Entera Bio Ltd. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), about our expectations, beliefs or intentions regarding our product development efforts, business, financial condition, results of operations, strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate to historical or current matters. Rather, 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. These factors include those contained in “Item 1A — Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” of this Annual Report on Form 10-K. We do not undertake any obligation to update forward-looking statements except as required by applicable law. We intend that all forward-looking statements be subject to the safe harbor provisions of PSLRA. These forward-looking statements reflect our views only as of the date they are made. For purposes of this Item 7, references to the “Company,” “we,” “us” and “our” refer to Entera Bio Ltd. and its consolidated subsidiary. Overview We are a clinical-stage biopharmaceutical company focused on the development and commercialization of orally delivered large molecule therapeutics for use in areas with significant unmet medical need and where adoption of injectable therapies is limited due to cost, convenience and compliance challenges for patients. We were organized under the laws of the State of Israel on September 30, 2009 and commenced operations on June 1, 2010. We have developed a proprietary platform that enables the oral delivery of injectable proteins and large molecules. Our platform has been tested successfully on numerous molecules of broad characteristics and size. We have advanced our lead oral PTH product, EB613 to Phase 3 (potentially pivotal) and in December 2018 entered into a research collaboration and license agreement with Amgen for the use of Entera’s oral delivery platform in the field of inflammatory diseases. Our lead product candidates are EB613 for the treatment of osteoporosis and EB612 for the treatment of hypoparathyroidism. Both EB613 and EB612 are oral formulations of human parathyroid hormone (1-34), or PTH. An injectable formulation of PTH has been approved in the United States for more than a decade for both of these indications (PTH 1-34 for Osteoporosis and PTH 1-84 for Hypoparathyroidism). Currently, the leading products are administered via injection. In total, more than 260 healthy volunteers and patients have received multiple doses of various formulations of our oral PTH (1-34) in clinical trials. Osteoporosis is a disease characterized by low bone mass and structural deterioration of bone tissue, which leads to greater fragility of bones and an increase in fracture risk. Forteo ® is a once-daily subcutaneous injectable form of PTH (1-34) marketed by Eli Lilly and Company (“Eli Lilly”), that was approved by the U.S. Food and Drug Administration (the “FDA”) in 2002 for the treatment of osteoporosis in the United States and is widely considered one of the most effective treatments due to its ability to build bone. Because our product candidate EB613 is delivered in a patient-friendly oral formulation, we believe it will reduce the treatment and cost burden on patients and lead to significantly higher patient and physician acceptance compared to injectable PTH. In 2020, we engaged a third-party firm to conduct two primary market research studies with clinicians who treat osteoporosis patients. In these two studies, the responses to the prospect of prescribing an oral PTH with demonstrated safety and efficacy were overwhelmingly positive and driven by expected improvements in patient compliance, ease of administration and reduced costs. In November 2018, we had a pre- Investigational New Drug (“IND”) meeting with the FDA to discuss the EB613 for the treatment of osteoporosis program, and, in December 2020, we announced that the FDA had reviewed our IND application for EB613 and informed us that we may proceed with our U.S. clinical trial. We have completed two, multi-stage Phase 1 clinical trials of EB613 and a Phase 2 double-blind, placebo-controlled, dose-ranging trial of EB613 in patients with osteoporosis. The Phase 2 trial studied five once-daily doses of EB613 (0.5mg, 1.0mg, 1.5mg and 2.5mg) and placebo for six months and assessed safety, tolerability, bone biomarkers and bone mineral density (BMD). Based on these trials, EB613 appears to be safe and well tolerated with no serious drug-related adverse events reported and produced clinically and statistically significant increases in BMD at month six. The adverse events seen in these trials are consistent with those seen in other published third party trials of PTH (1-34). In December 2021 we held an end-of-Phase 2 meeting with the FDA to review the Phase 2 results and proposed Phase 3 protocol, including various aspects of our nonclinical and clinical development plan and the use of BMD, rather than fracture incidence, as the primary endpoint to support a New Drug Application, or NDA. 79 Hypoparathyroidism is a rare condition in which the body fails to produce sufficient amounts of PTH or the PTH produced lacks biologic activity. Historically, the treatments for hypoparathyroidism have been calcium supplements, active vitamin D analogs (calcitriol or similar drugs) and occasionally phosphate binders, the chronic use of which results in serious side effects and significant costs to patients and the healthcare system. A once-daily injectable form of PTH (1-84), marketed as Natpara ® , has been approved for the treatment of hypoparathyroidism; however, Natpara is currently the subject of an FDA recall and is not currently avaialble. Our lead product candidate for hypoparathyroidism, EB612, is delivered orally and can be administered in customized doses several times a day. Studies performed by researchers at the National Institutes of Health, or NIH, have shown that dosing PTH multiple times per day significantly increases the efficacy of therapy and may be more effective for treating hypoparathyroidism. These studies found that the total daily PTH dose required to maintain serum calcium in the normal or near-normal range was reduced by 50% with twice-daily PTH (1-34) and also demonstrated that twice-daily