fair value of the award on the grant date.
We
selected the binomial option pricing model as the most appropriate method for determining the estimated fair value of our equity-based
awards. The resulting cost of an equity incentive award is recognized as an expense over the requisite service period of the award,
which is usually the vesting period. We recognize compensation expense over the vesting period using the accelerated method pursuant
to which each vesting tranche is treated as a separate amortization period from grant date to vest date, and classify these amounts
in the financial statements based on the department to which the related employee reports.
Grants
under the Israeli Encouragement of Industrial and Development Law
Research
and development grants received from the OCS, today known as the IIA, are recognized upon receipt as a liability if future economic
benefits are expected from the project that will result in royalty-bearing sales. The amount of the liability for the loan is
first measured at fair value using a discount rate that reflects a market rate of interest that reflects the appropriate degree
of risks inherent in our business. If no economic benefits are expected from the research activity, the grant receipts are recognized
as a reduction of the related research and development expenses. In that event, the royalty obligation is treated as a contingent
liability in accordance with IAS 37, “Provisions, Contingent Liabilities and Contingent Assets.”
At
the end of each reporting period, we evaluate whether there is reasonable assurance that the received grants will not be repaid
based on its best estimate of future sales and, if so, no liability is recognized and the grants are recorded against a corresponding
reduction in research and development expenses.
Since our development
projects are currently in Phase 3 clinical trials, the management estimate that future economic benefits of the project are possible,
therefor liability with respect to the IIA was recorded to December 31, 2018 and to date, in the sum of NIS 14.6 million (approximately
$3.9 million). Research and development grants received from the European Union are recorded against a corresponding reduction
in research and development expenses.
Subject to prior consent
of the IIA, the company may transfer the IIA-funded know-how to another Israeli company. If the IIA-funded know-how is transferred
to another Israeli entity, the transfer would still require IIA approval but will not be subject to the payment of the redemption
fee (we note that there will be an obligation to pay royalties to the IIA from the income of such sale transaction as part of the
royalty payment obligation). In such case, the acquiring company would have to assume all of the selling company’s responsibilities
towards the IIA as a condition to IIA approval.
Our research and
development efforts have been financed, partially, through grants that we have received from the IIA. We therefore must comply
with the requirements of the Research Law and related regulations. As of December 31, 2018, we have received a total of $5.5 million
in IIA grants.
We did not receive
additional IIA grants from December 31, 2018 through the date of this prospectus.
Impairment of available-for-sale financial assets
Our management assesses
at each reporting date whether there is objective evidence that the asset has been impaired and an impairment loss has been incurred.
In evaluating impairment, the management makes judgments as to indicators of objective evidence relating to the extent of the
percentage of decline in fair value and of the duration of the period of the decline in fair value.
Impairment of non-financial assets
We evaluate the need
to record an impairment of the carrying amount of non-financial assets whenever events or changes in circumstances indicate that
the carrying amount is not recoverable. If the carrying amount of non-financial assets exceeds their recoverable amount, the assets
are reduced to their recoverable amount.
An impairment loss
of an asset, is reversed only if there have been changes in the estimates used to determine the asset’s recoverable amount
since the last impairment loss was recognized. Reversal of an impairment loss, as above, may not increase the value above the
lower of (i) the carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss
been recognized for the asset in prior years, and (ii) its recoverable amount.
Recent Accounting Pronouncements
In January 2016, the
IASB issued IFRS 16, “Leases” (“the new Standard”). According to the new Standard, a lease is a contract, or
part of a contract, that conveys the right to use an asset for a period of time in exchange for consideration.
The effects of the
adoption of the new Standard are as follows:
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According to the new Standard, lessees
are required to recognize all leases in the statement of financial position (excluding certain exceptions, see below). Lessees
will recognize a liability for lease payments with a corresponding right-of-use asset, similar to the accounting treatment for
finance leases under the existing standard, IAS 17, “Leases”. Lessees will also recognize interest expense and depreciation
expense separately.
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The new Standard includes two exceptions
which allow lessees to account for leases based on the existing accounting treatment for operating leases - leases for which the
underlying asset is of low financial value and short-term leases (up to one year).
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The new Standard is
effective for annual periods beginning on or after January 1, 2019.
For leases existing
at the date of transition, the new Standard permits lessees to use either a full retrospective approach, or a modified retrospective
approach, with certain transition relief whereby restatement of comparative data is not required.
We are evaluating the possible
effects of the new Standard. At this stage, we are unable to quantify the impact on the financial statements.
Jumpstart Our Business Startups Act of 2012
We qualify as an “emerging
growth company,” as defined in the JOBS Act. For as long as we are deemed an emerging growth company, we are permitted to
and intend to take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to
other public companies, including:
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an exemption
from the auditor attestation requirement in the assessment of our internal controls over
financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act; and
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an exemption
from compliance with any new requirements adopted by the Public Company Accounting Oversight
Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s
report in which the auditor would be required to provide additional information about
our audit and our financial statements.
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We may take advantage
of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our
common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended, or the
Securities Act, which such fifth anniversary will occur in 2020. However,
if certain events occur prior to the end of such five year period, including if we become a “large accelerated filer,”
our annual gross revenues exceed $1.0 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period,
we will cease to be an emerging growth company prior to the end of such five-year period.
In addition, Section
107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words,
an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise
apply to private companies. However, we are choosing to “opt out” of such extended transition period, and as a result,
we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition
period for complying with new or revised accounting standards is irrevocable.
Government Policies and Factors
We believe certain
governmental policies and factors could materially affect, directly or indirectly, our operations or your investment. Please see
“Risk Factors — Risks Related to Our Company and Its Business.”
RELATED
PARTY TRANSACTIONS
The following is a description of some
of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. The
descriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified
in their entirety by the complete agreements.
We believe that we have executed all of
our transactions with related parties on terms no less favorable to us than those we could have obtained from unaffiliated third
parties. See “Management — Approval of Related Party Transactions under Israeli Law.”
Payment to Dr. Ron Babecoff
In connection with an investigation
conducted by the Israeli Securities Authority already concluded and terminated without further proceedings against Dr. Babecoff,
on April 10, 2016, the Audit Committee and the Board of Directors unanimously resolved to approve the payment of NIS 200,000 to
be increased by an additional amount of up to NIS 200,000 as needed, for the benefit of CEO and director Dr. Ron Babecoff, and
in connection with such terminated investigation.
The resolution was
adopted,
inter alia
, in accordance with the exemption and indemnification letter between the Company and Dr. Babecoff presently
in effect, and in accordance with the Israeli applicable law. The approval of this payment in connection with the terminated investigation
is considered a Related Party Transaction, as defined in the Israeli Companies Law, and thus required the approval of the Audit
Committee, in addition to the approval of the Board of Directors.
Indemnification Agreements
Our articles of association permit us to
exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the Companies Law. We have
obtained directors’ and officers’ insurance for each of our officers and directors and have entered into indemnification
agreements with all of our current officers and directors.
We have entered into indemnification and
exculpation agreements with each of our current office holders and directors exculpating them to the fullest extent permitted
by the law and our articles of association and undertaking to indemnify them to the fullest extent permitted by the law and our
articles of association, including with respect to liabilities resulting from this offering, to the extent such liabilities are
not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”
Employment and Service Agreements
We have or have had employment, service
or related agreements with each member of our senior management. See - “Executive Compensation”.
EXECUTIVE COMPENSATION
Compensation to Directors
During 2018, we paid
our members of our audit and compensation committee, Dr. Ruth Ben Yakar and Ms. Michal Marom Brikman, an annual fee of NIS 119,890
($33,055) for meetings participation and annual fee.
Professor Avner
Rotman has been the chairman of our board of directors since 2005. In May 2010 our general shareholders meeting approved a gross
monthly payment of NIS 6,000 plus VAT ($1,730 plus VAT) to Professor Rotman as compensation for his service as the chairman of
the board, to be paid by us to Rodar Technologies Ltd., a private company controlled by Prof. Rotman. On February 12, 2015, our
shareholders approved the extension of Prof. Rotman’s term and compensation for an additional period of two years.
Subject to the
approval of the Company’s shareholders, our compensation committee and our board of directors have approved a services agreement
between the Company and Mr. Mark Germain, the vice chairman and director of the Company, to include: (1) the grant of options
under the Company’s ESOP exercisable to purchase up to 130,710 ADSs, representing 2% of the current outstanding share capital
of the Company (1.5% on a fully diluted basis); (2) a monthly payment of $10,000.
In
addition, in August 2012 our general shareholders meeting approved the grant of the following conditioned bonuses to all our directors
serving at the time of such approval, except the external directors, during the term of their service: in the event that we duly
enter into one or more material agreement, defined as an agreement or a series of agreements, pertaining to a transaction with
us (or any other entity designated by us for the transaction by us) in connection with the sale of all or substantially all of
our assets or a commercialization of one of our products in the field of business, with aggregate proceeds received resultant
of such agreement are no less than a sum of $10,000,000 with any third party during their term, such directors shall each be entitled
to receive a one-time bonus per material agreement equal to 0.5% of the proceeds received by us as a result of the material agreement.
According to our compensation policy as amended and approved by our shareholders on March 1, 2015, this bonus shall be limited
to an aggregate amount of NIS 50 million ($14.4 million).
The following table
sets forth the annual compensation (excluding option grants) of members of our senior management and board of directors for the
years ended December 31, 2018 and 2017:
Annual
Compensation (excluding option grants)
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December
31, 2018
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December
31, 2017
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Name
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Salary
and related benefits (in NIS)
|
|
|
Salary
and related benefits (in $US)
(1)
|
|
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Salary
and related benefits (in NIS)
|
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Salary
and related benefits (in $US)
(1)
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Avner Rotman
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72,000
|
|
|
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19,210
|
|
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72,000
|
|
|
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19,210
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Ron Babecoff
|
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1,087,727
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|
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290,215
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|
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1,007,000
|
|
|
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268,677
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Tamar Ben Yedidia
|
|
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573,070
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|
|
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152,900
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|
|
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525,000
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|
|
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140,075
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Ruth Ben Yakar
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59,945
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15,994
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|
|
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53,000
|
|
|
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14,141
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Michael Marom Brikman
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58,739
|
|
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15,672
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|
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54,000
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|
|
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14,408
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Irit Ben Ami
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-
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|
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-
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23,000
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|
|
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6,137
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Morris Laster
|
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44,626
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|
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11,907
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|
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-
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|
|
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-
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Mark Germain
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248,398
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|
|
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66,275
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|
|
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-
|
|
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-
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Uri Ben Or
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335,242
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|
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89,446
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|
|
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534,000
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|
|
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142,476
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(1)
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Calculated
using the exchange rate reported by the Bank of Israel for December 31, 2018, at the
rate of one U.S. dollar per NIS 3.748
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(2)
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Includes compensation
paid to Irit Ben Ami who served as an external Director until June 2017 in accordance with the Companies Law and Regulations
promulgated hereof and to Includes compensation paid to Liora Katzenstein who served as an external Director until June 2018
in accordance with the Companies Law and Regulations promulgated hereof.
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(3)
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“Salary
and related benefits” include payments to the National Insurance Institute, advanced education funds, managers’
insurance and pension funds; vacation pay; and recuperations pay as mandated by Israeli law.
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Other than as provided in the table set
forth below, we did not set aside or accrue amounts to provide pension, retirement or other similar benefits for our executive
officers and directors for the year ended December 31, 2017 and 2018.
Employment and Services Agreements
Our employees are
employed under the terms prescribed in their respective personal contracts, in accordance with the decisions of our management.
Under these employment contracts, the employees are entitled to the social benefits prescribed by law and as otherwise provided
in their personal contracts. These employment contracts each contain provisions standard for a company in our industry regarding
non-competition, confidentiality of information and assignment of inventions. Under current applicable employment laws, we may
not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the
expertise of some of our former employees. We also provide certain of our employees with a company car, which is leased from a
leasing company, and a mobile phone and additional benefits.
Our executive officers
are also employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice
periods of varying duration for termination of the agreement by us or by the relevant executive officer, during which time the
executive officer will continue to receive base salary and benefits. These agreements also contain customary provisions regarding
non-competition, confidentiality of information and assignment of inventions.
Services and Employment Agreements
with Our Chief Executive Officer
Ron Babecoff
Dr. Babecoff is
one of our founders and has served as the CEO and a member of our board of directors since 2005. We retained Dr. Babecoff’s
services through Ron Executive Ltd., a company solely owned by him, with which we entered into a management services agreement
on April 1, 2007, as later amended on April 18, 2012, and extended and further amended as described below. Under the agreement,
Dr. Babecoff received a monthly salary of NIS 52,500 plus VAT. We also provide Dr. Babecoff with a leased company car. In addition,
in the event that we duly enter into one or more material agreement(s) (i.e. an agreement or a series of agreements, pertaining
to a transaction with us (or any other entity designated by us for the transaction by us) in connection with the sale of all or
substantially all of our assets or a commercialization of one of our products in the field of business, with aggregate proceeds
received resultant of such agreement are no less than a sum of $10,000,000) with any third party during the term of Dr. Babecoff’s
engagement with us or during a period of three years commencing on the date of the termination of the management services agreement
by us, Dr. Babecoff shall be entitled to receive a one-time bonus per material agreement equal to 1.75% of the proceeds received
by us as a result of the material agreement. The term of Dr. Babecoff’s agreement was to expire on April 1, 2015, unless
earlier terminated. Dr. Babecoff’s service agreement may be terminated by us upon nine months prior written notice or immediately
if terminated for cause (i.e., termination due to a material breach by Ron Executive Ltd. of its obligations under the employment
agreement, a breach of trust, malfeasance or gross negligence by Ron Executive Ltd. and/or Dr. Babecoff; or the conviction of
Ron Executive Ltd. and/or Dr. Babecoff of any felony). Ron Executive Ltd. may also terminate the service agreement upon 90 days’
prior written notice.
Following the approval
of our compensation committee and our board of directors, on January 18, 2015 our shareholders meeting approved an extension of
Dr. Babecoff’s agreement, under the same terms and conditions, for an additional period of five years. Dr. Babecoff also
serves as a director in our company, for which he received unregistered options as compensation.
Following the approval
of our compensation committee and our board of directors, on May 26 and 28, 2015, respectively, on July 28, 2015, our shareholders
meeting approved increasing Dr. Babecoff’s monthly salary from NIS 52,500 to NIS 80,000 ($23,074), and a grant of unregistered
options in accordance with our 2005 Israeli Share Option Plan in an amount equal to 2.5% of the Company issued and outstanding
capital on a fully diluted basis, as of May 28, 2015, exercisable to up to 5,929,503 ordinary shares of the Company no par value
at an exercise price of NIS 0.74607 per ordinary share. The options are scheduled to vest over a period of 3 years and shall expire
10 years from the grant date, in addition to a previous grant of 80,000 ordinary shares issuable upon exercise of options at an
exercise price of NIS 0.81 per share and with an expiration date of October 31, 2021. As of the date of this annual report, Dr.
Babecoff held options to purchase 6,009,503 ordinary shares, all vested.
Subject to the
approval of the Company’s shareholders, our compensation committee and our board of directors have, on April 30, 2018, approved
the extension of the management service agreement between the Company and Dr. Babecoff for additional five (5) years, and have
approved new compensation terms, as follows: (1) Dr. Babecoff shall be entitled to a 2% salary raise each year for 5 years; (2)
the grant of 8,633,310 restricted share units, or RSUs, represented by 215,832 American Depositary Shares (“ADSs”,
each ADS represents 40 ordinary shares no par value), in lieu of his forfeiture of 5,929,503 options previously granted to Dr.
Babecoff; (3) the grant of a onetime bonus equal to 12 monthly salaries in an aggregate amount of NIS 960,000, in recognition
of Dr. Babecoff’s recent extraordinary achievements and performance; (4) the grant of an annual bonus for the year of 2018,
in an amount equal to up to 9 monthly salaries of Dr. Babecoff, subject to the fulfillment of annual targets as determined by
the board of directors. On January 16, 2019, our compensation committee determined that Dr. Babecoff had fulfilled the relevant
annual targets with respect to the annual bonus for the year of 2018.
