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Item 2. Management’s Discussion and Analysis

2023-05-05 compared with 2022-11-10 · 135 added, 209 removed, 136 unchanged (72% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provide information we believe is relevant to an assessment and understanding of our results of operations, financial condition, liquidity and cash flows for the periods presented below.

This discussion should be read in conjunction with the interim unaudited consolidated financial statements and related notes contained elsewhere in this Quarterly Report and Item 1A-Risk Factors in this Quarterly Report and our 2021 Annual Report.

The following discussion and analysis provides information we believe is relevant to an assessment and understanding of our results of operations, financial condition, liquidity and cash flows for the periods presented below.

This discussion should be read in conjunction with the interim unaudited condensed consolidated financial statements and related notes contained elsewhere in this Quarterly Report and Item 1A-Risk Factors in this Quarterly Report and in our 2022 Annual Report.

As discussed in the section above titled “Cautionary Note Regarding Forward-Looking Statements,” the following discussion contains forward-looking statements that are based upon our current expectations, including with respect to our future revenues and operating results.

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and its consolidated subsidiary.

Entera is a leader in the development of orally delivered macromolecule therapeutics, including peptides and other therapeutic proteins.

We apply our platform for use in areas with significant unmet medical need, 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.

Oral delivery of most therapeutic proteins is challenging due to poor absorption into the blood stream, enzymatic degradation within the gastrointestinal tract, and variable drug exposure.

Entera’s proprietary, oral drug delivery technology is designed to address these technical challenges using a synthetic absorption enhancer and protease inhibitors to prevent enzymatic degradation and support delivery to targeted tissues.

Our platform has been tested pre-clinically and/or clinically on several molecules of broad characteristics and size.

The Company’s most advanced product candidates, EB613 for the treatment of osteoporosis and EB612 for the treatment of hypoparathyroidism, are in clinical development.

The Company also aims to license its oral delivery technology to biopharmaceutical companies for use with their proprietary compounds.

Entera established such a collaboration with Amgen Inc., referred to as Amgen, in December 2018, for the use of Entera’s oral delivery platform in the field of inflammatory diseases.

See “Patent Transfer, licensing Agreements and Grant Funding—Amgen Research Collaboration and License Agreement” below for more information.

Parathyroid hormone (PTH) is an 84-amino acid hormone and the primary regulator of calcium and phosphate metabolism in bone and in the kidney.

Our lead product candidates are EB613 for the treatment of osteoporosis and EB612 for the treatment of hypoparathyroidism.

Both EB613 and EB612 are first in class oral formulations of synthetic human PTH (1-34), (teriparatide), a peptide consisting of the first 34 amino acids of PTH, which represent the functional region of the hormone.

In total, more than 260 subjects have participated in Entera’s clinical trials to date.

Entera’s oral PTH (1-34) formulations have been administered collectively to a total of 225 subjects in two Phase 1 studies and three phase 2 studies (161 subjects in our Phase 2 osteoperosis study and 35 subjects in two phase 2 hypoparathyroidism studies).

Entera is a clinical stage biopharmaceutical company and a leader in the development of orally delivered macromolecule therapeutics, including peptides and therapeutic proteins.

Currently, most protein therapies are administered via frequent intravenous, subcutaneous, or intramuscular injections.

In chronic diseases where patients require persistent management, these cumbersome, often painful and high-priced injections can create a major treatment gap.

Furthermore, from a technical standpoint, oral delivery of therapeutic proteins has historically been challenging due to enzymatic degradation within the gastrointestinal tract, poor absorption into the blood stream and variable drug exposures.

Entera’s proprietary technology is designed to deliver orally administered proteins with sufficient bioavailability to meet treatment goals, using white mini tablets (around 6mm in diameter) of the desired protein.

We strategically focus on underserved, chronic medical conditions where oral administration of a mini tablet peptide or peptide replacement therapy has the potential to significantly shift a treatment paradigm.

We currently have two product candidates in the clinical stage of development:

EB613 and EB612.

Both candidates are first-in-class daily mini tablets of human parathyroid hormone (hPTH (1-34), teriparatide).

To date, Entera’s proprietary PTH tablets have been safely administered to a total of 72 healthy subjects in Phase 1 studies and 153 patients across Phase 2 studies in osteoporosis and hypoparathyroidism, two diseases that remain underserved with the current standard of care and which disproportionately affect women.