dosing achieved better control over serum calcium and urinary calcium excretion as compared to once-daily dosing. In addition, based on the market research we conducted in osteoporosis, we believe patients generally prefer orally-administered drugs. For these reasons, we believe EB612 dosed two or more times during the day may be clinically superior to the existing daily therapy and has the potential to become the standard of care, if approved, for hypoparathyroidism. In 2015, we successfully completed a Phase 2a trial for EB612. Although our Phase 2a trial involved a smaller number of patients, was conducted for a shorter duration and did not include an initial dose optimization period, in each case in comparison to the design of the pivotal trial used for regulatory approval of Natpara (the REPLACE trial), our trial showed the potential for similar efficacy. In the third quarter of 2019, we reported the results of a second Phase 2 clinical trial that included one day of dosing with EB612 to evaluate the pharmacokinetic/pharmacodynamics, or PK/PD, profile of various EB612 dose regimens compared with Natpara. The results from this study demonstrated that EB612 was effectively delivered into the blood stream and activated PTH-dependent biological pathways that are inadequately activated in patients with hypoparathyroidism. In addition, the various dosing regimens demonstrated positive impacts on serum calcium, urine calcium and serum phosphate levels. No serious adverse events were reported. We have developed an improved formulation of EB612 based on new intellectual property and optimization of the PK profile for hypoparathydoidism and are evaluating this in preclinical and human PK/PD studies in 2022. These data will help determine the design of a pivotal Phase 2b or Phase 3 trial of EB612 in patients with hypoparathyroidism in which the dose frequency would be titrated to control hypocalcemia, normalize serum phosphate and reduce renal calcium excretion. In the future, after the completion of additional formulation and development activities, we expect to initiate a multi-site Phase 2b/3 clinical trial of EB612 for the treatment of hypoparathyroidism, which will further evaluate the dosage, effectiveness and safety profile of EB612 in an expanded population of patients with hypoparathyroidism. We expect that this Phase 2b/3 trial, when initiated, will be designed to replicate the REPLACE trial in many aspects and to achieve a significant reduction in urinary calcium. The phase 2b/3 clinical trial of EB612 in hypoparathyroidism may potentially support a submission for regulatory approval of EB612, if successful. In addition to the utilization of our technology to develop our own internal drug candidates, we intend to use our technology as a platform for the oral delivery of other novel protein and large molecule therapeutics. We believe our proprietary technology has advantages over alternative delivery options, and may enable us to create a potential pipeline of products across a range of therapeutic indications. We have generated data on a number of additional proteins and peptides in molecules as large as 150 kilodaltons, or kDa, and may develop these candidates further internally, or explore potential business development collaborations to advance these therapies through clinical development and generate funding. In December 2018, we entered into a research collaboration and license agreement with Amgen, Inc, or Amgen. Under the agreement, we and Amgen have agreed to collaborate on the development and discovery of clinical candidates in the field of inflammatory disease and other serious illnesses. Specifically, we and Amgen have agreed to use our proprietary drug delivery platform to help Amgen develop oral formulations for up to three large molecule drug candidates within Amgen’s pipeline. Further, under the terms of the agreement, we have agreed to conduct preclinical development activities, at Amgen’s expense, and Amgen will be responsible for research, clinical development, manufacturing and commercialization of any of the resulting programs, at its expense. We will be eligible to receive from Amgen aggregate payments of up to $270 million upon achievement of various clinical and commercial milestones or Amgen’s exercise of its option to select up to two additional programs to include in the collaboration, as well as tiered royalty payments based on percentages ranging from the low to mid-single digits based on the level of Amgen’s net sales of any applicable products, if approved. We will retain all intellectual property rights to our drug delivery technology, which under this collaboration will be licensed to Amgen exclusively for Amgen’s selected drug targets. Amgen will retain all rights to its large molecules, including any subsequent improvements. 80 In February 2021, we announced that we initiated a new research program for an oral glucagon-like peptide-2 (GLP-2) analog based on the Company’s platform technology. GLP-2, a peptide produced in the intestine and the central nervous system via the brainstem and hypothalamus, is known to enhance intestinal absorption, specifically the increased absorption of nutrients. The only GLP-2 analog currently on the market, teduglutide, was approved in 2012 as a once daily injection for the treatment of short bowel syndrome in the United States and Europe, registering global sales of $613 million in 2020. In preclinical models, our oral formulation of a GLP-2 analog has shown a comparable pharmacokinetic profile to a subcutaneous injection. In addition, GLP-2 analogs are an important category of new therapies for many metabolic diseases and therefore we believe this product candidate is well positioned for partnering opportunities. We intend to utilize future funds, as available, to advance EB613 and EB612 through clinical development and ultimately towards regulatory approval. To date, we have funded our operations through sales of Ordinary Shares under our prior Equity Distribution Agreement with Canaccord Genuity LLC (the “Prior ATM Program”), our current At the Market Sales Agreement with B. Riley Securities, Inc. (the “ATM