Services and Employment Agreements
with Our Chief Scientific Officer
Tamar Ben Yedidia
Pursuant to her employment
agreement entered into with us on March 15, 2005, as amended on April 2012, Dr. Ben Yedidia is employed on a full time basis and
is currently entitled to a monthly salary of NIS 27,300 which also includes monthly contributions equal to 7.5% of her monthly
salary to an Education Fund (“Keren Hishtalmut”, a short term savings plan available in Israel which is tax free to
the employee up to a cap determined by law). In addition, we provide Dr. Ben Yedidia with a leased company car and a mobile phone.
Dr. Ben Yedidia is entitled to 22 annual paid vacation days.
Dr. Ben Yedidia’s
employment agreement may be terminated by either us or Dr. Ben Yedidia upon 120 days’ prior written notice or by us immediately
for cause (i.e., termination due to embezzlement of our funds, or the material breach of the terms and conditions of the employment
agreement, or if Dr. Ben Yedidia is involved in an act which constitutes a breach of trust between her and us or constitutes a
severe breach of discipline, or conduct causing grave injury to us any, monetarily or otherwise, or Dr. Ben Yedidia’s inability
to carry out her duties for a period exceeding 120 consecutive days, provided that the her resumption of her duties for a period
of less than 15 consecutive days shall not be deemed to have broken the continuity of the aforementioned 120 days). Under her
employment agreement, Dr. Ben Yedidia received options to purchase 25,000 ordinary shares.
In addition, in February
2012 our board of directors approved the grant of the following conditioned bonus to Tamar Ben Yedidia: in the event that we duly
enter into one or more material agreement(s) (i.e. an agreement or a series of agreements, pertaining to a transaction with us
(or any other entity designated by us for the transaction by us) in connection with the sale of all or substantially all of our
assets or a commercialization of one of our products in the field of business, with aggregate proceeds received resultant of such
agreement are no less than a sum of $10,000,000) with any third party during the term of Dr. Ben Yedidia’s engagement with
us or during a period of three years commencing on the date of the termination of the employment agreement by us, Dr. Ben Yedidia
shall be entitled to receive a one-time bonus per material agreement equal to 1.25% of the proceeds received by us as a result
of the material agreement.
On May 26 and 28,
2015, our compensation committee and the Board of Directors, respectively, approved Ms. Tamar Ben Yedida’s monthly salary
from NIS 27,300 to NIS 30,000 and on August 2018 from 30,000 to 32,500 in compliance with our compensation plan. On the same dates,
our compensation committee and the Board of Directors also approved granting Ms. Tamar Ben Yedida additional 500,000 unregistered
options in accordance with our 2005 Israeli Share Option plan. The options are scheduled to vest over a period of three (3) years
and shall expire 10 years from the grant date. Each option shall be exercisable at an exercise price equal to 130% of the average
sale share price on TASE during the thirty (30) trading days prior to the options’ grant date. As of the date of this annual
report, Dr. Ben Yedidia held options to purchase 920,000 ordinary shares, of which 920,000 are fully vested.
Services and Employment Agreement
with Our Chief Financial Officer
Uri Ben Or
Pursuant to the service
agreement entered into on June 20, 2007, between us, Mr. Ben Or and CFO Direct, an Israeli company solely owned by him through
which he provides his services to us, as amended on August 31, 2014, CFO Direct is entitled to a monthly fee of NIS 2,500. The
service agreement will remain in effect for a period of five years from the amendment date and shall expire on August 31, 2019,
unless earlier terminated by either us or CFO Direct with 60 days prior written notice. We may terminate our service agreement
with CFO Direct at any time and effective immediately, without need for prior written notice, and without derogating from any
other remedy to which we may be entitled, for cause (i.e., termination due to the conviction of CFO Direct and/or Uri Ben Or of
any felony, the liability of CFO Direct by a court of competent jurisdiction for fraud against us, any conduct that has a material
adverse effect or is materially detrimental to us, including but not limited to, a breach of contract or any claim by CFO direct
or any one connect thereto that CFO Direct is our employee. In addition, pursuant to the provisions of the service agreement,
for services provided in connection with the preparation the initial public offering in the U.S., CFO Direct was entitled to receive
NIS 192,500 in four equal installments on the first of each month commencing on September 1, 2014. Furthermore, following the
consummation of the initial public offering in the U.S., CFO Direct are entitled to receive a one-time cash payment of NIS 87,500,
and from such date the monthly compensation under the services agreement will be increased to NIS 15,000.
In addition, pursuant
to a separate employment agreement entered into between us and Mr. Ben Or on August 31, 2014, as of such date, Mr. Ben Or is also
employed by us in a 60% employment capacity, for which he is entitled to a monthly salary of NIS 10,000. Mr. Ben Or is entitled
to 60% of the annual paid vacation days prescribed under applicable law, and we shall obtain and maintain with Mr. Ben Or a pension
insurance to Mr. Ben Or, in a Managers Insurance and/or a pension fund, according to Mr. Ben Or’s discretion. Mr. Ben Or’s
employment agreement will remain in effect for a period of five years and shall expire on August 31, 2019, unless earlier terminated
by either us or Mr. Ben Or with 60 days prior written notice, or by us immediately for cause (i.e., if he is convicted of a felony
or is held liable by a court of competent jurisdiction for fraud against us, a breach of trust due to theft or embezzlement by
him, any conduct which has a material adverse effect or is materially detrimental to us, any breach of his fiduciary duties or
duties of care to us, including without limitation, any material conflict of interest for the promotion of his benefit, fraud,
felonious conduct, dishonesty or insubordination, and any circumstances in which Israeli law or his employment agreement deny
the right for severance payment, in whole or in part). In August 2016, our compensation committee and board of directors approved
the payment of NIS 25,000 for his efforts in preparing a registration statement on Form F-3 and an ATM prospectus filed in November
2016. In January 2017, our compensation committee and board approved a onetime bonus of NIS 120,000 (approximately $34.6 thousands)
for Mr. Ben Or’s efforts in the capital raise completed in September 2017.
On May 26 and 28,
2015, our compensation committee and the Board of Directors, respectively, approved the grant of 500,000 unregistered option in
accordance with our 2005 Israeli Share Option plan. The options are scheduled to vest over a period of three (3) years and shall
expire 10 years from the grant date. Each option shall be exercisable at an exercise price equal to 130% of the average sale share
price on TASE during the thirty (30) trading days prior to the options’ grant date. As of as of the date of this annual
report, Mr. Uri Ben Or held options to purchase 620,000 ordinary shares, of which 620,000 are fully vested.
Equity Compensation Plan
In March 2018, the
Company’s board of directors as well as the annual general meeting of the shareholders approved and adopted the 2018 BiondVax
share option plan to employees, directors, consultants, service providers and other entities which the board shall decide their
services are considered valuable to the company, or the 2018 Plan, under similar terms and conditions to the Previous Plan. We
have not yet granted options under the 2018 Plan.
Options granted under
the 2018 Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.
Upon the termination
of a Participant’s engagement with us for any reason other than death, retirement, disability or due cause, all unvested
options allocated shall automatically expire and all vested options allocated will automatically expire 90 days after the termination,
unless expired earlier due to their term. If the Participant’s engagement was terminated for cause (as defined in the 2018
Plan), the Participant’s right to exercise any unexercised options, awarded and allocated in favor of such Participant,
whether vested or not, will immediately cease and expire as of the date of such termination. If the Participant dies, retires
or is disabled, any vested but unexercised options will automatically expire 12 months from the termination of the engagement,
unless expired earlier due to their term.
In the event that
options allocated under the 2018 Plan expire or otherwise terminate in accordance with the provisions of the 2018 Plan, such expired
or terminated options will become available for future grant awards and allocations under the 2018 Plan.
In the event of (i)
the sale of all or substantially all of our assets; (ii) a sale (including an exchange) of all or substantially all of our share
capital; or (iii) a merger, consolidation or like transaction of ours with or into another corporation, then, subject to obtaining
the applicable approvals of the Israeli tax authorities, the board of directors in its sole discretion, will resolve: (a) if and
how any unvested options will be cancelled, replaced or accelerated; (b) if and how any vested options (including options with
respect to which the vesting period has been accelerated according to the foregoing), will be exercised, replaced and/or sold
by a trustee or us (as the case may be) on the behalf of the respective Israeli Participants; and (c) how any underlying shares
issued upon exercise of the options and held by a trustee on behalf any Israeli Participants will be replaced and/or sold by such
trustee on behalf of the Israeli Participants.
ENFORCEMENT
OF FOREIGN JUDGMENTS
We are incorporated
under the laws of the State of Israel. Service of process upon us and upon our directors and officers and the Israeli experts
named in this registration statement, substantially all of whom reside outside of the United States, may be difficult to obtain
within the United States. Furthermore, because substantially all of our assets and substantially all of our directors and officers
are located outside of the United States, any judgment obtained in the United States against us or any of our directors and officers
may not be collectible within the United States.
We have been informed
by our legal counsel in Israel, Pearl Cohen Zedek Latzer Baratz, that it may be difficult to assert U.S. securities law claims
in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws
because Israel is not the most appropriate forum 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 proved as a fact which can be a time-consuming and costly process. Certain matters of procedure
will also be governed by Israeli law.
Subject to specified
time limitations and legal procedures, Israeli courts may enforce a United States judgment in a civil matter which, subject to
certain exceptions, is non-appealable, including judgments based upon the civil liability provisions of the Securities Act and
the Exchange Act and including a monetary or compensatory judgment in a non-civil matter, provided that among other things:
|
●
|
the judgment
is obtained after due process before a court of competent jurisdiction, according to
the laws of the state in which the judgment is given and the rules of private international
law currently prevailing in Israel;
|
|
●
|
the judgment
is final and is not subject to any right of appeal;
|
|
●
|
the prevailing
law of the foreign state in which the judgment was rendered allows for the enforcement
of judgments of Israeli courts and the substance of the judgment is not contrary to public
policy; and
|
|
●
|
the judgment
is executory in the state in which it was given.
|
Even if these conditions
are met, an Israeli court will not declare a foreign civil judgment enforceable if:
|
●
|
the judgment
was given in a state whose laws do not provide for the enforcement of judgments of Israeli
courts (subject to exceptional cases);
|
|
●
|
the judgment
was obtained by fraud;
|
|
●
|
the possibility
given to the defendant to bring its arguments and evidence before the court was not reasonable
in the opinion of the Israeli court;
|
|
●
|
the judgment
was rendered by a court not competent to render it according to the laws of private international
law as they apply in Israel;
|
|
●
|
the judgment
is contradictory to another judgment that was given in the same matter between the same
parties and that is still valid; or
|
|
●
|
at the time
the action was brought in the foreign court, a lawsuit in the same matter and between
the same parties was pending before a court or tribunal in Israel.
|
If a foreign judgment
is enforced by an Israeli court, it generally will be payable in Israeli currency, which can then be converted into non-Israeli
currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an amount in a non-Israeli
currency is for the Israeli court to issue a judgment for the equivalent amount in Israeli currency at the rate of exchange in
force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending collection, the amount
of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli consumer price index plus
interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must bear the risk
of unfavorable exchange rates.
BENEFICIAL OWNERSHIP
The
following table and notes set forth information, as of December 31, 2018, concerning the beneficial ownership of our securities
by:
|
●
|
each
of our directors and executive officers;
|
|
|
|
|
●
|
all
of our executive officers and directors as a group; and
|
|
|
|
|
●
|
each
person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary
shares.
|
Beneficial ownership is
determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares or
Ordinary shares represented by ADSs. Ordinary shares issuable under share options, warrants or other conversion rights currently
exercisable or that are exercisable within 60 days after February 28, 2019, are deemed outstanding for the purpose of computing
the percentage ownership of the person holding the options, warrants or other conversion rights but are not deemed outstanding
for the purpose of computing the percentage ownership of any other person.
None of our shareholders has
different voting rights from other shareholders. To the best of our knowledge, we are not owned or controlled, directly or indirectly,
by another corporation or by any foreign government.
Except
as otherwise indicated in the footnotes to this table, we believe the persons named in this table have sole voting and investment
power with respect to all the ordinary shares indicated.
|
|
Ordinary Shares
|
|
|
Percent of Class%
|
|
Directors and Executive Officers
|
|
|
|
|
|
|
Ron Babecoff
|
|
|
11,537,503
|
(1)
|
|
|
4.28
|
%
|
Avner Rotman
|
|
|
238,900
|
(2)
|
|
|
*
|
|
George H. Lowell
|
|
|
435,000
|
(3)
|
|
|
*
|
|
Uri Ben Or
|
|
|
820,000
|
(4)
|
|
|
*
|
|
Tamar Ben Yedidya
|
|
|
1,270,000
|
(5)
|
|
|
*
|
|
All executive officers and directors as a group (5 people)
|
|
|
14,301,403
|
|
|
|
5.30
|
%
|
Angels Investments in Hi Tech Ltd.
|
|
|
53,760,832
|
(6)
|
|
|
20.56
|
%
|
Eastern Capital Limited
|
|
|
19,000,000
|
(7)
|
|
|
7.27
|
%
|
IBEX Investors, LLC
|
|
|
14,360,000
|
(8)
|
|
|
5.49
|
%
|
*
|
Less
than 1%.
|
|
|
(1)
|
Consists
of 5,528,000 ordinary shares, 80,000 ordinary shares issuable upon exercise of options at an exercise price of NIS 0.81 per
share and with an expiration date of October 31, 2021 and 5,929,503 ordinary shares issuable upon exercise of options
at an exercise price of NIS 0.7461 per share and with an expiration date of August 3, 2025.
|
|
|
(2)
|
Consists
of 158,900 ordinary shares and 80,000 ordinary shares issuable upon exercise of options at an exercise price of NIS 0.81 per
share and with an expiration date of October 31, 2021.
|
|
|
(3)
|
Consists
of 355,000 ordinary shares and 80,000 ordinary shares issuable upon exercise of options at an exercise price of NIS 0.81 per
share and with an expiration date of October 31, 2021.
|
|
|
(4)
|
Consists
of 5,000 ADSs, representing 200,000 ordinary shares, 70,000 ordinary shares issuable upon exercise of options at an exercise
price of NIS 1.325 per share and with an expiration date of November 26, 2022, 50,000 ordinary shares issuable upon exercise
of options at an exercise price of NIS 0.45 per share and with an expiration date of August 7, 2020 and 500,000
ordinary shares issuable upon exercise of options at an exercise price of NIS 0.7461 per share and with an expiration date
of October 15, 2025.
|
|
|
(5)
|
Consists
of 5,000 ADSs, representing 200,000 ordinary shares, 150,000 ordinary shares, 120,000 ordinary shares issuable upon exercise
of options at an exercise price of NIS 0.45 per share and with an expiration date of November 26, 2022, 300,000 ordinary shares
issuable upon exercise of options at an exercise price of NIS 1.325 per share and with an expiration date of July 8, 2020,
and , 500,000 ordinary shares issuable upon exercise of options at an exercise price
of NIS 0.7461 per share and with an expiration date of November 26, 2022
|
|
|
(6)
|
Consists
of 33,760,832 ordinary shares and 20,000,000 ordinary shares represented by 500,000 ADSs
|
|
|
(7)
|
Consists
of 19,000,000 ordinary shares represented by 475,000 ADSs.
|
|
|
(8)
|
Consists
of 14,360,000 ordinary shares represented by 359,000 ADSs.
|
EXPENSES
RELATING TO THIS OFFERING
We estimate that the
total expenses of this offering payable by us, excluding the underwriting discounts, commissions and expenses, will be approximately
$ as follows:
|
|
Amount
|
|
Securities and Exchange Commission
registration fee
|
|
$
|
2,424.00
|
|
Financial Industry Regulatory Authority, Inc.
filing fee
|
|
$
|
|
|
Rights Agent fee
|
|
$
|
|
|
Printing and engraving expenses
|
|
|
|
*
|
Edgarizing costs
|
|
|
|
*
|
Information Agent fees and expenses
|
|
|
|
*
|
Legal fees and expenses
|
|
|
|
*
|
Accountant fees and expenses
|
|
|
|
*
|
Miscellaneous costs
|
|
|
|
*
|
Total
|
|
$
|
[___]
|
|
All amounts in the
table are estimated except the Securities and Exchange Commission registration fee.