In addition to these product candidates, we have various internal early stage research programs targeting GLP-2, kappa opioid receptors and hGH..

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.

Osteoporosis is most associated with menopause in women, aging in both women and men and glucocorticoid steroid use (greater than three months).

Osteoporosis is most frequently associated with menopause in women, aging in both women and men and glucocorticoid steroid use (greater than three months).

The bone remodeling cycle can be separated into two distinct processes:

(i) bone resorption, where cells called osteoclasts function in the resorption of mineralized tissue and (ii) bone formation, where cells called osteoblasts are responsible for bone matrix synthesis and subsequent mineralization of the bone.

Current osteoporosis pharmacologic treatment is segmented into anti-resorptive agents that suppress osteoclast-mediated bone resorption and anabolic agents that promote new bone formation by activating osteoblasts.

Current anti-resorptive standards of care treatments include bisphosphonates, a rank-ligand inhibitor (such as Amgen’s denosumab, Prolia ® ), SERMS, estrogen/HRT and calcitonin.

Current anabolic standard of care treatments include PTH receptor agonists (such as Forteo ® and Tymlos ® ) and Evenity ® , Amgen’s anti-sclerostin monoclonal antibody.

In contrast to the anti-resorptive drugs available, there are currently no oral anabolic treatments for osteoporosis.

Forteo®, a once-daily subcutaneous injectable form of PTH (1-34), (teriparatide), marketed by Eli Lilly and Company (“Eli Lilly”), is considered one of the most effective treatments in osteoporosis therapy due to its ability to build bone (anabolic mechanism of action).

Forteo® had peak sales surpassing $1.7 billion globally in 2017, prior to patent expiry.

Entera’s EB613 has the same amino acid sequence as Forteo.

® In February 2022, we engaged a third-party firm to conduct primary market research with endocrinologist and general practice clinicians who treat osteoporosis patients.

According to these surveys, it is estimated that less than 10% of osteoporosis patients use current anabolic drugs (including PTH receptor activators currently available).

Despite the validated mechanism of action of these treatments, patients are deterred by their high cost and injectable mode of administration.

Furthermore, healthcare providers indicated that they would support the use of an oral PTH anabolic therapy earlier in the treatment paradigm due to its validated PTH receptor-activating bone formation mechanism of action and patients’ preference for an oral route of administration.

Because our PTH product candidate, EB613, is delivered in a patient-friendly, oral tablet formulation, we believe it will lead to significantly higher patient and physician acceptance compared to the injectable PTH standard treatments, thus addressing this significant unmet clinical need.

To date, we have completed two Phase 1 clinical trials and a six-month placebo-controlled Phase 2 double-blind, dose-ranging trial of EB613 in patients with osteoporosis in Israel.

The dose ranging Phase 2 study in postmenopausal women with low bone mass met its primary and key secondary endpoints and was presented in a late-breaker oral presentation at the 2021 ASBMR Annual Meeting.

For the primary efficacy endpoint, a statistically significant increase in P1NP (a bone formation marker) at 3 months was achieved.

A significant dose response was observed for 0.5, 1.0, 1.5 and 2.5 mg oral PTH doses on P1NP, Osteocalcin and bone mineral density (“BMD”).

Subjects receiving the 2.5 mg dose of EB613 showed significant dose-related increases in BMD at the lumbar spine, total hip, and femoral neck at six months.

Subjects receiving the 2.5 mg dose of EB613 daily for six months had a significant placebo adjusted increase of 3.78% in lumbar spine BMD (p<0.008) which is similar to the 3.9% increase in lumbar spine BMD seen with Forteo ® at six months in clinical studies reported in published literature.

Increases in total hip and femoral neck BMD were greater than those previously reported with Forteo.

® EB613 exhibited was well tolerated, with no drug related serious adverse events.

The most common adverse events included mild nausea, moderate back pain, moderate headache, and moderate upper abdominal pain.

(i) bone resorption, where cells called osteoclasts function in the resorption of mineralized tissue;

and (ii) bone formation, where cells called osteoblasts are responsible for bone matrix synthesis and subsequent mineralization of the bone.

In healthy individuals, bone resorption is matched by new bone formation.