Program”, and together with the Prior ATM Program, the “ATM Programs”), sales of Ordinary Shares in our IPO, private placements of our Ordinary Shares and preferred shares, warrants and convertible debt, government grants and through revenues generated from research collaboration and our license agreement with Amgen. We have no products that have received regulatory approval and have never generated revenue from product sales. Since our inception, we have raised a total of $84.7 million, including $25.3 million through our ATM Programs, of which $21.8 million was raised in 2021, $14.3 million in our December 2019 private placement, $11.2 million in our IPO in 2018 and $33.9 million in aggregate funding from a combination of grants, exercise of options and warrants and private placements of Ordinary Shares, preferred shares and debt prior to our IPO. Since inception, we have incurred significant losses. For the years ended December 31, 2021 and 2020, our operating losses were $12.2 million and $11.2 million, respectively, and we expect to continue to incur significant expenses and losses for the foreseeable future. As of December 31, 2021, we had an accumulated deficit of $82.4 million. Our losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials, our expenditures on any other research and development activities and payments under the collaboration with Amgen or any future collaborations into which we may enter. As a result of our recurring losses from operations, negative cash flows and lack of liquidity, management is of the opinion that there is substantial doubt as to the Company's ability to continue as a going concern. Our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of, and for the year ended, December 31, 2021, expressing the existence of substantial doubt about our ability to continue as a going concern. The audited consolidated financial statements included herein have been prepared assuming that we will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. If we are unable to raise the requisite funds, we will need to curtail or cease operations. See “Item 1A—Risk Factors—Risks Related to Our Financial Position and Need for Additional Capital.” As of December 31, 2021, we had cash and cash equivalents of $24.9 million. In order to fund further operations, we will need to raise additional capital. We may raise these funds through a variety of means, including private or public equity offerings, debt financings, government grants, strategic collaborations and licensing arrangements. Additional financing may not be available when we need it or may not be available on terms that are favorable to us. As of December 31, 2021, we had 21 employees and 5 consultants who provide services to us on a part-time basis. Our operations are located in Jerusalem, Israel. Patent Transfer, Licensing Agreements and Grant Funding Oramed Patent Transfer Agreement In 2011, we entered into a patent transfer agreement with Oramed, or the Patent Transfer Agreement, pursuant to which Oramed assigned to us all of its rights, title and interest in the patent rights Oramed licensed to us when we were originally organized, subject to a worldwide, royalty-free, exclusive, irrevocable, perpetual and sub-licensable license granted to Oramed under the assigned patent rights to develop, manufacture and commercialize products or otherwise exploit such patent rights in the fields of diabetes and influenza. Additionally, we agreed not to engage, directly or indirectly, in any activities in the fields of diabetes and influenza. Under the terms of the Patent Transfer Agreement, we agreed to pay Oramed royalties equal to 3% of our net revenues generated, directly or indirectly, from exploitation of the assigned patent rights, including the sale, lease or transfer of the assigned patent rights or sales of products or services covered by the assigned patent rights. 81 Amgen Research Collaboration and License Agreement On December 10, 2018, we entered into a research collaboration and license agreement with Amgen, which we refer to as the Amgen Agreement, with respect to inflammatory disease and other serious illnesses. Pursuant to the Amgen Agreement, we and Amgen have agreed to use our proprietary drug delivery platform to develop oral formulations for one preclinical large molecule program that Amgen has selected. In exchange for entering into the agreement, Amgen paid us a non-refundable and non-creditable initial access fee of $725,000 in the first quarter of 2019, of which $500,000 was attributed to the right to use the intellectual property and $225,000 was attributed to the pre-clinical R&D services that we are obligated to perform under the Amgen Agreement. In addition, under the Amgen Agreement, Amgen reimburses us for additional expenses that we incur for any work we do under the collaboration. Thus far during our collaboration, Amgen has paid $968,000 for pre-clinical R&D services. Amgen also has options, limited in time, to select up to two additional programs to include in the collaboration. Amgen is responsible for the clinical development, regulatory approval, manufacturing and worldwide commercialization of the programs. Pursuant to the terms of the Amgen Agreement, Amgen is required to make aggregate payments of up to $270 million upon achievement of various clinical and commercial milestones or its exercise of options to select the additional two programs to include in the collaboration. In addition, Amgen is required to make tiered royalty payments ranging from the low to mid-single digits as a percentage of Amgen’s net sales of the applicable products covered by the Amgen Agreement. Amgen’s obligation to pay royalties with respect to a product in a particular country commences upon the first commercial sale of such product in such country and expires on a country-by-country and product-by-product basis on the later of (a) the date on which the sale of the product is no longer covered by a valid claim of a patent licensed to Amgen under the Amgen Agreement, and (b) the tenth anniversary of the first commercial sale of such product in such country. Under the Amgen Agreement, we granted Amgen an