LEGAL
MATTERS
The validity of the
securities being offered by this prospectus and other legal matters concerning this offering will be passed upon for us by Pearl
Cohen Zedek Latzer Baratz, Tel-Aviv, Israel.
EXPERTS
The financial statements of
BiondVax Pharmaceuticals Ltd. as of December 31, 2017 and for each of the three years preceding the said fiscal year ended December
31, 2017 included in this Prospectus and Registration Statement have been so included in reliance on the report of Kost Forer
Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, given on the authority
of said firm as experts in auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We have filed with
the SEC a registration statement on Form F-1 under the Securities Act relating to this offering of the ADSs. This prospectus does
not contain all of the information contained in the registration statement. The rules and regulations of the SEC allow us to omit
certain information from this prospectus that is included in the registration statement. Statements made in this prospectus concerning
the contents of any contract, agreement or other document are summaries of all material information about the documents summarized,
but are not complete descriptions of all terms of these documents. If we filed any of these documents as an exhibit to the registration
statement, you may read the document itself for a complete description of its terms.
The SEC maintains
an Internet website that contains reports and other information regarding issuers that file electronically with the SEC. Our filings
with the SEC are also available to the public through the SEC’s website at
http://www.sec.gov
.
We maintain a corporate
website at
www.biondvax.com.
Information contained on, or that can be accessed through, our website does not constitute
a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.
BIONDVAX
PHARMACEUTICALS LTD.
FINANCIAL
STATEMENTS
AS
OF DECEMBER 31, 2018
INDEX
|
|
Kost
Forer Gabbay & Kasierer
144
Menachem Begin Road, Building A,
Tel-Aviv
6492102, Israel
|
|
Tel:
+972-3-6232525
Fax:
+972-3-5622555
ey.com
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and
Board
of Directors of
BIONDVAX
PHARMACEUTICALS LTD.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of Biondvax Pharmaceuticals Ltd. (the “Company”) as of December 31,
2018 and 2017 and the related statements of comprehensive loss, shareholders’ equity and cash flows for each of the three
years in the period ended December 31, 2018 and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December
31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December
31, 2018, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
KOST
FORER GABBAY & KASIERER
A
Member of Ernst & Young Global
We
have served as the Company’s auditor since 2005.
Tel-Aviv,
Israel
April
28, 2019
|
|
BIONDVAX PHARMACEUTICALS LTD.
BALANCE
SHEETS
In
thousands
,
except share and per share data
|
|
|
|
|
|
|
|
|
|
|
Convenience
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation
|
|
|
|
|
|
|
|
|
|
|
|
|
(Note
2c)
|
|
|
|
|
|
|
December
31,
|
|
|
December 31,
|
|
|
|
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
Note
|
|
|
N
I S
|
|
|
U.S.
dollars
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
5
|
|
|
|
71,382
|
|
|
|
75,883
|
|
|
|
20,246
|
|
Other receivables
|
|
|
6
|
|
|
|
3,923
|
|
|
|
965
|
|
|
|
258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,305
|
|
|
|
76,848
|
|
|
|
20,504
|
|
LONG-TERM ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
7
|
|
|
|
5,510
|
|
|
|
28,249
|
|
|
|
7,537
|
|
Other long term assets
|
|
|
8
|
|
|
|
880
|
|
|
|
740
|
|
|
|
197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,390
|
|
|
|
28,989
|
|
|
|
7,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,695
|
|
|
|
105,837
|
|
|
|
28,238
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables
|
|
|
|
|
|
|
6,223
|
|
|
|
20,723
|
|
|
|
5,529
|
|
Other payables
|
|
|
9
|
|
|
|
660
|
|
|
|
1,076
|
|
|
|
287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,883
|
|
|
|
21,799
|
|
|
|
5,816
|
|
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability in respect of
government grants
|
|
|
12(b)
|
|
|
|
10,300
|
|
|
|
14,643
|
|
|
|
3,907
|
|
Loan from others
|
|
|
12(d)
|
|
|
|
-
|
|
|
|
94,360
|
|
|
|
25,176
|
|
Warrants
|
|
|
10,
13(e)
|
|
|
|
8,177
|
|
|
|
6,168
|
|
|
|
1,645
|
|
Severance pay liability, net
|
|
|
11
|
|
|
|
83
|
|
|
|
82
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,560
|
|
|
|
115,253
|
|
|
|
30,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY:
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares of NIS
0.0000001 par value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized: 391,000,000
shares as of December 31, 2018 and 2017; Issued and Outstanding: 261,419,599, shares as of December 31, 2018 and 2017
|
|
|
|
|
|
|
*)-
|
|
|
|
*)-
|
|
|
|
*)-
|
|
Share premium
|
|
|
|
|
|
|
179,669
|
|
|
|
179,929
|
|
|
|
48,007
|
|
Accumulated deficit
|
|
|
|
|
|
|
(123,417
|
)
|
|
|
(211,144
|
)
|
|
|
(56,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,252
|
|
|
|
(31,215
|
)
|
|
|
(8,328
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,695
|
|
|
|
105,837
|
|
|
|
28,238
|
|
|
*)
|
Represents
an amount lower than NIS 1.
|
The
accompanying notes are an integral part of the financial statements.
BIONDVAX PHARMACEUTICALS LTD.
STATEMENTS
OF COMPREHENSIVE LOSS
In
thousands
,
except share and per share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience
translation
(Note
2c
)
|
|
|
|
|
|
|
Year
ended
December
31,
|
|
|
Year
ended
December 31,
|
|
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
Note
|
|
|
N
I S
|
|
|
U.S.
dollars
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development, net of participations
|
|
|
15a
|
|
|
|
7,794
|
|
|
|
18,777
|
|
|
|
71,913
|
|
|
|
19,187
|
|
Marketing, general and administrative
|
|
|
15b
|
|
|
|
4,106
|
|
|
|
4,879
|
|
|
|
5,154
|
|
|
|
1,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
|
|
|
|
11,900
|
|
|
|
23,656
|
|
|
|
77,067
|
|
|
|
20,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
|
|
|
|
(11,900
|
)
|
|
|
(23,656
|
)
|
|
|
(77,067
|
)
|
|
|
(20,562
|
)
|
Financial income
|
|
|
15c
|
|
|
|
3,019
|
|
|
|
18
|
|
|
|
2,936
|
|
|
|
783
|
|
Financial expense
|
|
|
15c
|
|
|
|
(303
|
)
|
|
|
(10,913
|
)
|
|
|
(13,596
|
)
|
|
|
(3,628
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
|
|
|
|
|
|
|
(9,184
|
)
|
|
|
(34,551
|
)
|
|
|
(87,727
|
)
|
|
|
(23,407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items to be reclassified
to profit or loss in subsequent periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from available-for-sale marketable securities
|
|
|
|
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
(9,190
|
)
|
|
|
(34,557
|
)
|
|
|
(87,727
|
)
|
|
|
(23,407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
(0.17
|
)
|
|
|
(0.34
|
)
|
|
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding used
to compute basic and diluted loss per share
|
|
|
|
|
|
|
135,097,367
|
|
|
|
201,030,768
|
|
|
|
261,419,599
|
|
|
|
261,419,599
|
|
The
accompanying notes are an integral part of the financial statements.
April
28, 2019
|
|
|
|
|
|
|
Date
of approval of the
|
|
Avner
Rotman
|
|
Ron
Babecoff
|
|
Uri
Ben-Or
|
financial
statements
|
|
Chairman
of the Board
|
|
Chief
Executive officer
|
|
Chief
Financial officer
|
BIONDVAX PHARMACEUTICALS LTD.
STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY
In
thousands
,
except share and per share data
|
|
Share
capital
|
|
|
Share premium
|
|
|
Options
|
|
|
Unrealized gain (loss)
on available-for-sale financial assets
|
|
|
Accumulated
deficit
|
|
|
Total
Equity
|
|
|
|
NIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2016
|
|
|
*)-
|
|
|
|
110,679
|
|
|
|
2,536
|
|
|
|
12
|
|
|
|
(79,682
|
)
|
|
|
33,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,184
|
)
|
|
|
(9,184
|
)
|
Other comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
(9,184
|
)
|
|
|
(9,190
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expiration of Options series 3
|
|
|
-
|
|
|
|
1,101
|
|
|
|
(1,101
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based compensation
|
|
|
-
|
|
|
|
1,261
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2016
|
|
|
*)-
|
|
|
|
113,041
|
|
|
|
1,435
|
|
|
|
6
|
|
|
|
(88,866
|
)
|
|
|
25,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(34,551
|
)
|
|
|
(34,551
|
)
|
Other comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
(34,551
|
)
|
|
|
(34,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of ordinary shares, net of issuance costs
|
|
|
*)-
|
|
|
|
55,692
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,692
|
|
Exercise of employees’ options
|
|
|
*)-
|
|
|
|
18
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18
|
|
Exercise of options
|
|
|
*)-
|
|
|
|
8,964
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,964
|
|
Expiration of options series 4
|
|
|
-
|
|
|
|
902
|
|
|
|
(902
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expiration of options series 5
|
|
|
-
|
|
|
|
533
|
|
|
|
(533
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based compensation
|
|
|
-
|
|
|
|
519
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31,
2017
|
|
|
*)-
|
|
|
|
179,669
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(123,417
|
)
|
|
|
56,252
|
|
Total comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(87,727
|
)
|
|
|
(87,727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
-
|
|
|
|
260
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
260
|
|
Balance as of December 31, 2018
|
|
|
*)-
|
|
|
|
179,929
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(211,144
|
)
|
|
|
(31,215
|
)
|
(convenience translation into
U.S. dollars) (see Note 2c)
|
|
|
*)-
|
|
|
|
48,007
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(56,335
|
)
|
|
|
(8,328
|
)
|
|
*)
|
Represents
an amount lower than NISUSD 1.
|
The
accompanying notes are an integral part of the financial statements.
BIONDVAX PHARMACEUTICALS LTD.
STATEMENTS
OF CASH FLOWS
In
thousands
,
except share and per share data
|
|
|
|
|
|
|
|
|
|
|
Convenience
translation
(Note
2c)
|
|
|
|
Year
ended
December
31,
|
|
|
Year
ended
December 31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
N
I S
|
|
|
U.S.
dollars
|
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(9,184
|
)
|
|
|
(34,551
|
)
|
|
|
(87,727
|
)
|
|
|
(23,407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile
net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to profit and
loss items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
621
|
|
|
|
440
|
|
|
|
260
|
|
|
|
69
|
|
Net financial expenses
(income)
|
|
|
(2,716
|
)
|
|
|
10,895
|
|
|
|
(2,053
|
)
|
|
|
(548
|
)
|
Capital loss
|
|
|
-
|
|
|
|
-
|
|
|
|
597
|
|
|
|
159
|
|
Increase in liability with
respect to loans from others
|
|
|
-
|
|
|
|
-
|
|
|
|
9,202
|
|
|
|
2,455
|
|
Increase in liability with
respect to government grants
|
|
|
-
|
|
|
|
10,300
|
|
|
|
4,343
|
|
|
|
1,159
|
|
Share-based compensation
|
|
|
1,261
|
|
|
|
519
|
|
|
|
260
|
|
|
|
69
|
|
Change in employee benefit liabilities, net
|
|
|
7
|
|
|
|
7
|
|
|
|
(1
|
)
|
|
|
*)-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(827
|
)
|
|
|
22,161
|
|
|
|
12,608
|
|
|
|
3,363
|
|
Changes in asset and liability
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in
other receivables
|
|
|
640
|
|
|
|
(3,108
|
)
|
|
|
2,958
|
|
|
|
789
|
|
Increase (decrease) in
trade payables
|
|
|
(238
|
)
|
|
|
5,537
|
|
|
|
14,500
|
|
|
|
3,869
|
|
Increase (decrease) in other payables
|
|
|
(79
|
)
|
|
|
(29
|
)
|
|
|
416
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
323
|
|
|
|
2,400
|
|
|
|
17,874
|
|
|
|
4,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid and received
during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
(27
|
)
|
|
|
(73
|
)
|
|
|
(46
|
)
|
|
|
(12
|
)
|
Interest received
|
|
|
62
|
|
|
|
13
|
|
|
|
98
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
(60
|
)
|
|
|
52
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(9,653
|
)
|
|
|
(10,050
|
)
|
|
|
(57,193
|
)
|
|
|
(15,261
|
)
|
|
*)
|
Represents
an amount lower than NISUSD 1.
|
The
accompanying notes are an integral part of the financial statements.
BIONDVAX PHARMACEUTICALS LTD.
STATEMENTS
OF CASH FLOWS
In
thousands
,
except share and per share data
|
|
|
|
|
|
|
|
|
|
|
Convenience
translation
(Note
2c)
|
|
|
|
Year
ended
December
31,
|
|
|
Year
ended
December 31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
N
I S
|
|
|
U.S.
dollars
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in
short-term deposits
|
|
|
(7,602
|
)
|
|
|
7,602
|
|
|
|
-
|
|
|
|
-
|
|
Purchase of property and
equipment
|
|
|
(20
|
)
|
|
|
(4,508
|
)
|
|
|
(23,731
|
)
|
|
|
(6,332
|
)
|
Proceeds from sale of property
and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
137
|
|
|
|
37
|
|
Proceeds from sale of marketable
securities
|
|
|
-
|
|
|
|
4,067
|
|
|
|
-
|
|
|
|
-
|
|
Decrease (increase) in other long term assets
|
|
|
(191
|
)
|
|
|
(402
|
)
|
|
|
140
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(7,813
|
)
|
|
|
6,759
|
|
|
|
(23,454
|
)
|
|
|
(6,257
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from loan from
others
|
|
|
-
|
|
|
|
-
|
|
|
|
84,321
|
|
|
|
22,498
|
|
Proceeds from issuance
of shares and options, net of issuance costs
|
|
|
-
|
|
|
|
55,692
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds from exercise
of options to employees
|
|
|
-
|
|
|
|
18
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds from exercise of options to public
|
|
|
-
|
|
|
|
6,129
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
-
|
|
|
|
61,839
|
|
|
|
84,321
|
|
|
|
22,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences on balances of cash and cash equivalents
|
|
|
(299
|
)
|
|
|
(2,871
|
)
|
|
|
827
|
|
|
|
221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in
cash and cash equivalents
|
|
|
(17,765
|
)
|
|
|
55,677
|
|
|
|
4,501
|
|
|
|
1,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance of cash and cash equivalents at the beginning
of the year
|
|
|
33,470
|
|
|
|
15,705
|
|
|
|
71,382
|
|
|
|
19,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance of cash and cash equivalents at the end of the year
|
|
|
15,705
|
|
|
|
71,382
|
|
|
|
75,883
|
|
|
|
20,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of options to public
|
|
|
-
|
|
|
|
2,835
|
|
|
|
-
|
|
|
|
-
|
|
The
accompanying notes are an integral part of the financial statements.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
1: GENERAL
|
a.
|
BiondVax
Pharmaceuticals Ltd. (“the Company”) is focused on developing and ultimately,
commercializing immunomodulation therapies for infectious diseases. The Company was incorporated
on July 21, 2003 and started its activity on March 31, 2005.
|
|
b.
|
On
June 7, 2007, the Company issued ordinary shares and options on the TASE.
|
|
c.
|
On
May 15, 2015, the Company completed a public offering of securities in the United States.
|
|
d.
|
On
March 28, 2017, the Company received an approval from the Investment Center of the Ministry
of Economy and Industry of the State of Israel, for a grant representing 20% of NIS 20,000
budget to be utilized towards the construction of a factory for the production of Phase
3 and commercial batches of the Company is product (“the Grant”). The receipt
of the Grant is subject to certain terms and conditions, including those outlined under
the Israeli Encouragement of Capital Investment Law,1959. The terms and conditions include,
inter alia, the following: (a) at least 24% of the investments in the planned manufacturing
facility’s fixed assets will be financed by additional share capital; (b) the Company
will maintain its intellectual property and manufacturing facility in Israel for a period
of at least 10 years.
|
|
e.
|
On
August 30, 2017, the Company announced that its Board of Directors has decided to voluntarily
delist from the Tel Aviv Stock Exchange (TASE), while remaining listed on NASDAQ. The
Company announced that the delisting process of BiondVax’s shares from trading
on the TASE will take place by the end of 2017. On October 30, 2017, the Company announced
the delisting procedure and timeline. In addition, during the interim period, BiondVax’s
shares will continue to be traded on the TASE.
|
|
|
|
|
f.
|
On
March 13, 2018, the Company announced the appointment of a contract research organization
(CRO) to conduct the first pivotal phase 3 clinical trial of M-001, BiondVax’s
universal flu vaccine candidate.
|
|
g.
|
On
March 15, 2018, the Company and the CRO executed a master service agreement and work
order. According to the master service agreement, the Company undertakes to pay remuneration
as well as to reimburse the CRO for costs incurred as a result of the master service
agreement and work orders. The master service agreement shall be in effect as of March
8, 2018 for a period of five years or later, if a work order remains in effect, and until
such work order’s completion. The first work order which governs the conduct of
the Company’s clinical trial in Europe is scheduled for a total period of 32.5
months. The Company has a right to terminate the master service agreement or the work
order by giving a 45 days’ notice or in the event of a material breach.
|
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
1: GENERAL (Cont.)
|
h.
|
During
year ended December 31, 2018, the Company incurred a loss of NIS 87,727 ($ 23,407)
and negative cash flows from operating activities of NIS 57,193 ($ 15,261) and it
has an accumulated deficit of NIS 211,144 ($ 56,335) as of that date.
|
To
date the Company has not generated any revenues yet and will need additional funds to finance its Phase 3 clinical trials in the
future (see also Note 19).