Osteoporosis develops as the balance between bone resorption by osteoclasts and bone formation by osteoblasts is not maintained, and not enough bone tissue is formed, leading to frail and fracture-prone bones.

Current osteoporosis drugs may be divided into two categories:

antiresorptive and anabolic.

Drugs that inhibit bone resorption include oral and injectable options such as estrogen (for postmenopausal women), oral and intravenous bisphosphonates, selective estrogen receptor modulators (SERMs), the RANK-ligand inhibitor (denosumab) and (salmon) calcitonin.

The three currently approved osteoanabolic drugs that stimulate bone formation all require daily or monthly subcutaneous injections:

teriparatide (hPTH[1-34]);

abaloparatide (a PTH-related protein analog);

and romosozumab (an antibody that inhibits sclerostin and also inhibits bone resorption).

There are currently no FDA-approved oral anabolic treatments for osteoporosis.

To date, we have completed two Phase 1 clinical trials and a six-month Phase 2 double-blind, placebo-controlled dose-ranging trial of EB613 in patients with osteoporosis in Israel.

The dose ranging Phase 2 study in postmenopausal women with low bone mass met its primary —change in P1NP at Month 3— and key secondary endpoints including bone mineral density (BMD) at Month 6 and was presented in a late-breaker oral presentation at the 2021 ASBMR Annual Meeting.

In November 2018, we had a Pre-Investigational New Drug (“Pre-IND”) meeting with the FDA to discuss our EB613 program for the treatment of osteoporosis.

In December 2020, we announced that the FDA had reviewed our October 2020 IND Application and informed us that we may proceed with our U.S.

clinical pharmacology study.

In December 2021 we held an end-of-Phase 2 meeting with the FDA to review the six-month phase 2 results and our proposed Head-to-Head Non-Inferiority Phase 3 study protocol vs.

Forteo®, 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 (“NDA”).

Following our End of Phase 2 Meeting with the FDA, Entera redesigned the pivotal phase 3 study for EB613 based on the FDA’s suggestion to explore a placebo-controlled trial.

A Type C meeting with the FDA in relation to Entera’s proposed Phase 3 registrational study was held in the second half of 2022 and in October 2022, the Company concluded its Type C meeting and the FDA agreed that a single Phase 3 placebo-controlled study could support an NDA submission of EB613 (oral hPTH (1-34), teriparatide tablets) under the 505(b)(2) regulatory pathway.

The FDA also agreed that Total BMD could serve as the primary endpoint of the registrational study in post-menopausal osteoporosis patients.

In December 2020, we announced that the FDA had approved our 2020 IND Application.

In December 2021, we held an end-of-Phase 2 meeting with the FDA to review the six-month phase 2 results and a proposed Head-to-Head Non-Inferiority Phase 3 study protocol vs.

Forteo®, our nonclinical and clinical development plan and the use of BMD, rather than fracture incidence, as the primary endpoint to support a potential NDA submission.

In our End of Phase 2 Meeting Minutes received in January 2022, the FDA expressed concern that a Head-to-Head study phase 3 design vs.

Forteo® may not be favorable to support an NDA for EB613.

During early 2022 and considering FDA’s suggestions and emerging data from the ASBMR-FNIH SABRE program1, we redesigned our pivotal phase 3 study for EB613 as a placebo-controlled trial with a total hip (TH) BMD primary endpoint.

A Type C meeting with the FDA in relation to Entera’s re-designed Phase 3 registrational study was held in August 2022 and in October 2022, we announced FDA’s concurrence on the major design elements of the protocol;

and that (1) a single Phase 3 placebo-controlled study with a TH BMD primary endpoint along with (2) a comparative PK study vs.

Forteo® could support an NDA submission of EB613 (oral hPTH (1-34), teriparatide tablets) under the 505(b)(2) regulatory pathway.

In February 2023, we submitted the revised phase 3 protocol as part of a Type D meeting with FDA in February 2023.

On April 3rd, 2023, we reported the outcome of our Type D meeting and the FDA’s written responses to our two questions.

On the first question, “Based on the FDA’s feedback provided in the Type C meeting written response August 19, 2022, and subsequent teleconference held on September 27, 2022, the Sponsor has updated the Phase 3 protocol design including the use of Total Hip Bone Mineral Density (BMD) as the primary endpoint.