exclusive, worldwide, sub-licensable license to certain of our intellectual property relating to our drug delivery technology to develop, manufacture and commercialize the applicable products. We have retained all intellectual property rights to our drug delivery technology, Amgen will retain all rights to its large molecules and any subsequent improvements, and ownership of certain intellectual property developed through the performance of the collaboration is to be determined by U.S. patent law. Each party is responsible for the filing and prosecution of patents relating to its owned developments and, with respect to any jointly-owned developments, we are responsible for the filing and prosecution of patents solely claiming improvements to our drug delivery technology and Amgen is responsible for the filing and prosecution of any other jointly-owned developments. Amgen has the primary right to enforce any such patents against third-party infringement with respect to a product that has the same mechanism of action as one of the collaboration programs, subject to involvement by us in certain circumstances. During certain periods covered by the Amgen Agreement, we may not alone, or with a third party, research, develop, manufacture or commercialize certain products that interact with the targets of the applicable collaboration programs. The collaboration is governed by a joint research committee, or JRC, made up of equal representatives of us and Amgen. The JRC may establish additional subcommittees to oversee particular projects or activities. Subject to certain limitations, if the JRC is unable to make a decision by consensus, the disagreement is to be resolved through escalation to specified senior executive officers of the parties, although Amgen has the final decision-making ability with respect to certain pre-defined issues. The term of the Amgen Agreement commenced on December 10, 2018, and unless earlier terminated, continues in full force and effect, on a product-by-product basis, until expiration of the last-to-expire royalty term with respect to such product. At any point in the research, development or commercialization process, subject to certain conditions, Amgen can terminate the Amgen Agreement in its entirety or with respect to a specific development program. Both parties can terminate the agreement for a material breach by the other party that goes uncured, subject to a 90-day notice period. The Israeli Innovation Authority Grants We have received grants of approximately $0.5 million from the IIA to partially fund our research and development. The grants are subject to certain requirements and restrictions under the Israeli Encouragement of Research, Development and Technological Innovation in Industry Law 5477-1984, or the Research Law. In general, until the grants are repaid with interest, royalties are payable to the Israeli government in the amount of 3% on revenues derived from sales of products or services developed in whole or in part using the IIA grants, including EB613, EB612 and any other oral PTH product candidates we may develop. The royalty rate may increase to 5%, with respect to approved applications filed following any year in which we achieve sales of over $70 million. 82 The amount that must be repaid may be increased up to six times the amount of the grant received, and the rate of royalties may be accelerated, if manufacturing of the products developed with the grant money is transferred outside of the State of Israel. Moreover, a payment of up to 600% of the grant received may be required upon the transfer of any IIA-funded know-how to a non-Israeli entity. We signed a contract with a U.K.-based contract manufacturing organization to produce and supply pills for trials performed worldwide. We believe that, because this production is not for commercial purposes, it will not affect the royalty rates to be paid to the IIA. Should the IIA successfully take a contrary position, the maximum royalties to be paid to the IIA will be approximately $1.5 million, which is three times the amount of the original grant. Following the signing of the Amgen Agreement, we have been required to pay 5.38% of each payment by Amgen and up to 600% of the grant received. As of December 31, 2021, we had paid royalties to the IIA in the amount of $79,000 related to the Amgen Agreement. In addition to paying any royalties due, we must abide by other restrictions associated with receiving such grants under the Research Law that continue to apply following repayment to the IIA. Financial Overview Revenue To date, we have not generated any revenue from sales of our products, and we do not expect to receive any revenue from any product candidates that we develop unless and until we obtain regulatory approval and successfully commercialize our products. Under the Amgen Agreement, during 2020 through December 31, 2021, we had received an additional aggregate amount of $743,000 from Amgen for research and development services. Revenues including revenues under the Amgen Agreement are recognized according to ASC 606, "Revenues from Contracts with Customers”. According to ASC 606, a performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services. Goods and services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created. A good or service promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. Options granted to the customer that do not provide a material right to the customer that it would not receive without entering into the contract do not give rise to performance obligations. We identified two performance obligations in the agreement: the license to use the Company's proprietary drug delivery platform and pre-clinical research and development services (“pre-clinical R&D services”). The license to our intellectual property has significant standalone functionality, since we are not required to continue to support, develop or maintain the intellectual property transferred and will not undertake any activities to change the standalone functionality of the intellectual property. Therefore, we recognized the revenues related to this performance obligation in December 2018 at the point in