Furthermore,
the Company intends to continue to finance its operating activities by raising capital. There are no assurances that the Company
will be successful in obtaining an adequate level of financing needed for its long-term research and development activities.
If
the Company will not have the sufficient liquidity resources, the Company may not be able to continue the development of all its
products or may be required to implement a cost reduction and may be required to delay part of its development program. The Company’s
management and Board of Directors are in the opinion that its current financial resources will be sufficient to continue the development
of the Company’s products for at least the next twelve months.
NOTE
2:- SIGNIFICANT ACCOUNTING POLICIES
The
following accounting policies have been applied consistently in the financial statements for all periods presented, unless otherwise
stated.
|
a.
|
Basis
of presentation of the financial statements:
|
These
financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as
issued by the International Accounting Standards Board (“IASB”).
The
Company’s financial statements have been prepared on a cost basis, except for financial instruments which are measured at
fair value through profit or loss.
The
Company has elected to present profit or loss items using the “function of expense” method.
|
b.
|
Functional
currency, reporting currency and foreign currency:
|
|
1.
|
Functional
currency and reporting currency:
|
The
reporting currency of the financial statements is the NIS.
The
functional currency is the currency that best reflects the economic environment in which the Company operates and conducts its
transactions. Most of the Company costs are incurred in NIS. In addition, the Company financing activities are incurred normally
in NIS. The Company’s management believes that the functional currency of the Company is the NIS.
|
2.
|
Transactions,
assets and liabilities in foreign currency:
|
Transactions
denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. After
initial recognition, monetary assets and liabilities denominated in foreign currency are translated at the end of each reporting
period into the functional currency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
c.
|
Convenience
translation into U.S. dollars:
|
The
financial statements as of December 31, 2018 and for the year then ended have been translated into U.S. Dollars using the exchange
rate of the U.S. Dollar as of December 31, 2018 (U.S. $ 1.00 = NIS 3.748). The translation was made solely for convenience
purposes.
The
dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or
payable in Dollars or convertible into Dollars, unless otherwise indicated.
Cash
equivalents are considered as highly liquid investments, including unrestricted short-term bank deposits with an original maturity
of three months or less from the date of acquisition.
Restricted
cash are bank deposits with an original maturity of more than one year from the date of investment and which do not meet the definition
of cash equivalents. The deposits are presented according to their terms of deposit.
|
f.
|
Property
and equipment:
|
Property,
plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation, accumulated impairment
losses and excluding day-to-day servicing expenses.
Depreciation
is calculated on a straight-line basis over the useful life of the assets at annual rates as follows:
|
|
%
|
|
Laboratory equipment
|
|
|
15
|
|
Office furniture and equipment
|
|
|
6
- 33
|
|
Computers
|
|
|
33
|
|
Leasehold improvements
|
|
|
(*)
|
|
|
(*)
|
Leasehold
improvements are depreciated on a straight-line basis over the shorter of the lease term
(including the extension option held by the Company and intended to be exercised) and
the expected life of the improvement.
|
The
useful life, depreciation method and residual value of an asset are reviewed at least each year-end and any changes are accounted
for prospectively as a change in accounting estimate.
An
item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or
disposal.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
g.
|
Research
and development expenses, net of participations:
|
Research
and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project
or from the development phase of an internal project is recognized if the Company can demonstrate the technical feasibility of
completing the intangible asset so that it will be available for use or sale; the Company’s intention to complete the intangible
asset and use or sell it; the Company’s ability to use or sell the intangible asset; how the intangible asset will generate
future economic benefits; the availability of adequate technical, financial and other resources to complete the intangible asset;
and the Company’s ability to measure reliably the expenditure attributable to the intangible asset during its development.
Since the Company’s research and development projects are often subject to regulatory approval procedures and other uncertainties,
the conditions for the capitalization of costs incurred before receipt of approvals are not normally satisfied and, therefore,
development expenditures are recognized in profit or loss when incurred.
|
h.
|
Government
investment grants:
|
Government
grants are recognized when there is reasonable assurance that the grants will be received and the Company will comply with the
attendant conditions.
Research
and development grants received from the Israeli Innovation Authority (“IIA”) are recognized upon receipt as a liability
only if future economic benefits are expected from the project that will result in royalty-bearing sales. A liability for the
grant is first measured at fair value using a discount rate that reflects a market interest rate. The difference between the amount
of the grant received and the fair value of the liability is accounted for as a government grant and recognized as a reduction
of research and development expenses. After initial recognition, the liability is measured at amortized cost using the effective
interest method.
Future
Royalty payments will be treated as a reduction of the liability. In that event, the royalty obligation is treated as a contingent
liability in accordance with IAS 37, “
Provisions, Contingent Liabilities and Contingent Assets
” (“IAS 37”).
At
the end of each reporting period, the Company evaluates whether there is reasonable assurance that the received grants will
not be repaid based on its best estimate of future
sales
and, if so, no liability is recognized and the grants are recorded against a corresponding reduction in research and
development expenses.
Since
the Company’s development projects are at the beginning of Phase 3 clinical trials, future economic benefits from the research
and development activity are currently expected. Therefore, a liability was recorded with respect to the IIA grants
,
against a corresponding increase in research and development expenses.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Research
and development grants received from the European Union are recorded against a corresponding reduction in research and development
expenses. Since they are non-refundable and do not depend on the generation of future sales.
|
i.
|
Impairment
of non-financial assets:
|
The
Company evaluates the need to record an impairment of the carrying amount of non-financial assets whenever events or changes in
circumstances indicate that the carrying amount is not recoverable. If the carrying amount of non-financial assets exceeds their
recoverable amount, the assets are reduced to their recoverable amount. The recoverable amount of an asset that does not generate
independent cash flows is determined for the cash-generating unit to which the asset belongs and is calculated based on the projected
cash flows that will be generated by the cash generated unit. Impairment losses are recognized in profit or loss.
An
impairment loss of an asset is reversed only if there have been changes in the estimates used to determine the asset’s recoverable
amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the
lower of the carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been
recognized for the asset in prior years, and its recoverable amount.
The
Company did not recognize any impairment of non-financial assets for any of the periods presented.
|
j.
|
Financial
instruments:
|
As
described in Note 2q regarding the initial adoption of IFRS 9, “Financial Instruments” (“the Standard”),
the Company elected to adopt the provisions of the Standard retrospectively without restatement of comparative data.
The
accounting policy for financial instruments applied until December 31, 2017, is as follows:
Financial
assets within the scope of IAS 39, “
Financial Instruments: Recognition and Measurement
” (“IAS 39”)
are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair
value through profit or loss in respect of which transaction costs are recorded in profit or loss.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
After
initial recognition, the accounting treatment of financial assets is based on their classification as follows:
Financial
assets at fair value through profit or loss
This
category includes financial assets designated upon initial recognition as at fair value through profit or loss.
Loans
and receivables
The
Company has receivables that are financial assets with fixed or determinable payments that are not quoted in an active market.
|
2.
|
Financial
liabilities:
|
Financial
liabilities within the scope of IAS 39 are initially measured at fair value.
After
initial recognition, the accounting treatment of financial liabilities is based on their classification as follows:
Financial
liabilities measured at amortized cost:
Loans
and other liabilities are measured at amortized cost using the effective interest method taking into account directly attributable
transaction costs.
Financial
liabilities at fair value through profit or loss:
Financial
liabilities at fair value through profit or loss include financial liabilities classified as held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss.
|
3.
|
De-recognition
of financial instruments:
|
A
financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or the Company has
transferred its contractual rights to receive cash flows from the financial asset or assumes an obligation to pay the cash flows
in full without material delay to a third party and has transferred substantially all the risks and rewards of the asset, or has
neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
b)
|
Financial
liabilities:
|
A
financial liability is derecognized when it is extinguished, that is when the obligation is discharged or cancelled or expires.
A financial liability is extinguished when the debtor (the Company) discharges the liability by paying in cash, other financial
assets, goods or services; or is legally released from the liability.
|
4.
|
Issue
of a unit of securities:
|
The
issue of a unit of securities involves the allocation of the proceeds received (before issuance expenses) to the components of
the securities issued in the unit based on the following order: financial derivatives and other financial instruments measured
at fair value in each period. Then fair value is determined for financial liabilities and compound instruments that are presented
at amortized cost. The proceeds allocated to equity instruments are the residual amount. Issue costs are allocated to each component
pro rata to the amounts determined for each component in the unit.
The
accounting policy for financial instruments applied commencing from January 1, 2018, is as follows:
Financial
assets are measured upon initial recognition at fair value plus transaction costs that are directly attributable to the acquisition
of the financial assets, except for financial assets measured at fair value through profit or loss in respect of which transaction
costs are recorded in profit or loss.
The
Company classifies and measures debt instruments in the financial statements based on the following criteria:
|
-
|
The
Company’s business model for managing financial assets; and
|
|
-
|
The
contractual cash flow terms of the financial asset.
|
|
a.
|
Debt
instruments are measured at fair value through profit or loss when:
|
A
financial asset which is a debt instrument does not meet the criteria for measurement at amortized cost or at fair value through
other comprehensive income. After initial recognition, the financial asset is measured at fair value and gains or losses from
fair value adjustments are recognized in profit or loss.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
2.
|
Derecognition
of financial assets:
|
A
financial asset is derecognized only when:
|
-
|
The
contractual rights to the cash flows from the financial asset has expired; or
|
|
-
|
The
Company has transferred substantially all the risks and rewards deriving from the contractual
rights to receive cash flows from the financial asset or has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control
of the asset; or
|
|
-
|
The
Company has retained its contractual rights to receive cash flows from the financial
asset but has assumed a contractual obligation to pay the cash flows in full without
material delay to a third party.
|
|
3.
|
Financial
liabilities:
|
|
a)
|
Financial
liabilities measured at amortized cost:
|
Financial
liabilities are initially recognized at fair value less transaction costs that are directly attributable to the issue of the financial
liability.
After
initial recognition, the Company measures all financial liabilities at amortized cost using the effective interest rate method,
except for:
|
-
|
Financial
liabilities at fair value through profit or loss such as warrant liability
|
|
b)
|
Financial
liabilities measured at fair value through profit or loss:
|
At
initial recognition, the Company measures financial liabilities that are not measured at amortized cost at fair value. Transaction
costs are recognized in profit or loss.
After
initial recognition, changes in fair value are recognized in profit or loss.
|
4.
|
Derecognition
of financial liabilities:
|
A
financial liability is derecognized only when it is extinguished, that is when the obligation specified in the contract is discharged
or cancelled or expires. A financial liability is extinguished when the debtor discharges the liability by paying in cash, other
financial assets, goods or services; or is legally released from the liability.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
5.
|
Issue
of a unit of securities:
|
The
issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued
in the unit based on the following order: financial derivatives and other financial instruments measured at fair value in each
period. Then fair value is determined for financial liabilities that are measured at amortized cost. The proceeds allocated to
equity instruments are determined to be the residual amount. Issue costs are allocated to each component pro rata to the amounts
determined for each component in the unit.
|
k.
|
Fair
value measurement:
|
Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
Fair
value measurement is based on the assumption that the transaction will take place in the asset’s or the liability’s
principal market, or in the absence of a principal market, in the most advantageous market.
The
fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset
or liability, assuming that market participants act in their economic best interest.
Fair
value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits
by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its
highest and best use.
The
Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure
fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
All
assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair
value hierarchy based on the lowest level input that is significant to the entire fair value measurement:
Level
1
|
-
|
quoted
prices (unadjusted) in active markets for identical assets or liabilities.
|
|
|
|
Level
2
|
-
|
inputs
other than quoted prices included within Level 1 that are observable directly or indirectly.
|
|
|
|
Level
3
|
-
|
inputs
that are not based on observable market data (valuation techniques which use inputs that are not based on observable market
data).
|
A
provision in accordance with IAS 37 is recognized when the Company has a present obligation (legal or constructive) as a result
of a past event, it is expected to require the use of economic resources to settle the obligation and a reliable estimate can
be made of it.
Lease
agreements are classified as an operating lease if they do not transfer substantially all the risks and benefits incidental to
ownership of the leased asset. Operating lease payments are recognized as an expense in profit or loss on a straight-line basis
over the lease term.
|
n.
|
Employee
benefit liabilities:
|
The
Group has several employee benefit plans:
|
1.
|
Short-term
employee benefits:
|
Short-term
employee benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are recognized
as expenses as the services are rendered.
|
2.
|
Post-employment
benefits:
|
Post-employment
benefit plans are normally financed by contributions to insurance companies and classified as defined contribution plans or as
defined benefit plans.
The
Company has defined contribution plans pursuant to Section 14 of the Severance Pay Law into which the Company pays fixed
contributions and has no legal or constructive obligation to pay further contributions on account of severance pay if the fund
does not hold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Contributions
to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributed concurrently
with performance of the employee’s services.
|
o.
|
Share-based
payment transactions:
|
From
time to time, the Company grants to its employees and service providers remuneration in the form of equity-settled share-based
instruments, such as options to purchase ordinary shares.
Equity-settled
transactions:
The
cost of equity-settled transactions with employees is measured at the fair value of the equity instruments granted at grant date.
The fair value is determined using an acceptable option pricing model.
With
respect to other service providers, the cost of the transactions is measured at the fair value of the goods or services received
as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equity
instruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.
The
cost of equity-settled transactions is recognized in profit or loss, together with a corresponding increase in equity, during
the period which the performance or service conditions are to be satisfied, ending on the date on which the relevant employees
become fully entitled to the award (the “Vesting Period”).
No
expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition,
which are treated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions
are satisfied.
Loss
per share is calculated by dividing the loss attributable to Company shareholders by the weighted number of outstanding ordinary
shares during the period. Potential Ordinary shares are only included in the computation of diluted loss per share when their
conversion increases loss per share or decreases income per share. Potential Ordinary shares that are converted during the period
are included in diluted loss per share only until the conversion date.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
q.
|
Changes
in accounting policies - initial adoption of new financial reporting and accounting standards
and amendments to existing financial reporting and accounting standards:
|
Initial
adoption of IFRS 9, “Financial Instruments”:
In
July 2014, the IASB issued the final and complete version of IFRS 9, “Financial Instruments” (“the new Standard”),
which replaces IAS 39, “Financial Instruments: Recognition and Measurement”. The new Standard mainly focuses on the
classification and measurement of financial assets and it applies to all assets within the scope of IAS 39.
The
new Standard has been applied for the first time in these financial statements retrospectively without restatement of comparative
data.
The
adoption of the new Standard did not have a material impact on the Company’s financial statements.
NOTE
3:- SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUPMTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The
preparation of the financial statements requires management to make estimates and assumptions that have an effect on the application
of the accounting policies and on the reported amounts of assets, liabilities and expenses.