Does the FDA concur that the revised protocol meets its expectations?” the FDA responded that it is not opposed to the use of BMD as a surrogate for fracture, including initiating a study under the proposed Foundation for the National Institutes of Health Bone Quality Project (FNIH BQP) pathway, which is undergoing review.

The FDA re-confirmed to Entera that a 24-month placebo-controlled phase 3 trial with the primary efficacy analysis at 24 months was acceptable and provided some guidance on the statistical evaluation of the study.

On the second question, “Does FDA agree that the design of the population PK (pharmacokinetic) and exposure response evaluation incorporated in the draft Phase 3 study protocol meets FDA expectations?” FDA responded that the Company’s proposed PK sampling scheme in the phase 3 study seems reasonable.

On April 3 rd , the Company announced that it plans on continuing its dialogue with FDA in light of its review of the FNIH-BQP criteria and will not plan to initiate a phase 3 study for EB613 until such a time that FDA provides final guidance on the evaluation of its primary endpoint.

Hypoparathyroidism

Hypoparathyroidism is a rare condition in which the body fails to produce sufficient amounts of PTH or the PTH produced lacks normal biologic activity.

Historically, the treatments for hypoparathyroidism have been calcium supplements, calcitriol or “active vitamin D” analogs and occasionally phosphate binders, the chronic use of which may result in serious side effects and significant costs to patients and healthcare systems.

Our lead product candidate for hypoparathyroidism, EB612, is delivered orally and may be administered in customized doses several times a day.

We believe EB612 has the potential to become a standard of care, if approved, for hypoparathyroidism because of its oral administration, which is preferred by most patients based on clinician and third-party commercial research to date.

Hypoparathyroidism is a rare condition in which the body either fails to produce sufficient amounts of PTH or the PTH produced lacks normal biologic activity.

Individuals with a deficiency of parathyroid hormone may exhibit hypocalcemia and hyperphosphatemia.

Hypocalcemia can cause weakness, muscle cramps, excessive nervousness, headaches and uncontrollable twitching and tetany.

Hyperphosphatemia can result in soft tissue calcium deposition, which may lead to severe issues, including damage to the circulatory and central nervous systems.

The most common cause of hypoparathyroidism is damage to, or removal of, the parathyroid glands due to surgery for another condition.

Our product candidate for hypoparathyroidism, EB612, is the first oral formulation of PTH (1-34, teriparatide) hormone replacement treatment developed in a mini tablet form.

The FDA and the European Medicines Agency have granted EB612 orphan drug designation for the treatment of hypoparathyroidism.

We believe that EB612 may have inherent advantages compared to injectable forms, including convenience of administration without any special preparation of the medication, as well as convenience of storage (room temperature or refrigeration for long term storage).

In 2015, we successfully completed a Phase 2a trial for EB612.

EB612 induced a rapid decline in median serum phosphate levels and maintenance of target calcium levels throughout the study, even as patients were able to meaningfully reduce their calcium and active vitamin D supplementation which is key to reducing common comorbidities of this disease.

Although this pilot four-month Phase 2a trial involved a smaller number of patients, was conducted for a shorter duration and did not include an initial dose optimization in comparison to the design of the pivotal trial used for regulatory approval of Natpara® (the REPLACE trial), our study achieved its primary and secondary endpoints, including a reduction in calcium supplements, reductions in serum phosphate and 24-hour urine calcium excretion, maintenance of ACa within the reference range, and an improvement in quality of life.

1 FNIH BQP is also known as the ASBMR FNIH-SABRE, American Society for Bone and Mineral Research-Foundation for the National Institutes of Health (FNIH) Strategy to Advance BMD as a Regulatory Endpoint (SABRE)

We have since developed an improved formulation of EB612 based on new intellectual property, optimization of its PK profile and the potential for reduced daily dosing for hypoparathyroidism.

We expect to carry out a PK study for the new formulation of EB612 in the first half of 2023.

We anticipate that the outcome of the PK study 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.

If successful, the phase 2b/3 clinical trial of EB612 in hypoparathyroidism may potentially support a submission for regulatory approval of EB612.

Entera has received U.S.

and European Union (“EU”) orphan drug designation for EB612.

Since our inception, we have raised a total of $84.7 million in various public and private equity offerings, as well as from grants, and the exercise of options and warrants.