time that control of the license was transferred to Amgen. The preclinical R&D services include discovery, research and design preclinical activities relating to the programs selected by Amgen. Revenues attributed to the preclinical R&D services are recognized during the period the pre-clinical R&D services are provided according to the input model method on a cost-to-cost basis. Each of these items met the definition of distinct performance obligation. The Company evaluated the standalone selling price of the pre-clinical R&D services at $225,000 and the right to use the intellectual property at $500,000. Under ASC 606, the consideration that we would be entitled to upon the achievement of contractual milestones, which are contingent upon the occurrence of future events of development and commercial progress, are a form of variable consideration. When assessing the portion, if any, of such milestone-related consideration to be included in the transaction price, we first assess the most likely outcome for each milestone, and exclude the consideration related to milestones of which the occurrence is not considered the most likely outcome. We then evaluate if any of the variable consideration determined in the first step is constrained. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available. We did not recognize any revenues from milestone payments. 83 An entity should recognize revenue for a sales-based or usage-based royalty promised in exchange for a license of intellectual property only when (or as) the later of the following events occurs: • The subsequent sale or usage occurs; and • The performance obligation to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied (or partially satisfied). We did not recognize any revenues from royalties since royalties are payable based on future commercial sales, as defined in the Amgen Agreement and there were no commercial sales as of the date of the financial statements For the years ended December 31, 2021 and 2020, we recognized revenues from the Amgen Agreement in the total amounts of $502,000 and $365,000, respectively. Research and Development Expenses Research and development expenses consist of costs incurred for the development of our drug delivery technology and our product candidates. Those expenses include: • employee-related expenses, including salaries, bonuses and share-based compensation expenses for employees and service providers in the research and development function; • expenses incurred in operating our laboratories including our small-scale manufacturing facility; • expenses incurred under agreements with CROs, and investigative sites that conduct our clinical trials; • expenses related to outsourced and contracted services, such as external laboratories, consulting and advisory services; • supply, development and manufacturing costs relating to clinical trial materials; and • other costs associated with pre-clinical and clinical activities. Research and development activities are the primary focus of our business. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase significantly in future periods as we advance EB613 and EB612 into later stages of clinical development and invest in additional preclinical candidates. Research expenses are generally recognized as incurred. An intangible asset arising from the development of our product candidates is recognized if certain capitalization conditions are met. During the years ended December 31, 2021 and 2020, we did not capitalize any development costs. Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities, including due to the timing of initiation of clinical trials and the enrollment of patients in clinical trials. For the years ended December 31, 2021 and 2020, our research and development expenses were $6.8 million and $6.4 million, respectively. Research and development expenses for the years ended December 31, 2021 and 2020 were primarily for the development of EB613 and EB612. The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflows may commence from, any of our product candidates. This is due to numerous risks and uncertainties associated with developing drugs, including: • the uncertainty of the scope, rate of progress, results and cost of our clinical trials, nonclinical testing and other related activities; • the cost of manufacturing clinical supplies and establishing commercial supplies of our product candidates and any products that we may develop; • the number and characteristics of product candidates that we pursue; • the cost, timing and outcomes of regulatory approvals; • the cost and timing of establishing any sales, marketing, and distribution capabilities; and 84 • the terms and timing of any collaborative, licensing and other arrangements that we may establish, including any milestone and royalty payments thereunder. A change in the outcome of any of these variables with respect to the development of EB613, EB612 or any other product candidate that we may develop could mean a significant change in the costs and timing associated with the development of such product candidate. For example, if the FDA or other regulatory authority were to require us to conduct preclinical and/or clinical studies beyond those which we currently anticipate will be required for the completion of clinical development, if we experience significant delays in enrollment in any clinical trials or if we encounter difficulties in manufacturing our clinical supplies, then we could be required to expend significant additional financial resources and time on the completion of the clinical development. General and Administrative Expenses General and administrative expenses consist principally of salaries, benefits, share-based compensation and related costs for directors and personnel in executive and finance functions. Other general and administrative expenses include D&O insurance and other insurance, communication expenses, professional fees for legal and accounting services, patent counseling and portfolio maintenance and business development expenses. We expect that our general and administrative expenses will increase in the future as we increase our headcount and expand