Discussed
below are the key assumptions made in the financial statements concerning uncertainties at the end of the reporting period and
the critical estimates computed by the Company that may result in a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
|
●
|
Determining
the fair value of share based compensation to employees and directors:
|
The
fair value of share based compensation to employees and directors is determined using acceptable option pricing models.
The
assumptions used in the models include the expected volatility, expected life, expected dividend and risk-free interest rate.
|
●
|
Grants
from the Israel Innovation Authority (“the IIA”):
|
Government
grants received from the IIA are recognized as a liability if future economic benefits are expected from the research and development
activity that will result in royalty-bearing sales. There is certainty regarding the estimated future economic benefits, therefore
the liability was recorded with respect to the IIA grants.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION
In
January 2016, the IASB issued IFRS 16, “Leases” (“the new Lease Standard”). According to the new Lease
Standard, a lease is a contract, or part of a contract, that conveys the right to use an asset for a period of time in exchange
for consideration.
The
effects of the adoption of the new Lease Standard are as follows:
|
●
|
According
to the new Lease Standard, lessees are required to recognize all leases in the statement of financial position (excluding
certain exceptions, see below). Lessees will recognize a liability for lease payments with a corresponding right-of-use asset,
similar to the accounting treatment for finance leases under the existing standard, IAS 17, “Leases”. Lessees
will also recognize interest expense and depreciation expense separately.
|
|
●
|
Variable
lease payments that are not dependent on changes in the Consumer Price Index (“CPI”) or interest rates, but are
based on performance or use are recognized as an expense by the lessees as incurred and recognized as income by the lessors
as earned.
|
|
●
|
In
the event of a change in variable lease payments that are CPI-linked, lessees are required to remeasure the lease liability
and record the effect of the remeasurement as an adjustment to the carrying amount of the right-of-use asset.
|
|
●
|
The
accounting treatment by lessors remains substantially unchanged from the existing standard, namely classification of a lease
as a finance lease or an operating lease.
|
|
●
|
The
new Lease Standard includes two exceptions which allow lessees to account for leases based on the existing accounting treatment
for operating leases - leases for which the underlying asset is of low financial value and short-term leases (up to one year).
|
The
new Lease Standard is effective for annual periods beginning on or after January 1, 2019.
The
new Standard permits lessees to use one of the following approaches:
|
1.
|
Full
retrospective approach - according to this approach, a right-of-use asset and the corresponding
liability will be presented in the statement of financial position as if they had always
been measured according to the provisions of the new Standard. Accordingly, the effect
of the adoption of the new Standard at the beginning of the earliest period presented
will be recorded in equity. Also, the Company will restate the comparative data in its
financial statements. Under this approach, the balance of the liability as of the date
of initial application of the new Standard will be calculated using the interest rate
implicit in the lease, unless this rate cannot be easily determined in which case the
lessee’s incremental borrowing rate of interest on the commencement date of the
lease will be used.
|
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)
|
2.
|
Modified
retrospective approach - this approach does not require restatement of comparative data.
The balance of the liability as of the date of initial application of the new Standard
will be calculated using the lessee’s incremental borrowing rate of interest on
the date of initial application of the new Standard. As for the measurement of the right-of-use
asset, the Company may choose, on a lease-by-lease basis, to apply one of the two following
alternatives:
|
|
●
|
Recognize
an asset in an amount equal to the lease liability, with certain adjustments.
|
|
|
|
|
●
|
Recognize
an asset as if the new Standard had always been applied.
|
Any
difference arising on the date of first-time recorded in equity.
The
Company believes that it will apply the modified retrospective approach upon the initial adoption of the new Lease Standard by
measuring the right-of-use asset at an amount equal to the lease liability, as measured on the transition date.
The
Company has a number of lease contracts, mainly leases of an office building and a production plant (see also Note 12). In assessing
the impact of the new Lease Standard on the financial statements, the Company evaluated the following matters:
|
●
|
Options
to extend the lease - according to the new Lease Standard, the non-cancellable period of a lease includes periods that are
covered by options to extend the lease if the lessee is reasonably certain to exercise the option.
|
|
●
|
Separation
of lease components - according to the new Lease Standard, all lease components within a contract should be accounted for
separately from non-lease components. A lessee is allowed a practical expedient according to which it can elect, by class
of underlying asset, not to separate non-lease components from lease components, and instead account for them as a single
lease component.
|
|
●
|
Incremental interest
rate - the Company estimates the incremental interest rate to be used for measuring the lease liability and right-of-use asset
on the date of initial adoption of the new Lease Standard, based on the lease term and nature of the leased asset.
|
The
Company estimated that the effect of the initial adoption of the new Lease Standard as of January 1, 2019, is expected to result
in an increase in the Company’s total assets and liabilities in the amount to NIS 7,282 ($ 1,943) and no impact on equity.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)
Moreover,
the effect of the initial adoption of the new Lease Standard in 2019 is expected to result in a decrease in the Company’s
lease expenses of NIS 1,113 ($ 297) and an increase in the Company’s depreciation and finance expenses of NIS 809 ($ 403)
and NIS 702 ($ 187) , respectively. The total effect of the initial adoption of the new Lease Standard in 2019 is expected to
result in a decrease of NIS 1,113 ($ 297) in operating loss and an increase of NIS 398 ($ 106) in loss before income taxes.
In
addition, as a result of the adoption of the new Standard, in 2019, the Company’s cash flows from operating activities are
expected to increase by approximately NIS 1,113 ($ 297) and its cash flows from financing activities are expected to decrease
by approximately NIS 1,113 ($ 297).
NOTE
5:- CASH AND CASH EQUIVALENTS
Cash
and cash equivalents:
|
|
|
|
|
|
|
|
Convenience
|
|
|
|
|
|
|
|
|
|
Translation
(Note 2c)
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
N I S
|
|
|
U.S. dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash in NIS
|
|
|
32,665
|
|
|
|
15,558
|
|
|
|
4,151
|
|
Cash in USD
|
|
|
38,677
|
|
|
|
13,586
|
|
|
|
3,625
|
|
Cash in EURO
|
|
|
40
|
|
|
|
46,739
|
|
|
|
12,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,382
|
|
|
|
75,883
|
|
|
|
20,246
|
|
NOTE
6:- OTHER RECEIVABLES
|
|
|
|
|
|
|
|
Convenience
|
|
|
|
|
|
|
|
|
|
Translation
(Note 2c)
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
N I S
|
|
|
U.S. dollars
|
|
|
|
|
|
Grants receivable
|
|
|
1,043
|
|
|
|
-
|
|
|
|
-
|
|
Government authorities
|
|
|
945
|
|
|
|
383
|
|
|
|
102
|
|
Debt issuance costs
|
|
|
1,185
|
|
|
|
-
|
|
|
|
-
|
|
Prepaid expenses and other
|
|
|
750
|
|
|
|
582
|
|
|
|
156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,923
|
|
|
|
965
|
|
|
|
258
|
|
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
7:- PROPERTY, PLANT AND EQUIPMENT, NET
Balance
as of December 31, 2018:
|
|
Laboratory equipment
|
|
|
Office furniture and equipment
|
|
|
Computers
|
|
|
Leasehold
Improvements
|
|
|
Factory Leasehold
|
|
|
Total
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2018
|
|
|
3,428
|
|
|
|
293
|
|
|
|
356
|
|
|
|
2,652
|
|
|
|
4,453
|
|
|
|
11,182
|
|
Additions
|
|
|
98
|
|
|
|
8
|
|
|
|
83
|
|
|
|
-
|
|
|
|
23,542
|
|
|
|
23,731
|
|
Deductions
|
|
|
(300
|
)
|
|
|
(182
|
)
|
|
|
-
|
|
|
|
(2,652
|
)
|
|
|
-
|
|
|
|
(3,134
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31,
2018
|
|
|
3,226
|
|
|
|
119
|
|
|
|
439
|
|
|
|
-
|
|
|
|
27,995
|
|
|
|
31,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2018
|
|
|
3,296
|
|
|
|
177
|
|
|
|
310
|
|
|
|
1,889
|
|
|
|
-
|
|
|
|
5,672
|
|
Additions
|
|
|
57
|
|
|
|
12
|
|
|
|
50
|
|
|
|
141
|
|
|
|
-
|
|
|
|
260
|
|
Deductions
|
|
|
(276
|
)
|
|
|
(96
|
)
|
|
|
-
|
|
|
|
(2,030
|
)
|
|
|
-
|
|
|
|
(2,402
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31,
2018
|
|
|
3,077
|
|
|
|
93
|
|
|
|
360
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciated cost as of December 31,
2018
|
|
|
149
|
|
|
|
26
|
|
|
|
79
|
|
|
|
-
|
|
|
|
27,995
|
|
|
|
28,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciated
cost as of December 31, 2018 (convenience translation into U.S. dollars) (Note 2c)
|
|
|
40
|
|
|
|
7
|
|
|
|
21
|
|
|
|
-
|
|
|
|
7,469
|
|
|
|
7,537
|
|
Balance
as of December 31, 2017:
|
|
Laboratory equipment
|
|
|
Office furniture and equipment
|
|
|
Computers
|
|
|
Leasehold
Improvements
|
|
|
Factory Leasehold
|
|
|
Total
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2017
|
|
|
3,411
|
|
|
|
293
|
|
|
|
318
|
|
|
|
2,652
|
|
|
|
-
|
|
|
|
6,674
|
|
Additions
|
|
|
17
|
|
|
|
-
|
|
|
|
38
|
|
|
|
-
|
|
|
|
4,453
|
|
|
|
4,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31,
2017
|
|
|
3,428
|
|
|
|
293
|
|
|
|
356
|
|
|
|
2,652
|
|
|
|
4,453
|
|
|
|
11,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2017
|
|
|
3,116
|
|
|
|
160
|
|
|
|
287
|
|
|
|
1,668
|
|
|
|
-
|
|
|
|
5,231
|
|
Additions
|
|
|
180
|
|
|
|
17
|
|
|
|
23
|
|
|
|
221
|
|
|
|
-
|
|
|
|
441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31,
2017
|
|
|
3,296
|
|
|
|
177
|
|
|
|
310
|
|
|
|
1,889
|
|
|
|
-
|
|
|
|
5,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciated cost as of December 31,
2017
|
|
|
132
|
|
|
|
116
|
|
|
|
46
|
|
|
|
763
|
|
|
|
4,453
|
|
|
|
5,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciated
cost as of December 31, 2017 (convenience translation into U.S. dollars) (Note 2c)
|
|
|
35
|
|
|
|
31
|
|
|
|
12
|
|
|
|
204
|
|
|
|
1,188
|
|
|
|
1,470
|
|
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
8:- OTHER LONG TERM ASSETS
|
|
|
|
|
|
|
|
Convenience
|
|
|
|
|
|
|
|
|
|
Translation
(Note 2c)
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
N I S
|
|
|
U.S. dollars
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
857
|
|
|
|
707
|
|
|
|
189
|
|
Leasing deposits
|
|
|
23
|
|
|
|
33
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
880
|
|
|
|
740
|
|
|
|
197
|
|
NOTE
9:- OTHER PAYABLES
|
|
|
|
|
|
|
|
Convenience
|
|
|
|
|
|
|
|
|
|
Translation
(Note 2c)
|
|
|
|
December
31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
N
I S
|
|
|
U.S.
dollars
|
|
|
|
|
|
|
|
|
|
|
|
Employees and
payroll accruals
|
|
|
624
|
|
|
|
924
|
|
|
|
247
|
|
Accrued expenses
|
|
|
36
|
|
|
|
152
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
660
|
|
|
|
1,076
|
|
|
|
287
|
|
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
10:- FINANCIAL INSTRUMENTS
|
a.
|
Classification
of financial liabilities:
|
|
|
|
|
|
|
|
|
Convenience
|
|
|
|
|
|
|
|
|
|
Translation
(Note 2c)
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
N I S
|
|
|
U.S. dollars
|
|
|
|
|
|
Financial liabilities at amortized costs:
|
|
|
|
|
|
|
|
|
|
Liability in respect of government grants
|
|
|
10,300
|
|
|
|
14,643
|
|
|
|
3,907
|
|
Loan from others
|
|
|
-
|
|
|
|
94,360
|
|
|
|
25,176
|
|
|
|
|
10,300
|
|
|
|
109,003
|
|
|
|
29,083
|
|
Financial liabilities at fair
value through profit and loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants measured at fair
value
|
|
|
8,177
|
|
|
|
6,168
|
|
|
|
1,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non current
|
|
|
18,477
|
|
|
|
115,171
|
|
|
|
30,728
|
|
|
b.
|
Financial
risk factors:
|
The
Company’s activities expose it to various market risks (foreign currency risk, Israeli CPI risk and interest rate risk)
and credit risk. The Company’s comprehensive risk management plan focuses on activities that reduce to a minimum any possible
adverse effects on the Company’s financial performance.
Risk
management is performed by the Company’s Board. The Board identifies, measures and manages financial risks in collaboration
with the Company’s operating units. The Board establishes documented objectives for the overall risk management activities
as well as specific policies with respect to certain exposures to risks such as exchange rate risk, interest rate risk, credit
risk, the use of non-derivative financial instruments and the investments of excess liquid positions.
Foreign
currency risk
The
Company has cash that is exposed to possible fluctuations in the U.S. dollar and Euro exchange rates. The currency exposure arising
from current accounts is partly managed in Dollars and in Euro. As of December 31, 2018, the carrying amounts of USD and
EURO were NIS 13,586 and NIS 46,739 respectively.
Credit
risk
The
Company has no significant concentrations of credit risk. All deposits are invested in financial institutions that are considered
to be financially sound.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
10:- FINANCIAL INSTRUMENTS (Cont.)
Regarding
the fair value of liability for warrants (see Note 10 (a) above). The carrying amount of cash and cash equivalents, other receivable,
other long term assets, trade payables and other payable approximates their fair value due to the short-term maturities of such
instruments.
|
d.
|
Fair
value measurement:
|
As
of December 31, 2018, warrants liability is measured at fair value and classified as Level 1 while loans from others and government
grant are classified as Level 2.
During
2018 there were no transfers in respect of fair value measurement of any financial instrument between Level 1 and Level 2, and
there were no transfers into or out of Level 3 fair value measurements of any financial instrument.
NOTE
11:- EMPLOYEE BENEFIT LIABILITIES
|
a.
|
Post-employment
benefits:
|
According
to the labor laws and Severance Pay Law in Israel, the Company is required to pay compensation to an employee upon dismissal or
retirement or to make current contributions in defined contribution plans pursuant to section 14 to the Severance Pay Law, as
specified below. The Company’s liability is accounted for as a post-employment benefit. The computation of the Company’s
employee benefit liability is made according to the current employment contract based on the employee’s salary and employment
term which establish the entitlement to receive the compensation.
The
post-employment employee benefits are normally financed by contributions classified as defined benefit plan or as defined contribution
plan, as detailed below.
|
b.
|
Defined
contribution plans:
|
Section
14 to the Severance Pay Law, 1963 applies to part of the compensation payments, pursuant to which the fixed contributions paid
by the Group into pension funds and/or policies of insurance companies release the Group from any additional liability to employees
for whom said contributions were made. These contributions and contributions for benefits represent defined contribution plans.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
11:- EMPLOYEE BENEFIT LIABILITIES (Cont.)
|
|
|
|
|
|
|
|
|
|
|
Convenience
translation
(Note
2c)
|
|
|
|
Year
ended
December
31,
|
|
|
Year
ended
December 31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
N I S
|
|
|
U.S. dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses-defined contribution
plan
|
|
|
204
|
|
|
|
196
|
|
|
|
242
|
|
|
|
65
|
|
NOTE
12:- CONTINGENT LIABILITIES AND COMMITMENTS
|
a.
|
On
July 31, 2003, the Company signed a license agreement with Yeda Research and Development
Company Ltd. (“Yeda”) according to which the Company acquired an exclusive
worldwide license for the development, manufacturing, use, marketing, sale, distribution
and importing of products based, directly or indirectly, on patents and patent applications
to be approved or submitted pursuant to the invention titled “Peptide Based Vaccine
for Influenza”, developed on the basis of the research conducted by Professor Ruth
Arnon and her team at the Weizmann Institute. This agreement was amended in 2005. In
exchange for the license grant, the Company or its future sublicensees will be obligated
to pay royalties equaling 3% of the total amount invoiced by the Company or by a sublicensee
in connection with the sale of products based on Yeda’s patents, or 2% of such
amounts if they originated from a country which did not grant a patent in connection
with such products. All sales of products in connection with the license agreement for
any purpose other than for the purpose of clinical trials are required to be made for
monetary consideration.
|
The
Company has the option to enter into a sublicense agreement provided that Yeda gives its consent in writing and, in such case,
the royalties to be paid by the Company to Yeda from the sublicense or from the option to sublicense will be (a) before the completion
of Phase 1 clinical trials - 45% (b) after Phase 1 but before Phase 2 trials - 35% of amounts up to the first $ 20,000 receivable
from a sublicense or a sublicense option, or 25% of amounts exceeding such first $ 20,000 receivable from the sublicense
or from a sublicense option; (c) after the completion of Phase 2 clinical trials the royalties will be 20% of amounts up to the
first $ 20,000 receivable from a sublicense or a sublicense option or 15% of amounts exceeding such first $ 20,000 receivable
from a sublicense or a sublicense option.