Since inception, we have incurred significant losses.

For the three months ended September 30, 2022 and 2021, our operating losses were $2.9 million and $3.2 million, respectively.

In addition, for the nine months ended September 30, 2022 and 2021, our operating losses were $9.9 million and $8.1 million, respectively, and we expect to continue to incur significant expenses and losses for the foreseeable future.

As of September 30, 2022, we had an accumulated deficit of $92.5 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 research and development activities and payments under the collaboration with Amgen or any future collaborations into which we may enter.

As of September 30, 2022, we had cash and cash equivalents of $14.3 million.

We believe that our existing cash resources will be sufficient to meet our projected operating requirements through the second quarter of 2023.

This assumes ongoing R&D, the Hypo PK study and continued investments in production, analytics, and clinical research operations to enable initiation of EB613 phase 3 during the second half of 2023.

This does not include potential partnership payments.

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 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 unaudited condensed 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” in our 2021 Annual Report.

As of September 30, 2022, we had 19 full-time employees and three 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

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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.

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.

Israeli Innovation Authority Grants

On December 10, 2018, we entered into a research collaboration and license agreement with Amgen, which we refer to as the Amgen Agreement.

Pursuant to the Amgen Agreement, we and Amgen had 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 thousand in the first quarter of 2019, of which $500 thousand was attributed to the right to use the intellectual property and $225 thousand was attributed to the pre-clinical R&D services that we were obligated to perform under the Amgen Agreement.

Since 2019, Amgen has paid $1.2 million for pre-clinical R&D services.

Under certain circumstances, Amgen had been required to make aggregate payments to us 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.

On May 2, 2023, the Company and Amgen agreed to terminate the Amgen Agreement in accordance with its terms, effective on such date.

See Part II, Item 5 of this Quarterly Report for more information.

The Israeli Innovation Authority Grants

We have received grants of approximately $0.5 million from the Israeli Innovation Authority (“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, referred to as the Research Law.

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.

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.

The amount that must be repaid may be increased up to six times the amount of the grant received plus interest.

The rate of royalties may be accelerated and the royalty liability may increase (up to three times the amount of the grant amount and the interest), 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.

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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 September 30, 2022, 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 IIA grants under the Research Law that continue to apply following repayment 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 plus interest thereon.

Following the signing of the Amgen Agreement, we were required to pay 5.38% of each payment by Amgen and up to 600% of the grant received plus interest.

Through March 31, 2023, we had paid royalties to the IIA in the amount of $95 thousand related to the Amgen Agreement and other Master Service Agreements (“MTA”).

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

Since our inception, we have raised a total of $84.7 million from a combination of public and private equity offerings, grants and the exercise of options and warrants.

Since inception, we have incurred significant losses.

For the three months ended March 31, 2023 and 2022, our operating losses were $2.2 million and $3.8 million, respectively, and we expect to continue to incur significant expenses and losses for the foreseeable future.

As of March 31, 2023, we had an accumulated deficit of $97.7 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 research and development activities, and payments under any future collaborations into which we may enter.

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, 2022, expressing the existence of substantial doubt about our ability to continue as a going concern.

If we are unable to raise the requisite funds, we will need to delay certain program initiation, curtail or cease operations.

See “Item 1A-Risk Factors-Risks Related to Our Financial Position and Need for Additional Capital” contained in our 2022 Annual Report.

As of March 31, 2023, we had cash and cash equivalents of $10.7 million.

We believe that our existing cash resources will be sufficient to meet our projected operating requirements into the third quarter of 2024, which includes the capital required to fund our ongoing operations, including R&D and the completion of the Phase 1 PK study related to the new formulation EB612.

However, this does not include the capital required to fund our proposed Phase 3 pivotal study for EB613 in osteoporosis and comparative PK study of EB613 and Forteo®.

Our ability to commence such studies will depend on finalizing discussions with the FDA and will require additional funding, which may not be available on reasonable terms, or at all.

Any delay or our inability to secure such funding will delay or prevent the commencement of these studies.

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, 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 March 31 2023, we had 18 full-time employees and five consultants who provide services to us on a part-time basis.

Our operations are located in Jerusalem, Israel.