our administrative function to support our operations. Financial Expenses (Income), Net Financial expenses, net are composed primarily of interest income and exchange rate differences of certain currencies against our functional currency. Taxes on Income We have not generated taxable income since our inception, and as of December 31, 2021, we had carry-forward tax losses of $56.1 million. We anticipate that we will be able to carry forward these tax losses indefinitely to future tax years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carryforward tax losses. We provided a full valuation allowance with respect to the deferred tax assets related to these carry forward losses of the Company. As of December 31, 2021, Entera Bio Inc. has no carry forward tax losses. Results of Operations Comparison of Years Ended December 31, 2021 and 2020 ​ Year Ended December 31, Increase (Decrease) ​ 2021 2020 $ % ​ (In thousands, except for percentage information) Revenues $ 571 $ 365 $ 206 56 % Cost of revenues $ 373 $ 300 73 24 % Operating expenses: ​ Research and development expenses, net $ 6,771 $ 6,382 $ 398 6 % General and administrative expenses $ 5,690 $ 4,851 $ 839 17 % Other income $ (46 ) $ - $ (46 ) 100 % Operating loss $ 12,217 $ 11,168 $ 1,049 9 % Financial expenses, net $ 29 $ 28 $ 1 4 % Income tax (benefit) expenses $ (59 ) $ 20 $ (79 ) (395 )% Net loss $ 12,187 $ 11,216 $ 1,190 9 % 85 Revenue Revenues for the year ended December 31, 2021 and 2020 were $571,000 and $365,000, respectively. For 2021 and 2020, the majority of our revenues were attributable to research and development, or R&D services provided to Amgen under the Amgen Agreement and other MTA agreements. We did not generate any revenues prior to the signing of the Amgen Agreement. For the accounting treatment see “—Critical Accounting Policies and Estimates—Revenue Recognition” below. Cost of Revenues Cost of revenues for the year ended December 31, 2021 were $373,000 compared to $300,000 for the year ended December 31, 2020 and were primarily attributed to salaries and related expenses in connection with the R&D services provided to Amgen and other MTA agreements. Research and Development Expenses, Net Research and development expenses, net for the year ended December 31, 2021 were $6.8 million, as compared to $6.4 million for the year ended December 31, 2020. The increase of $0.4 million was primarily due to an increase of $0.7 million in materials and production costs, an increase of $1.2 million in pre-clinical activity as part of the preparation for our Phase 3 clinical trial for EB613 and an increase of $0.1 million in employees compensation, including share-based compensation. The increase was partially offset by a decrease of $0.9 million in other clinical trial expenses related to EB613 related to our Phase 2 trial that was completed in June 2021 and a decrease of $0.7 million in professional and consulting services expenses mainly due to submission of the IND in 2020. General and Administrative Expenses General and administrative expenses for the year ended December 31, 2021 were $5.7 million, compared to $4.9 million for the year ended December 31, 2020. The increase of $0.8 million was mainly attributed to an increase of $0.8 million in share-based compensation granted to executive officers, as well as the reversal of expenses related to the expiration of the former CEO’s unvested options in 2020, an increase of $0.3 million in legal and accounting costs and an increase of $0.2 million in D&O insurance costs. The increase was partially offset by a decrease of $0.5 million in professional fees, mainly search fees. Financial Expenses, Net Financial expenses, net for the year ended December 31, 2021 was $29,000, compared to $28,000 for the year ended December 31, 2020. Our financial expenses are comprised mainly of bank commission and exchange rate differences of certain currencies against our functional currency, which is the U.S. Dollar. Liquidity and Capital Resources Since inception, we have incurred significant losses. As a result of our recurring losses from operations, negative cash flows from operating activities and lack of liquidity, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of, and for the year ended, December 31, 2021, expressing the existence of substantial doubt about our ability to continue as a going concern. For the years ended December 31, 2021 and 2020, our operating losses were $12.2 million and $11.2 million, respectively. We expect to continue to incur significant expenses and losses for the next several years as we advance our products through development and provide administrative support for our operations. As of December 31, 2021, we had an accumulated deficit of $82.4 million. Since our inception, we have raised a total of $84.7 million, including $25.3 million through our ATM Programs, of which $21.8 million was raised in 2021, $14.3 million in our December 2019 private placement, $11.2 in our IPO in 2018 and $33.9 in aggregate funding from a combination of grants, exercise of options and warrants and private placements of Ordinary Shares, preferred shares and debt prior to our IPO. In addition, through December 31, 2021, we had have received approximately $1.4 million under the Amgen Agreement. As of December 31, 2021, we had cash and cash equivalents of $24.9 million. Our primary uses of cash have been to fund research and development, general and administrative and working capital requirements, and we expect these will continue to be our primary uses of cash. 86 In July 2020, we entered into an equity distribution agreement with Canaccord Genuity LLC, as sales agent, to implement an ATM program under which we, from time to time, may offer and sell our Ordinary Shares, having an aggregate offering price of up to $13.9 million (the “Prior ATM Program”). The sales agent was entitled to a fixed commission of 3% of the aggregate gross proceeds as well as and reimbursement of expenses. On July 13, 2020, we filed with the SEC a shelf registration statement on a Form F-3 for the registration of our Ordinary Shares that we may, from time to time, offer and sell in one or more offerings, our