This
agreement terminates at the latest of (i) the expiration of the last patent licensed under the license agreement; or (ii) if only
one product is developed or is commercialized by utilizing the licensed intellectual property, 15 years after of first commercial
sale of such product in either the U.S or Europe, following receipt of New Drug Approval from the FDA or equivalent approval in
any European country for such product; or (iii)if more than one product is being developed or is commercialized by utilizing the
licensed intellectual property, following the receipt of New Drug Approval from the FDA or equivalent approval in any European
country for such product, the expiry of a 20 year period during which no sales are made in the U.S. or Europe.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
12:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
Yeda
shall be entitled, at its option and without the Company’s consent, to modify the license so that it is non-exclusive or
to terminate the license with 30 days prior written notice to the Company, if any of the following occurs:
|
(1)
|
the
Company fails to commence the commercial sale of at least one product based on the licenses
intellectual property, in at least one country, within six months following receipt of
after receipt of an FDA or similar foreign regulatory approval for commercial marketing
of such product and taking into account the seasonal nature of the products (except as
a result of force majeure or other factors beyond the Company’s control); or
|
|
(2)
|
the
Company fails to sell any product based on the licenses intellectual property, during
a period of one year after commercial sale of a product has commenced, during which no
sales of the product take place (except as a result of force majeure or other factors
beyond the Company’s control).
|
In
addition, Yeda is permitted to terminate the license agreement by written notice:
|
(a)
|
in
the event the Company materially breaches any of its obligations under the license agreement,
provided that such material breach is un-curable or, if curable, is not cured by the
Company within thirty days (or in the case of failure by the Company to make payments
due to Yeda in connection with the license agreement, ten days) from receipt of notice
of such breach; or
|
|
|
|
|
(b)
|
in
the event of the appointment of a temporary or permanent liquidator to the Company or
a resolution is passed to voluntary wind up the Company, or if an order or act is granted
for the winding up of the Company, provided that if such order or act was initiated by
any third party, such order or act is not cancelled within 120 days; or
|
|
(c)
|
if
the Company contests the validity of one of the patents registered by Yeda.
|
In
the event that Yeda terminates the license agreement due to any reason other than termination in accordance with (1), (2) or (a)
through (c) in the preceding two paragraphs above, the Company will be entitled to receive royalty payments equal to 25% of net
proceeds received by Yeda from the grant to third parties, within the five years following the termination of the license agreement,
of a license or other rights, which include the Company’s developments, up to the aggregate amount of research funds actually
expended by the Company for development.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
12:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
|
b.
|
The
Company obtained grants from the Government of Israel for the participation in research
and development and, in return, undertook to pay royalties amounting to 3%-5% on the
revenues derived from sales of products or services developed in whole or in part using
these grants. The maximum aggregate royalties paid generally cannot exceed 100% of
the grants received by the Company, plus annual interest generally equal to the 12-month LIBOR
applicable to dollar deposits, as published on the first business day of each calendar
year. The maximum royalty amount payable by the Company as of December 31, 2018
is approximately $ 5,490 (NIS 20,576), which represents the total gross amount
of grants actually received by the Company from the IIA including accrued interest.
As of December 31, 2018, the Company had not paid any royalties to the IIA.
|
|
c.
|
In
October 2013, the Company signed an agreement for obtaining funding in an amount of €
536 ($ 642) out of a total grant of approximately € 6,000 ($ 7,187) from the European
Union which was approved for the UNISEC consortium of which the Company is a member for
a period of three years. In October 2013, the Company received an advance of € 206
($ 247) and in October 2015 received € 247 ($ 296). The Company’s expenses
in respect of this project in 2013-2018 totaled € 1,028 ($ 1,231) which supported
by the less than 75% or€ 771 ($ 923). On October 10, 2018 the company received the
final part of the grant owed by UNISEC in the total of € 55 ( $62). The grant is
non-refundable providing the Company meets the conditions of the consortium and are recorded
as a reduction of research and development expenses.
|
|
d.
|
On
June 19, 2017, the Company entered into a Finance Contract with The European Investment
bank (EIB) for a total amount of € 20,000 (approximately $ 23,000) and up to 50%
of the Company expected cost of developing and marketing the Company’s product
candidate, M-001. The EIB financing will be available in three tranches, all subject
to receiving evidence that the Company has funding available to it in an amount equal
to the amount of the respective tranche.
|
The
EIB financing shall be provided interest free and shall be repayable, per each tranche, in a single instalment, five years following
the date of payment for each tranche. A failure to pay any amount payable under the Finance Contract shall cause interest to accrue
on each unduly paid amount, at an annual rate equal to EURIBOR plus 2%.
In
addition, and as consideration to the EIB financing, EIB shall be entitled to 3% of any annual M-001 sales revenues.
On
June 18, 2018, the Company withdrew the first tranche of € 6,000 (approximately $ 7,000).
On
August 13, 2018 the Company withdrew the second tranche of € 6,000 (approximately $ 7,000).
On
October 19, 2018 the Company withdrew the third tranche of € 8,000 (approximately $ 9,200).
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
12:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
In
the event the Company elects to prepay the EIB financing, or in the event the EIB shall demand prepayment following certain events,
including a change of control, senior management change or merger events, the Company shall be required to pay EIB the principal
amount of the tranches already paid, or the Prepayment Amount, plus the greater of:
|
(i)
|
the
amount, as determined by EIB required in order for the EIB to realize an internal rate
of return on the relevant amount prepaid of 20%; and
|
|
(ii)
|
the
Prepayment Amount.
|
The
Finance Contract also stipulates that in the event EIB demands prepayment of the loan due to any prepayment event to non-EIB lenders,
the Company shall be obligated to pay the Prepayment Amount plus an additional reduced amount.
In
addition, and as consideration to the EIB financing, EIB shall be entitled to 3% of any annual M-001 sales revenues.
The
Company performed a valuation of the financial liability for December 31, 2018 through an independent appraiser. According to
the valuation, which was based on WACC (Weighted Average Cost of capital) of 18% and CAPM (Capital Asset Pricing Model), the value
of the financial liability was estimated at NIS 94,360 ($ 25,176).
As
a result of the valuation, the Company incurred a financial expenses of NIS 9,202 ($ 2,455) for December 31, 2018.
On
April 22, 2019 the Finance Contract with (EIB) was extended by € 4,000 to a total of € 24,000 (approximately $ 27,600)
(see also Note 18a).
Operating
leases:
|
1.
|
The
Company entered into operating lease agreements on commercial vehicles which end in May
2021. The leases have an average life of three years with no renewal option included
in the contract. Future minimum monthly lease payable under the operating lease contracts
as of December 31, 2018 amount to NIS 358 ($ 96).
|
|
2.
|
On
July 10, 2017, the Company signed a 10 years lease agreement, starting in January 1,
2018, for approximately 1,845 square meters (m2) in the Jerusalem BioPark, located in
the Ein Karem Hadassah campus, next to Hadassah University Hospitals and Hebrew University’s
Medical School, with the intention of establishing a mid-size commercial facility to
manufacture M-001. The company have the right to terminate the leasing period at every
year end, by providing an advance notice by June 30, of every calendar year. According
to the agreement terms, the company have a 10 month grace period regarding the first
rent payment.
|
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
12:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
Future
minimum lease operating commitment agreements as of December 31, 2018 are as follows:
|
|
1
– 3 Years
|
|
|
4
– 5 Years
|
|
|
More
than 5 Years
|
|
|
Total
|
|
Operating Lease Obligations in
NIS
|
|
|
3,369
|
|
|
|
2,179
|
|
|
|
5,385
|
|
|
|
10,932
|
|
Operating Lease Obligations in USD
|
|
|
947
|
|
|
|
612
|
|
|
|
1,513
|
|
|
|
3,073
|
|
|
3.
|
On
March 2, 2015, the Company unilaterally announced a cancellation of a consultant agreement
with one of the Company’s consultants (see Note 15c). The cancellation notice provided
that all options, rights and benefits previously granted to the consultant pursuant
to the Consulting Services Agreement are invalid. On September 9, 2015, the consultant
brought a suit against the Company in the Israeli magistrate court in Tel Aviv, claiming
that the Company wrongfully terminated the Consulting Services Agreement and requesting
monetary compensation in the amount of approximately NIS 1,500 (approximately $ 380)
and the reinstatement of the previously cancelled options. On November 11, 2015, the
Company filed defense with the court wherein contented that the Consulting Services Agreement
was lawfully cancelled and that the consultant’s suit has no legal basis.
|
The
parties submitted affidavits and legal expert opinions to the court. An additional pre-trial meeting was held on February 13,
2017 and an additional hearing was scheduled for September 25, 2017.
On
November 14, 2017, the parties received the court’s final decision that the Company shall pay the consultant NIS 1,000 and
additional VAT. The Company paid the amount on November 26, 2017.
NOTE
13:- EQUITY
|
a.
|
Rights
attached to shares:
|
An
ordinary share confers upon its holder(s) a right to vote at the general meeting, a right to participate in distribution of dividends,
and a right to participate in the distribution of surplus assets upon liquidation of the Company.
In
February 2013, the Company issued 5,685,000 ordinary shares and 5,685,000 options (series 4) in consideration of NIS 4,836 ($
1,239), which were split into the option component in a total of NIS 902 ($ 231) and the share premium component in a total
of NIS 3,934 ($ 1,008) based on the fair market value on the TASE following the issuance.
The
options are exercisable until February 27, 2017 at an exercise price of NIS 1.5 ($ 0.38) per share. On February 28, 2017,
the Company’s options (series 4) expired.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
13:- EQUITY (Cont.)
In
October 2013, the Company issued 6,302,000 ordinary shares and 6,302,000 options (series 5) in consideration of NIS 4,413 ($ 1,131),
which were split into the option component in a total of NIS 625 ($ 160) and the share premium component in a total of NIS 3,788
($ 971) based on the fair market value on the TASE following the issuance.
The
options are exercisable at an exercise price of NIS 0.9 ($ 0.23) per share until July 31, 2014 or NIS 1.5 ($ 0.38)
per share from August 1, 2014 through October 29, 2017. In October 2017, the Company’s options (series 5)
expired.
|
d.
|
On
May 15, 2015, the Company completed a public offering of securities in the United States.
The trading of the Company’s securities, ADS, and investor’s warrants in
the NASDAQ began as of May 12, 2015. Each ADS represents 40 ordinary shares of the Company.
|
Accordingly,
on May 12, 2015, the Company allocated 76,400,000 ordinary shares of the Company to the U.S. public. The Company also allocated
2,038,000 tradable warrants in the U.S., which may be exercised into ADS for a five year period, until May 15, 2020, in return
for an exercise price of $ 6.25 for each warrant. The immediate gross consideration for the offering amounted to a total of NIS
36,607 ($ 9,382). The offering expenses amounted to a total of NIS 5,576. In addition, in accordance with the underwriting agreement,
the Company granted the underwriters 95,500 warrants, under the same terms and conditions for warrants offered to the public.
At
the time of the offering, the Company recorded an increase in equity in respect of shares, totaling NIS 26,417, net (after deduction
of offering expenses totaling NIS 4,860) and liability related to the warrants at the amount of NIS 7,398 thousand (offering expenses
for warrants totaling NIS 1,197 were recorded as financial expenses). The warrants are measured at their fair value based on their
quote price at the end of each reporting date.
On
June 24, 2015, the Company issued an additional 110,000 ADS to the underwriters in consideration of a total gross amount of NIS
2,069 ($ 530). Issuance expenses amounted to NIS 134. The Company recorded financial income (expenses) at the amount NIS 2,951,
d (7,969) and 2,009 in 2016, 2017 and 2018, respectively, for revaluation of these warrants.
|
e.
|
In
February 2017, the Company issued to a private investor (“the Investor”)
33,760,832 ordinary shares (equivalent to 844,000 NASDAQ listed ADSs) in consideration
of NIS 10,905 (approximately $ 2,830). Following the transaction, the Investor will hold
19.21% of all issued and outstanding share capital of the Company.
|
|
f.
|
On
March 30, 2017, the Company issued 6,666,640 ordinary shares (equivalent to 166,666 NASDAQ
listed ADSs) in consideration of NIS 4,482 (approximately $ 1,229).
|
|
g.
|
During
May and June 2017, 104,349 warrants were exercised into shares for a total consideration
of NIS 2,296 (approximately $ 653).
|
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
13:- EQUITY (Cont.)
|
h.
|
During
July 2017, the Company issued 8,000,000 ordinary shares (equivalent to 200,000 NASDAQ
listed ADSs) in consideration of NIS 7,065 (approximately $ 2,000).
|
|
i.
|
During
July and August 2017, 170,644 warrants were exercised to 6,825,760 shares for a total
consideration of NIS 3,833 (approximately $ 1,067).
|
|
j.
|
On
September 14, 2017, the Company completed public offering in NASDAQ and issued 66,666,680
ordinary shares (equivalent to 1,666,666 NASDAQ listed ADSs) in consideration of NIS
33,621 (approximately $ 9,546). Issuance costs amounted to NIS 250 (approximately $ 72).
|
NOTE
14:- SHARE-BASED COMPENSATION
|
a.
|
Expense
recognized in the financial statements:
|
The
expense that was recognized for services received from employees, directors and service providers is as follows:
|
|
|
|
|
|
|
|
|
|
|
Convenience
translation
(Note
2c)
|
|
|
|
Year
ended
December
31,
|
|
|
Year
ended
December 31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
N I S
|
|
|
U.S. dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
903
|
|
|
|
388
|
|
|
|
119
|
|
|
|
32
|
|
Marketing, general and administrative
|
|
|
358
|
|
|
|
131
|
|
|
|
141
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation
|
|
|
1,261
|
|
|
|
519
|
|
|
|
260
|
|
|
|
70
|
|
|
b.
|
Share-based
payment plan for employees and directors:
|
Options
granted under the Company’s 2005 Israeli Share Option Plan (“Plan”) are exercisable in accordance with the terms
of the Plan, within 10 years from the date of grant, against payment of an exercise price. The options generally vest over
a period of three or four years.
In
March 2018, the Company’s Board of Directors approved the adoption of the Company’s 2018 Israeli Share Option Plan
(“2018 Plan”) for the grant of options to employees, directors and service providers. The options are exercisable
in accordance with the terms of 2018 Plan, within 10 years from the date of grant, against payment of an exercise price.
The options generally vest over a period of three or four years.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
14:- SHARE-BASED COMPENSATION (Cont.)
Option
grants:
On
May 28, 2015, the Company’s Board of Directors approved an update of the terms and conditions of the Company’s CEO,
so that the monthly remuneration will be a total of NIS 80. In addition, it was decided to grant unregistered options to the CEO,
in the scope of 5% of the Company’s issued and paid up capital on a fully diluted basis, as of May 28, 2015, with an exercise
price of 130% beyond the average rate of the Company’s share price in the 30 days of trading that preceded the Company’s
Board of Directors’ resolution regarding the said grant. Notwithstanding the above, following a discussion with the Company’s
shareholders, it was agreed that the CEO shall be granted options at a rate of 2.5% of the Company’s issued and paid up
capital on a fully diluted basis. The options are exercisable for ten years and vest over a period of three years from the date
of grant. On July 27, 2015, the Shareholders’ meeting approved the grant of options as previously mentioned, and on August
4, 2015, the CEO was grant 5,929,503 options.