To date, we have not generated any revenue from sales of our products, and we do not expect to receive any revenue from our product candidates unless and until we obtain regulatory approval and successfully commercialize our products.

Under the Amgen Agreement, through September 30, 2022, we had received an aggregate of $968,000 from Amgen for research and development services.

In addition, we have several Material Transfer Agreements, or MTA agreements, under which we generate revenue.

Under the Amgen Agreement, from 2019 through March 31, 2023, we received an aggregate amount of $1.7 million.

We recognize revenues, including revenues under the Amgen Agreement, according to ASC 606, "Revenues from Contracts with Customers”.

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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.

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• 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 because royalties are payable based on future commercial sales, as defined in the Amgen Agreement, and there have been no commercial sales.

For the three months ended September 30, 2022 and 2021, we recognized revenues from the Amgen Agreement and other MTA agreements in the total amounts of $8 thousand and $140 thousand, respectively.

In addition, we recognized $120 thousand and $406 thousand under these agreements for the nine months ended September 30, 2022 and 2021, respectively.

We did not recognize any revenues from royalties because royalties are payable based on future commercial sales, as defined in the Amgen Agreement and there were no commercial sales as of March 31, 2023.

Research and Development Expenses

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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.

For the three and nine months ended September 30, 2022 and 2021, 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 three months ended September 30, 2022 and 2021, our research and development expenses were $1.4 million and $1.8 million, respectively.

For the nine months ended September 30, 2022 and 2021, our research and development expenses were $4.5 million and $4.1 million, respectively.

Research and development expenses for both the three and nine months ended September 30, 2022 and 2021 were primarily for the development of EB613, which is our most-advanced product candidate.

For the three months ended March 31, 2023 and 2022, our research and development expenses were $0.9 million and $1.7 million, respectively.

Research and development expenses for the three months ended March 31, 2023 and 2022 were primarily for the development of EB613.

The successful development of our product candidates is highly uncertain.

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General and Administrative Expenses

General and administrative expenses consist principally of salaries and related benefits, share-based compensation and related costs for employees and directors 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 business development 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.

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 (Income) Loss, Net

Financial (income), loss, net is composed primarily of exchange rate differences of certain currencies against our functional currency.

Financial Income, Net

Financial income, net is composed primarily of 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 September 30, 2022, we had carry-forward tax losses of $64.2 million.

We have not generated taxable income since our inception, and, as of March 31, 2023, we had carry-forward tax losses of $69.2 million.

We anticipate that we will be able to carry forward these tax losses indefinitely to future tax years.

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We provided a full valuation allowance with respect to the deferred tax assets related to these carry forward losses of the Company.

As of September 30, 2022, our subsidiary, Entera Bio Inc., had no carry forward tax losses.

The Company’s subsidiary, Entera Bio, Inc., is taxed separately under U.S.

As of March 31, 2023, Entera Bio Inc.

had tax loss carry-forwards of $26 thousand.

Results of Operations

Comparison of Three Months Ended September 30, 2022 and 2021

Comparison of Three Months Ended March 31, 2023 and 2022

Three Months Ended

September 30,

Increase (Decrease)

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Operating loss

Financial loss, net

Financial income, net

Income tax benefit

Revenues for the three months ended September 30, 2022 and 2021 were $8,000 and $140,000, respectively.

For both the three months ended September 30, 2022 and 2021, the majority of our revenues were attributable to pre-clinical R&D services provided to Amgen under the Amgen Agreement.

The decrease in revenue for the quarter ended September 30, 2022 as compared to the prior year period was primarily due to finalization of third year pre-clinical R&D services.

Cost of Revenues

Cost of revenues for the three months ended September 30, 2022 was $6,000 compared to $65,000 for the three months ended September 30, 2021 and was primarily attributed to salaries and related expenses in connection with the R&D services provided to Amgen.

The decrease in cost of revenues for the three months ended September 30, 2022 was primarily due to decreased revenues under the Amgen Agreement, as described above.

Research and Development Expenses

Research and development expenses for three months ended September 30, 2022 were $1.4 million, as compared to $1.8 million for the three months ended September 30, 2021.

The decrease of $0.4 million was primarily due to a decrease of $0.7 million in pre-clinical activity, as part of the preparation for our Phase 3 clinical trial for EB613, and a decrease of $0.1 million in other clinical trial expenses related to our Phase 2 trial for EB613, which we completed in June 2021.