securities with an aggregate offering price of up to $100 million. In addition, certain Ordinary Shares under such Form F-3 were offered, issued and sold pursuant to Prior ATM Program and the ATM Program (as defined below). However, following our transition from foreign private issuer to domestic issuer status beginning January 1, 2022 and the filing of this Annual Report on Form 10-K, we will no longer be able to make use of such shelf registration statement on Form F-3 and will need to file a new registration statement on a form applicable to domestic issuers, such as Form S-3, should we wish to engage in further public offerings of our Ordinary Shares, including further sales pursuant to the ATM Program. The Prior ATM Program terminated in accordance with its terms following our sale of the full dollar amount of Ordinary Shares permitted thereunder. On May 7, 2021 we entered into an At Market Issuance Sales Agreement with B. Riley Securities, Inc., as sales agent, under which we, from time to time, may offer and sell up to 5,000,000 Ordinary Shares (the “ATM Program”). The sales agent is entitled to a fixed commission of 3% of the aggregate gross proceeds as well as and reimbursement of expenses. For the year ended December 31, 2021, we sold an aggregate of 2.546,265 Ordinary Shares under the Prior ATM Program and 1,764,860 Ordinary Shares under the ATM Program, the aggregate proceeds of which amounted to $25 million, net of issuance costs. Funding Requirements We believe that our existing capital resources, not including potential milestone payments, will be sufficient to meet our projected operating requirements into the fourth quarter of 2022. We have based these estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of our product candidates, and the extent to which we may enter into collaborations with third parties for development of these or other product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our current and future product candidates. Our future capital requirements will depend on many factors, including: • the costs, timing and outcome of clinical trials for, and regulatory review of, EB613, EB612 and any other product candidates we may develop; • the costs of development activities for any other product candidates we may pursue; • the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; • the impact of COVID-19 on our clinical trials, regulatory timelines, business operations and financial stability; and • our ability to establish collaborations on favorable terms, if at all. We are in the process of evaluating various financing alternatives in the public or private equity markets, government grants or through license of our technology to additional external parties through partnerships or research collaborations as we will need to finance future research and development activities, general and administrative expenses and working capital through fund raising. However, there is no certainty about our ability to obtain such funding. We do not have any committed external sources of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our then-existing shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that may adversely affect our existing shareholders’ rights as shareholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may include requirements to hold minimum levels of funding. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or collaborations, when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our oral PTH product candidates and any other product candidates that we would otherwise prefer to develop and market ourselves. 87 Our audited consolidated financial statements for the year ended December 31, 2021, included elsewhere in this Annual Report on Form 10-K, note that there is substantial doubt about our ability to continue as a going concern as of such date; and in its report accompanying our audited consolidated financial statements included herein, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations and our cash outflows from operating activities raise substantial doubt as to our ability to continue as a going concern. This means that our management and our independent registered public accounting firm have expressed substantial doubt about our ability to continue our operations without an additional infusion of capital from external sources. The audited consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that may be necessary should we be unable to continue as a going concern. If we are unable to finance our operations, our business would be in jeopardy and we might not be able to continue operations and might have to liquidate our assets. In that case, investors might receive less than the value at which those assets are carried on our financial statements, and it is likely that investors would lose all or a part of their investment. Cash Flows Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 The following table sets forth the primary sources and uses of cash for each of the periods set forth below: ​ (audited) Year ended December 31, ​ 2021 2020 ​ (in thousands) Net Cash used in operating activities $ (9,063 ) $ (10,557 ) Net Cash used in investing activities (17 ) (53 ) Net Cash provided by financing activities 25,381 4,051 Net (decrease) increase in cash and cash equivalents $ 16,301 $ (6,559 ) Net Cash Used in Operating Activities Net Cash used in operating activities for the year ended December 31, 2021 was $9.1 million, consisting primarily of our operating loss of $12.2 million, which was partially offset by $1.9 million of share-based compensation and depreciation expenses and an increase of $1.3 million in our working capital. Net Cash used in operating activities for the year ended December 31, 2020 was $10.6 million consisting primarily of our operating loss of $11.2 million and a 0.4 million decrease in our working capital which was partially offset by $0.9 million of share-based compensation, $0.1 million of depreciation expenses. The decrease of $1.5 million in cash used in operating activities for the year ended December 31, 2021 compared to the same period in 2020 was mainly attributed to our change in loss, an increase of $1.0 million in share-based compensation and a decrease of $1.7 in working capital mainly due to a decrease in payments to suppliers and services providers, which were partially offset by an increase of $0.2 in payments to D&O insurance and an increase of $1.0 million in our operating loss. Net Cash Used in Investing Activities Net Cash used in investing activities for the year ended December 31, 2021 and 2020 consisted primarily of the purchase of property and equipment. 