The
fair value of each option is approximately NIS 0.28 and the total value of the options granted was NIS 1,671.
On
February 2016, the Company granted 350,000 options to 4 external advisors that vest over a period of three years at an exercise
price of NIS 0.746 ($ 0.19) per share. The fair value of the options as of the date of grant totaled approximately NIS 84 ($ 22).
On
March 10, 2016, the Company granted 100,000 fully vested options to an external advisor at an exercise price of NIS 0.746 ($ 0.19)
per share. The fair value of the options as of the date of grant totaled approximately NIS 22 ($ 6).
In
addition, the Company’s Board of Directors approved the grant of 3,780,000 unregistered options to the Company’s officers
and employees, which may be exercised into 3,780,000 ordinary shares of NIS 0.0000001 par value each, according to the Company’s
option plan. The options are exercisable for ten years and vest over a period of three years from the date of grant. The exercise
price shall be 130% of the average rate of the Company’s share price in the 30 days of trading that preceded the Company’s
Board of Directors’ resolution regarding the grant of options.
The
fair value of each option is approximately NIS 0.298 and the total value of the options granted was NIS 1,127.
On
June 25, 2018, the Company granted 130,710 options to a board member which vest over a period of four years at an exercise price
of $ 3.45 per ADS. The fair value of the options as of the date of grant totaled approximately NIS 1,627 ($ 450).
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
14:- SHARE-BASED COMPENSATION (Cont.)
The
following table presents the number of share options, the weighted average exercise prices of share options and changes that were
made in the option plan to employees and directors:
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
|
Number
of
options
|
|
|
Weighted
Average
Exercise
price
|
|
|
Number
of
options
|
|
|
Weighted
Average
Exercise
price
|
|
|
Number
of
options
|
|
|
Weighted
Average
Exercise
price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year
|
|
|
11,806,503
|
|
|
|
0.75
|
|
|
|
12,156,503
|
|
|
|
0.75
|
|
|
|
11,759,503
|
|
|
|
0.75
|
|
Granted
|
|
|
450,000
|
|
|
|
0.75
|
|
|
|
-
|
|
|
|
-
|
|
|
|
130,710
|
|
|
|
0.05
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
(37,000
|
)
|
|
|
0.49
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(100,000
|
)
|
|
|
0.75
|
|
|
|
(360,000
|
)
|
|
|
0.81
|
|
|
|
(340,000
|
)
|
|
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
12,156,503
|
|
|
|
0.75
|
|
|
|
11,759,503
|
|
|
|
0.75
|
|
|
|
11,550,213
|
|
|
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of year
|
|
|
5,793,501
|
|
|
|
0.75
|
|
|
|
8,653,010
|
|
|
|
0.74
|
|
|
|
10,979,503
|
|
|
|
0.78
|
|
The
weighted average remaining contractual life for the share options outstanding as of December 31, 2018 was 5.86 years (as
of December 31, 2017 – 6.86 years).
|
c.
|
The
fair value of the Company’s share options granted to employees, directors and service
providers for the years ended December 31, 2016, 2017 and 2018 was estimated using
the binominal option pricing model using the following assumptions:
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
Dividend yield (%)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expected volatility of the share prices (%)
|
|
|
82
|
|
|
|
53
|
|
|
|
53
|
|
Risk-free interest rate (%)
|
|
|
2.1
|
|
|
|
1.5
|
|
|
|
2.9
|
|
Expected life of share options (years)
|
|
|
8.8
|
|
|
|
7.8
|
|
|
|
7.5
|
|
Share price (NIS)
|
|
|
0.32
|
|
|
|
0.45
|
|
|
|
23.6
|
*
|
*
ADS – NIS 23.6 ($ 6.3)
The
expected life of the share options is based on the midpoints between the available exercise dates (the end of the vesting periods)
and the last available exercise date (the contracted expiry date), as adequate historical experience is still not available to
provide a reasonable estimate.
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
15:- SUPPLEMENTARY INFORMATION TO THE STATEMENTS OF COMPREHENSIVE INCOME
|
a.
|
Research
and development expenses, net of participations:
|
|
|
|
|
|
|
|
|
|
|
|
Convenience
translation
(Note
2c)
|
|
|
|
Year
ended
December
31,
|
|
|
Year
ended
December 31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
N
I S
|
|
|
U.S.
dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trial
phase 3
|
|
|
-
|
|
|
|
-
|
|
|
|
53,678
|
|
|
|
14,321
|
|
Materials and subcontractors
|
|
|
3,145
|
|
|
|
3,797
|
|
|
|
12,287
|
|
|
|
3,279
|
|
Salaries and related expenses
|
|
|
3,808
|
|
|
|
3,695
|
|
|
|
4,214
|
|
|
|
1,124
|
|
Share-based payment
|
|
|
903
|
|
|
|
388
|
|
|
|
119
|
|
|
|
32
|
|
Patent registration fees
|
|
|
358
|
|
|
|
322
|
|
|
|
399
|
|
|
|
107
|
|
Rentals and maintenance
of laboratory
|
|
|
610
|
|
|
|
610
|
|
|
|
1,028
|
|
|
|
274
|
|
Revaluation of the liability
with respect to the IIA grants
|
|
|
-
|
|
|
|
10,300
|
|
|
|
-
|
|
|
|
-
|
|
Depreciation
|
|
|
573
|
|
|
|
311
|
|
|
|
195
|
|
|
|
52
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
136
|
|
|
|
36
|
|
|
|
|
9,397
|
|
|
|
19,423
|
|
|
|
72,056
|
|
|
|
19,225
|
|
Participation by IIA and UNISEC
|
|
|
(1,603
|
)
|
|
|
(646
|
)
|
|
|
(143
|
)
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
7,794
|
|
|
|
18,777
|
|
|
|
71,913
|
|
|
|
19,187
|
|
|
b.
|
Marketing,
general and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Convenience
translation
(Note
2c)
|
|
|
|
Year
ended
December
31,
|
|
|
Year
ended
December 31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
N
I S
|
|
|
U.S.
dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
related expenses
|
|
|
587
|
|
|
|
622
|
|
|
|
1,136
|
|
|
|
303
|
|
Share-based payment
|
|
|
358
|
|
|
|
131
|
|
|
|
141
|
|
|
|
38
|
|
Professional services
|
|
|
2,595
|
|
|
|
3,338
|
|
|
|
3,275
|
|
|
|
874
|
|
Rentals, office expenses
and maintenance
|
|
|
201
|
|
|
|
203
|
|
|
|
343
|
|
|
|
91
|
|
Depreciation
|
|
|
48
|
|
|
|
130
|
|
|
|
65
|
|
|
|
17
|
|
Other
|
|
|
317
|
|
|
|
455
|
|
|
|
194
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,106
|
|
|
|
4,879
|
|
|
|
5,154
|
|
|
|
1,376
|
|
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
15:- SUPPLEMENTARY INFORMATION TO THE STATEMENTS OF COMPREHENSIVE INCOME (Cont.)
|
c.
|
Financial
income and expense:
|
|
|
|
|
|
|
|
|
|
|
|
Convenience
translation
(Note
2c)
|
|
|
|
Year
ended
December
31,
|
|
|
Year
ended
December 31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
N
I S
|
|
|
U.S.
dollars
|
|
|
|
|
|
Financial
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
on deposits
|
|
|
55
|
|
|
|
18
|
|
|
|
100
|
|
|
|
26
|
|
Exchange differences, net
|
|
|
-
|
|
|
|
-
|
|
|
|
827
|
|
|
|
221
|
|
Revaluation of warrants
|
|
|
2,951
|
|
|
|
-
|
|
|
|
2,009
|
|
|
|
536
|
|
Revaluation of marketable securities
|
|
|
13
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,019
|
|
|
|
18
|
|
|
|
2,936
|
|
|
|
783
|
|
Financial
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences, net
|
|
|
276
|
|
|
|
2,871
|
|
|
|
-
|
|
|
|
-
|
|
Revaluation of warrants
|
|
|
-
|
|
|
|
7,969
|
|
|
|
-
|
|
|
|
-
|
|
Finance expenses in respect
of loan from others
|
|
|
-
|
|
|
|
-
|
|
|
|
9,202
|
|
|
|
2,455
|
|
Finance expenses in respect of government grants
|
|
|
-
|
|
|
|
|
|
|
|
4,343
|
|
|
|
1,159
|
|
Bank commissions and other financial expenses
|
|
|
27
|
|
|
|
73
|
|
|
|
51
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
303
|
|
|
|
10,913
|
|
|
|
13,596
|
|
|
|
3,628
|
|
NOTE
16:- TAXES ON INCOME
|
a.
|
Corporate
tax rates in Israel:
|
The
Israeli corporate tax rate in 2016 was 25%, 2017 was 24% and in 2018 was 23%.
In
December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy
for the 2017 and 2018 Budget Years), 2016 which further reduces the corporate income tax rate to 24% (instead of 25%) effective
from January 1, 2017 and to 23% effective from January 1, 2018.
|
b.
|
Final
tax assessments:
|
The
Company received final tax assessments through 2012.
|
c.
|
Net
operating carryforwards losses for tax purposes and other temporary differences:
|
as
of December 31, 2018, the Company had carryforwards losses and other temporary differences amounting to approximately NIS
126,700 ($ 33,800).
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
16:- TAXES ON INCOME (Cont.)
The
Company did not recognize deferred tax assets for carryforwards losses and other temporary differences because their utilization
in the foreseeable future is not probable.
The
Company did not record any current taxes for the years ended December 31, 2016, 2017 and 2018 as it is still incurring losses
on an ongoing basis.
The
reconciliation between the tax expense, assuming that all the income and expenses, gains and losses in the statement of income
were taxed at the statutory tax rate and the taxes on income recorded in profit or loss (0%), relates to the creation of carryforward
tax losses and other temporary differences for which deferred tax assets were not recorded.
NOTE
17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES
|
a.
|
Related
parties consist of nine directors (including the CEO, who is also a shareholder) serving
on the Company’s board of directors and two key officers.
|
|
b.
|
Transactions
with related parties:
|
|
1.
|
In
February 2012, the Company’s audit committee and Board approved an amendment and
extension of the agreement with the Company’s CEO, dated April 2007. Pursuant to
the amendment, the monthly salary of the Company’s CEO will increase by 5% in each
of the three years of the extension of the engagement to NIS 52.5 a month starting
January 2012. The agreement was extended by an additional period through April 1,
2015. In April 2012, the Company’s shareholders approved the agreement at a shareholders’
meeting. On January 18, 2015, the Company’s shareholders extended the agreement
under the same terms for an additional five years.
|
In
addition, if a material agreement is signed between the Company and a third party during the term of the engagement or during
a period of three years after the termination on the Company’s part of the engagement between the Company’s CEO and
the Company, the Company’s CEO will be entitled to receive a bonus amounting to 1.75% of the monetary compensation payable
to the Company under the material agreement.
On
May 28, 2015, the Company’s Board of Directors approved an update of the terms and conditions in office of the Company’s
CEO, so that the monthly remuneration will be a total of NIS 80, and to grant options at a rate of 2.5% of the Company’s
issued and paid up capital on a fully diluted basis (see Note 14b).
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
|
2.
|
In
August 2014, the Company signed an employment agreement with the CFO for a period of
5 years, according to which the CFO shall be entitled to a monthly salary of NIS 10,
and accordingly updated the management agreement to fees at the amount of NIS 2.5 for
a period of five years. In addition, the CFO is entitled to receive a one-time cash payment
of NIS 192.5 for the services provided in connection with the preparation and submission
of the prospectus in the US, and, in the event that the Company should complete a successful
capital raise in the U.S. market, the CFO shall be entitled to receive a one-time payment
of NIS 87.5. Furthermore, from the consummation of the offering, the monthly compensation
under the services agreement will be increased to NIS 15,000. In addition, pursuant to
a separate employment agreement entered into between the Company and the CFO on August
31, 2014, as of such date, the CFO is also employed by the Company in a 60% employment
capacity, for which he is entitled to a monthly salary of NIS 10,000.
|
|
3.
|
In
August 2012, the Company approved the grant of future remuneration to four directors
in the Company. The remuneration will be granted provided that a material agreement is
signed between the Company and a third party during the director’s term with the
Company that will entitle each of the four directors to receive a bonus of 0.5% of the
monetary compensation that will be paid to the Company in the context of such material
agreement. The bonus is not limited in amount and is not restricted to one material agreement.
|
|
4.
|
On
April 10, 2016, the Audit Committee and the Board of Directors unanimously resolved to
approve the payment of NIS 200, to be increased by an additional amount of up to NIS
200 as needed, for the benefit of the Company’s CEO, for the purpose of placing
the bond required in connection with an investigation conducted by the Israeli Securities
Authority (“ISA”), regarding certain shareholders of the Company (not including
among them the Company’s CEO) alleged use of inside information.
|
|
c.
|
Balances
with related parties:
|
|
|
Payables
|
|
|
|
|
|
Key management personnel:
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
302
|
|
December 31, 2018
|
|
|
328
|
|
December 31,2018 (convenience
translation to U.S. dollars)
(Note 2c)
|
|
|
88
|
|
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
|
d.
|
Transactions
with related parties:
|
|
|
Research and development
|
|
|
Marketing, general and
administrative
|
|
Key management personnel:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
1,072
|
|
|
|
1,898
|
|
2017
|
|
|
1,575
|
|
|
|
1,098
|
|
2018
|
|
|
1,468
|
|
|
|
1,252
|
|
2018 (convenience translation
to U.S. dollars) (Note 2c)
|
|
$
|
392
|
|
|
|
334
|
|
|
e.
|
Compensation
of key officers:
|
The
following amounts disclosed in the table are recognized as an expense during the reporting period related to key officers.
Key
officers employed by the Company:
|
|
|
|
|
|
|
|
|
|
|
Convenience
translation
(Note
2c)
|
|
|
|
Year
ended
December
31,
|
|
|
Year
ended
December 31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
N
I S
|
|
|
U.S.
dollars
|
|
|
|
|
|
Salaries
|
|
|
190
|
|
|
|
209
|
|
|
|
485
|
|
|
|
71
|
|
Short-term employee benefits
|
|
|
1,740
|
|
|
|
1,972
|
|
|
|
1,901
|
|
|
|
533
|
|
Other employees benefits
|
|
|
106
|
|
|
|
94
|
|
|
|
95
|
|
|
|
25
|
|
Share-based compensation
|
|
|
934
|
|
|
|
398
|
|
|
|
239
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,970
|
|
|
|
2,673
|
|
|
|
2,720
|
|
|
|
693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of key officers
|
|
|
11
|
|
|
|
8
|
|
|
|
9
|
|
|
|
|
|
BIONDVAX PHARMACEUTICALS LTD.
NOTES
TO FINANCIAL STATEMENTS
In
thousands
,
except share and per share data
NOTE
18: SUBSEQUENT EVENTS
|
a.
|
On
April 22, 2019 the European Investment bank (EIB) announced a € 4,000 extension
to its 2017 financing agreement with the Company in support of the ongoing pivotal Phase
3 clinical trial of the Company M-001 Universal Influenza Vaccine candidate. The extension
will allow an increase of up to 8,000 participants, bringing the planned total size of
the trial to approximately 12,000 participants.
|
|
b.
|
On
March 25, 2019, the Company published a public offering in NASDAQ to issue NASDAQ listed
ADSs in consideration of maximum aggregate sum of NIS 72,960 ($ 20,000).
|
-
- - - -
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
Item 6. Indemnification of Directors and Officers
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. The company may not exculpate in advance a director from liability arising out
of a prohibited dividend or distribution to shareholders.