88 Net Cash Provided by Financing Activities Net Cash provided by financing activities for the year ended December 31, 2021 mainly resulted from net proceeds of $21.8 million from the issuance of Ordinary Shares under our ATM Programs and $3.6 million from exercise of warrants and options. Net Cash provided by financing activities for the year ended December 31, 2020 mainly resulted from net proceeds of $0.8 million from the issuance of the Ordinary Shares and Warrants in the final closing of our December 2019 private placement offering and net proceeds of $3.2 million from the issuance of Ordinary Shares under our Prior ATM Program. Contractual Obligations The following tables summarize our contractual obligations and commitments as of December 31, 2021 that will affect our future liquidity: ​ Payments due by period Contractual Obligations Total Less than 1 year 1 - 3 years 3 - 5 years More than 5 years ​ (In thousands) Operating leases for facility and vehicles $ 341 $ 224 $ 117 $ - $ - Total $ 341 $ 224 $ 117 $ - $ - Severance Obligations We have long-term liabilities for severance pay that are calculated pursuant to Israeli law generally based on the most recent salary of the relevant employees multiplied by the number of years of employment to the extent not covered by our regular deposits with defined contribution plans. As of December 31, 2021, our severance pay liability, net was immaterial. Because the timing of any such payments is not fixed and determinable, we have not included these liabilities in the table above. Contingencies We also have obligations to make future payments to third parties that become due and payable on the achievement of certain milestones, such as royalties upon sale of products or revenues from the Amgen Agreement. We have not included these commitments in our statements of financial position or in the table above because the achievement and timing of these milestones is not fixed and determinable. These potential future commitments include a commitment to pay Oramed royalties equal to 3% of our net revenues pursuant to the terms of the Patent Transfer Agreement between us and Oramed and a commitment to pay royalties to the IIA . Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. While our significant accounting policies are more fully described in Note 2 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are the most critical to assist shareholders and investors reading the consolidated financial statements in fully understanding and evaluating our financial condition and results of operations. These policies relate to the more significant areas involving management’s judgments and estimates and they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of the matters that are inherently uncertain. Revenue Recognition With respect to the Amgen Agreement, we used our judgement to identify our deliverables in the agreement and whether the deliverables are distinct performance obligation. In addition, we use our judgement to determine the allocation of the transaction price between our identified distinct performance obligations. We also used significant judgment in order to determine the R&D services period. For a description of our revenue recognition policy see “Note 2—Summary of Significant Accounting Policies—Revenue Recognition” of our audited consolidated financial statements for the year ended December 31, 2021, included elsewhere in this Annual Report. 89 Share-Based Compensation In 2013 and in 2018, we adopted share-based compensation plans for employees, directors and service providers. Our share-based compensation plan adopted in 2013 governs the issuance of equity incentive awards prior to our initial public offering, and the share-based compensation plan adopted in 2018 governs the issuance of equity incentive awards from and after the closing of our initial public offering. As part of the plans, we grant employees, directors and service providers, from time to time and at our discretion, options to purchase our Ordinary Shares and restricted share units. The fair value of the services received in exchange for the grant of the options is recognized as an expense in our statements of comprehensive loss with a corresponding adjustment to equity in our statements of financial position. The total amount is recognized as an expense ratably over the service period of the options, which is the period during which all vesting conditions are expected to be met. We estimate the fair value of our share-based compensation to employees, directors and service providers using the Black-Scholes option pricing model, which requires the input of highly subjective assumptions, including (a) the expected volatility of our shares, (b) the expected term of the award, (c) the risk-free interest rate, (d) expected dividends and (e) the fair value of our Ordinary Shares at the date of grant. The following table summarizes the allocation of our share-based compensation expense: ​ Year ended December 31, ​ 2021 2020 (1) ​ (in thousands) Cost of revenues $ 102 $ 51 Research and development 661 514 General and administrative 1,098 336 Total $ 1,861 $ 901 (1) The resignation of Mr. Gridley, our Former CEO, took effect on September 7, 2020. According to the terms of Mr. Gridley’s options, of which had yet to fully vest expired, 553,942 options expired and were recognized in the consolidated statement of comprehensive loss as a reverse of expense under the general and administrative line item in the amount of $0.3 million. Recently Issued Accounting Pronouncements Certain recently issued accounting pronouncements are discussed in Note 2 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.