Under the Companies
Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed
by him or her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided
its articles of association include a provision authorizing such indemnification:
|
●
|
financial
liability imposed on him or her in favor of another person pursuant to a judgment, including
a settlement or arbitrator’s award approved by a court. However, if an undertaking
to indemnify an office holder with respect to such liability is provided in advance,
then such an undertaking must be limited to events which, in the opinion of the board
of directors, can be foreseen based on the company’s activities when the undertaking
to indemnify is given, and to an amount or according to criteria determined by the board
of directors as reasonable under the circumstances, and such undertaking shall detail
the abovementioned foreseen events and amount or criteria;
|
|
●
|
reasonable
litigation expenses, including attorneys’ fees, incurred by the office holder (1)
as a result of an investigation or proceeding instituted against him or her by an authority
authorized to conduct such investigation or proceeding, provided that (i) no indictment
was filed against such office holder as a result of such investigation or proceeding;
and (ii) no financial liability, such as a criminal penalty, was imposed upon him or
her as a substitute for the criminal proceeding as a result of such investigation or
proceeding or, if such financial liability was imposed, it was imposed with respect to
an offense that does not require proof of criminal intent; and (2) in connection with
a monetary sanction; and
|
reasonable litigation expenses, including attorneys’
fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its
behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result
of a conviction for an offense that does not require proof of criminal intent.
Under the Companies
Law, a company may insure an office holder against the following liabilities incurred for acts performed by him or her as an office
holder if and to the extent provided in the company’s articles of association:
|
●
|
a breach
of the duty of loyalty to the company, provided that the office holder acted in good
faith and had a reasonable basis to believe that the act would not harm the company;
|
|
●
|
a breach
of duty of care to the company or to a third party, to the extent such a breach arises
out of the negligent conduct of the office holder; and
|
|
●
|
a financial
liability imposed on the office holder in favor of a third party.
|
Under our articles of association, we may insure
an office holder against the aforementioned liabilities as well as the following liabilities:
|
●
|
a breach
of duty of care to the company or to a third party.
|
|
●
|
any other
action which is permitted by law to insure an office holder against;
|
|
●
|
expenses
incurred and/or paid by the office holder in connection with an administrative enforcement
procedure under any applicable law including the Efficiency of Enforcement Procedures
in the Securities Authority Law (legislation amendments), 5771-2011 and the Israeli Securities
Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable
litigation expenses and attorney fees; and
|
|
●
|
A financial
liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities
Law.
|
Under the Companies Law, a company may not indemnify,
exculpate or insure an office holder against any of the following:
|
●
|
a breach
of the duty of loyalty, except for indemnification and insurance for a breach of the
duty of loyalty to the company to the extent that the office holder acted in good faith
and had a reasonable basis to believe that the act would not harm the company;
|
|
●
|
a breach
of duty of care committed intentionally or recklessly, excluding a breach arising out
of the negligent conduct of the office holder;
|
|
●
|
an act or
omission committed with intent to derive illegal personal benefit; or
|
|
●
|
a fine or
forfeit levied against the office holder.
|
Under the Companies
Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensation committee
and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders.
See “—Approval of Related Party Transactions under Israeli Law.”
We have entered into
indemnification agreements with our office holders to exculpate, indemnify and insure our office holders to the fullest extent
permitted by our articles of association, the Companies Law and the Israeli Securities Law, including expenses incurred and/or
paid by the office holder in connection with an Administrative Enforcement Procedure. The indemnification thereunder is limited
to events determined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria
determined by the board of directors as reasonable under the circumstances.
We have entered into
agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our
articles of association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association.
This indemnification is limited to events determined as foreseeable by the board of directors based on our activities, and to
an amount or according to criteria determined by the board of directors as reasonable under the circumstances.
The maximum indemnification
amount set forth in such agreements is limited to an amount which shall not exceed 25% of our net assets based on our most recently
audited or reviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition
to any amount paid (if paid) under insurance and/or by a third-party pursuant to an indemnification arrangement.
In the opinion of
the Securities and Exchange Commission, indemnification of directors and office holders for liabilities arising under the Securities
Act, however, is against public policy and therefore unenforceable.
There is no pending
litigation or proceeding against any of our office holders as to which indemnification is being sought, nor are we aware of any
pending or threatened litigation that may result in claims for indemnification by any office holder.
We have obtained directors’
and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage
and pay all premiums thereunder to the fullest extent permitted by the Companies Law. In addition, prior to the closing of this
offering, we intend to enter into agreements with each of our office holders undertaking to indemnify them to the fullest extent
permitted by the Companies Law, including with respect to liabilities resulting from this offering to the extent that these liabilities
are not covered by insurance.
Item 7. Recent Sales of Unregistered Securities
The following is a
summary of transactions during the three years preceding this offering, involving offers and sales of our securities which took
place outside the United States and were not registered under the Securities Act:
On January 1, 2017,
we entered into an Investment Agreement with Angles Investments in Hi Tech Ltd., or the Investor, a private Israeli company controlled
by Mr. Marius Nacht, an Israeli Investor, for the issuance of 33,760,832 ordinary shares of the Company for a purchase price of
NIS 10,904,749 (approximately $2.83 million. See – “
Business – Material Agreements
–
Investment
Agreement with Angels
”
Item 8. Exhibits and Financial Statement Schedules
|
(a)
|
The “Exhibit
Index” is hereby incorporated by reference herein.
|
|
(b)
|
Financial Statement
Schedules
|
Schedules not listed
above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 9. Undertakings
The undersigned Registrant
hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations
and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
|
(a)
|
(1)
|
To file,
during any period in which offers or sales are being made, a post-effective amendment
to this registration statement:
|
|
i.
|
To include any
prospectus required by section 10(a)(3) of the Securities Act of 1933;
|
|
ii.
|
To reflect in
the prospectus any facts or events arising after the effective date of the registration
statement (or the most recent post- effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than 20% change in the maximum aggregate offering price set forth in the “Calculation
of Registration Fee” table in the effective registration statement;
|
|
iii.
|
To include any
material information with respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such information in the registration
statement;
|
|
(2)
|
That for the
purpose of determining any liability under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and this offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
|
|
(3)
|
To remove from
registration by means of a post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
|
|
(4)
|
To file a post
-effective amendment to the registration statement to include any financial statements
required by Item 8.A of Form 20-F at the start of any delayed offering or throughout
a continuous offering.
|
|
(5)
|
That, for the
purpose of determining liability under the Securities Act to any purchaser: If the registrant
is subject to Rule 430C (§230.430C of this chapter), each prospectus filed pursuant
to Rule 424(b) as part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed in reliance
on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included
in the registration statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus that is part
of the registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to such first
use, supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such document immediately
prior to such date of first use.
|
|
(6)
|
That, for the
purpose of determining liability of the registrant under the Securities Act of 1933 to
any purchaser in the initial distribution of the securities, the undersigned registrant
undertakes that in a primary offering of securities of the undersigned registrant pursuant
to this registration statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such purchaser
by means of any of the following communications, the undersigned registrant will be a
seller to the purchaser and will be considered to offer or sell such securities to such
purchaser:
|
|
(i)
|
Any preliminary
prospectus or prospectus of the undersigned registrant relating to the offering required
to be filed pursuant to Rule 424;
|
|
(ii)
|
Any free writing
prospectus relating to the offering prepared by or on behalf of the undersigned registrant
or used or referred to by the undersigned registrant;
|
|
(iii)
|
The portion
of any other free writing prospectus relating to the offering containing material information
about the undersigned registrant or its securities provided by or on behalf of the undersigned
registrant; and
|
|
(iv)
|
Any other communication
that is an offer in the offering made by the undersigned registrant to the purchaser.
|
|
(b)
|
Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the provisions described
in Item 6 hereof, or otherwise, the Registrant has been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or paid by
a director, officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the final adjudication
of such issue.
|
SIGNATURES
Pursuant to the
requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form F-1/A and has duly caused this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Jerusalem, State of Israel on, May 6, 2019.
|
BiondVax
Pharmaceuticals Ltd.
|
|
|
|
|
By:
|
/s/
Ron Babecoff
|
|
|
Name:
|
Ron Babecoff
|
|
|
Title:
|
Chief Executive Officer
|
|
|
|
|
By:
|
/s/
Uri Ben Or
|
|
|
Name:
|
Uri Ben Or
|
|
|
Title:
|
Chief
Financial Officer
|
POWER
OF ATTORNEY
KNOW ALL MEN BY THESE
PRESENTS, that the undersigned directors and officers of the registrant, an Israeli corporation, which is filing a registration
statement on Form F-1 with the U.S. Securities and Exchange Commission, Washington, D.C. 20549 under the provisions of the Securities
Act of 1933, as amended, hereby constitute and appoint Messrs. Dr. Ron Babecoff and Uri Ben Or and each of them, the individual’s
true and lawful attorneys-in-fact and agents, with full power to act separately and full power of substitution and resubstitution,
for the person and in his or her name, place and stead, in any and all capacities, to sign such registration statement and any
and all amendments (including post-effective amendments) to the registration statement, including a prospectus or an amended prospectus
therein and any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) of the
Securities Act of 1933, as amended, and all other documents in connection therewith to be filed with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or his or her or their
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the
requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons on
May 6
, 2019, in the capacities indicated:
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Ron Babecoff
|
|
Chief Executive
Officer and Director
|
|
May 6, 2019
|
Ron Babecoff
|
|
(Principal Executive
Officer)
|
|
|
|
|
|
|
|
/s/
Uri Ben Or
|
|
Chief
Financial Officer
|
|
May
6, 2019
|
Uri Ben Or
|
|
(Principal Financial
Officer &
Principal Accounting Officer)
|
|
|
|
|
|
|
|
/s/
Tamar Ben Yedidia
|
|
Chief
Scientific Officer
|
|
May
6, 2019
|
Tamar Ben Yedidia
|
|
(Principal Scientific
Officer)
|
|
|
|
|
|
|
|
/s/
Avner Rotman
|
|
Chairman of the
Board
|
|
May 6, 2019
|
Avner Rotman
|
|
|
|
|
|
|
|
|
|
/s/
Mark Germain
|
|
Vice Chairman
|
|
May 6, 2019
|
Mark Germain
|
|
|
|
|
|
|
|
|
|
/s/
Isaac Devash
|
|
Director
|
|
May 6, 2019
|
Isaac Devash
|
|
|
|
|
|
|
|
|
|
/s/
George H. Lowell
|
|
Director
|
|
May6, 2019
|
George H. Lowell
|
|
|
|
|
|
|
|
|
|
/s/
Michal Brikman
|
|
Director
|
|
May 6, 2019
|
Michal Brikman
|
|
|
|
|
|
|
|
|
|
/s/
Ruth Ben Yakar
|
|
Director
|
|
May 6, 2019
|
Ruth Ben Yakar
|
|
|
|
|
|
|
|
|
|
/s/
Morris Laster
|
|
Director
|
|
May 6, 2019
|
Morris Laster
|
|
|
|
|
AUTHORIZED
REPRESENTATIVE
Pursuant to
the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of BiondVax
Pharmaceuticals Ltd. has signed this registration statement in the city of Newark, the State of Delaware, on May 6
,
2019.
|
Puglisi & Associates
|
|
|
|
By:
|
/s/ Donald J. Puglisi
|
|
Name:
|
Donald J. Puglisi, Managing Director
|
|
Title:
|
Authorized Representative
|
EXHIBIT
INDEX
Exhibit
No.
|
|
Exhibit
Description
|
|
|
|
3.1
|
|
Amended Articles of Association of BiondVax Pharmaceuticals Ltd. (unofficial English translation from Hebrew original), incorporated by reference to exhibit 1.1 to the annual report on Form 20-F filed with the SEC on April 30, 2018.
|
|
|
|
4.1
|
|
Form of Deposit Agreement between BiondVax Pharmaceuticals Ltd., The Bank of New York Mellon as Depositary, and owners and holders from time to time of ADSs issued thereunder, incorporated by reference to exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form F-1 filed with the SEC on April 6, 2015.
|
|
|
|
4.2
|
|
Specimen American Depositary Receipt (included in Exhibit 4.1).
|
|
|
|
4.3
|
|
Specimen Certificate for Ordinary Shares, previously filed as an exhibit to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014, which exhibit is incorporated herein by reference.
|
|
|
|
4.4
|
|
Form of Representative ADS Purchase Warrant, incorporated by reference to exhibit 1.1 to Amendment No. 1 to the Registration Statement on Form F-1 filed with the SEC on April 6, 2015.
|
|
|
|
4.5
|
|
Form of ADS Warrant Agent Agreement, incorporated by reference to exhibit 1.1 to Amendment No. 3 to the Registration Statement on Form F-1 filed with the SEC on April 28, 2015.
|
|
|
|
5.1*
|
|
Opinion of Pearl
Cohen Zedek Latzer Baratz, Israeli counsel to BiondVax Pharmaceuticals Ltd., (including consent).
|
|
|
|
10.1
|
|
License Agreement, entered into on March 16, 2005 and effective as of July 31, 2003, by and between Yeda of the Weizman Institute and BiondVax Pharmaceuticals Ltd, incorporated by reference to exhibit 10.1 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.
|
|
|
|
10.2
|
|
Finance Contract between European Investment Bank and BiondVax Pharmaceuticals Ltd. dated June 17, 2018 (including Security Agreement), incorporated by reference to exhibit 99.2 to Current Report on Form 6-K filed with the SEC on June 19, 2017.
|
|
|
|
10.3
|
|
Investment Agreement between Angels Hi Tech Ltd. and BiondVavx Pharmaceuticals Ltd. dated January 1, 2017, incorporated by reference to exhibit 10.17 to the Registration Statement on Form F-3 filed with the SEC on January 26, 2017.
|
|
|
|
10.4
|
|
BiondVax Pharmaceuticals Ltd. 2018 Israeli Share Option Plan, incorporated by reference to exhibit 99.1 to Current Report on Form 6-K filed with the SEC on February 22, 2018.
|
|
|
|
10.5
|
|
Management Services Agreement dated April 1, 2007, between BiondVax Pharmaceuticals Ltd. and Ron Executive Ltd., together with the amendment thereto dated May 20, 2012, incorporated by reference to exhibit 10.5 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.
|
|
|
|
10.6
|
|
Employment Agreement dated March 15, 2005, between BiondVax Pharmaceuticals Ltd. and Dr. Tamar Ben Yedidia, incorporated by reference to exhibit 10.6 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.
|
|
|
|
10.7
|
|
Service Agreement dated June 20, 2007, between BiondVax Pharmaceuticals Ltd., CFO Direct and Uri Ben Or, incorporated by reference to exhibit 10.7 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.
|
|
|
|
10.8
|
|
Form of Indemnification Letter (unofficial English translation from Hebrew original), incorporated by reference to exhibit 10.9 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.
|
Exhibit
No.
|
|
Exhibit
Description
|
|
|
|
10.9
|
|
Lease Agreement dated July 18, 2017 between BiondVax Pharmaceuticals Ltd. and Unihad BioPark Ltd. (unofficial English translation from Hebrew original), incorporated by reference to exhibit 4.19 to the annual report on Form 20-F filed with the SEC on April 30, 2018.
|
|
|
|
10.10
|
|
Addendum to Employment Agreement dated April 1, 2012, between BiondVax Pharmaceuticals Ltd. and Dr. Tamar Ben Yedidia incorporated by reference to exhibit 10.11 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.
|
|
|
|
10.11
|
|
Addendum to Service Agreement dated August 31, 2014, between BiondVax Pharmaceuticals Ltd., CFO Direct and Uri Ben Or, incorporated by reference to exhibit 10.12 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.
|
|
|
|
10.12
|
|
Employment Agreement dated August 31, 2014, between BiondVax Pharmaceuticals Ltd. and Uri Ben Or, incorporated by reference to exhibit 10.13 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.
|
|
|
|
10.13*
|
|
Form of Subscription Rights Certificate
|
|
|
|
10.14*
|
|
Form of Beneficial
Owner Certification
|
|
|
|
10.15
|
|
Reply to Staff Comment letter of April 5, 2019
|
|
|
|
23.1
|
|
Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.
|
|
|
|
23.2*
|
|
Consent of Pearl
Cohen Zedek Latzer Baratz, Israeli counsel to BiondVax Pharmaceuticals Ltd., (included in Exhibit 5.1).
|
|
|
|
24.1
|
|
Power of Attorney (included on the signature pages of this registration statement).
|
*
To be filed by amendment.
II-8
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