This decrease was partially offset by an increase of $0.1 million in employee compensation mainly related to one-time payment to our former President of R&D and an increase of $0.3 million in materials and production costs for our Phase 3 clinical trial for EB613.

General and Administrative Expenses

General and administrative expenses for both the three months ended September 30, 2022 and 2021 were $1.5 million.

For the quarter ended September 30, 2022, there was an increase of $0.2 million in professional fees and an increase of $0.1 million in D&O insurance costs, as compared to the 2021 period, which was partially offset by a decrease of $0.3 million in share-based compensation mainly due to a reversal of share-based compensation expense related to the separation agreement of our former Chief Executive Officer.

Financial Loss, Net

Financial loss, net for the three months ended September 30, 2022 and 2021 was $8,000 and $7,000, respectively.

Our financial income is composed mainly of exchange rate differences of certain currencies against our functional currency, which is the U.S.

Comparison of Nine Months Ended September 30, 2022 and 2021

Nine Months Ended

September 30,

Increase (Decrease)

(In thousands, except for percentage information)

Cost of revenues

Operating expenses :

Research and development expenses

General and administrative expenses

Operating loss

Financial loss (income), net

Income tax benefit(expense)

Revenues for the nine months ended September 30, 2022 and 2021 were $120,000 and $406,000, respectively.

For both the nine months ended September 30, 2022 and 2021, the majority of our revenues were attributable to pre-clinical R&D services provided to Amgen under the Amgen Agreement and other MTA agreements.

The decrease in revenue for the nine months ended September 30, 2022 as compared to the prior year period was primarily due to finalization of third year pre-clinical R&D services.

Revenues for the three months ended March 31, 2022 of $68,000 were mainly attributable to pre-clinical R&D services provided to Amgen under the Amgen Agreement.

We did not recognize any revenue for the three months ended March 31, 2023 due to finalization of third year pre-clinical R&D services.

We did not generate any revenues prior to entering into the Amgen Agreement.

Cost of Revenues

Cost of revenues for the nine months ended September 30, 2022 was $93,000 compared to $237,000 for the nine months ended September 30, 2021 and were primarily attributed to salaries and related expenses in connection with the R&D services provided to Amgen and other MTA agreements.

The decrease in cost of revenues for the nine months ended September 30, 2022 as compared to the prior year period was primarily due to decreased revenues under the Amgen Agreement, as described above

Cost of revenues for the three months ended March 31, 2022 of $54,000 were mainly attributable to pre-clinical R&D services provided to Amgen under the Amgen Agreement.

The decrease in cost was due to the lack of revenues under the Amgen Agreement, as described above, for the three months ended March 31, 2023.

Research and Development Expenses

Research and development expenses for nine months ended September 30, 2022 were $4.5 million, as compared to $4.1 million for the nine months ended September 30, 2021.

The increase of $0.4 million was primarily attributed to an increase of $0.7 million in continued materials and production costs, strengthening the R&D organization in preparation for EB613’s proposed phase 3 study and an increase of $0.6 million in employee's compensation mainly related to a one-time payment to our former President of R&D, which were partially offset by a decrease of $0.5 million related to our the completion of our Phase 2 trial for EB613 in September 2021, and $0.4 million in pre-clinical activities related to supporting our Phase 3 clinical trial for EB613.

Research and development expenses for three months ended March 31, 2023 were $0.9 million, as compared to $1.7 million for the three months ended March 31, 2022.

The decrease of $0.8 million was primarily due to a decrease of $0.6 million in continued materials and production costs and others consultants and a decrease of $0.2 million in employee compensation including share-based compensation.

General and Administrative Expenses

General and administrative expenses for the nine months ended September 30, 2022 were $5.5 million compared to $4.2 million for the nine months ended September 30, 2021.

The increase of $1.3 million was mainly attributable to an increase of $0.5 million in non-cash share-based compensation granted to directors and executive officers and a one-time payment to our former Chief Executive Officer.

Additionally, there was an increase of $0.4 million in legal and professional fees and an increase of $0.3 million in D&O insurance costs.

Financial Loss (Income), Net

Financial loss (income), net for the nine months ended September 30, 2022 and 2021 was $(96,000) and $2,000, respectively.

General and administrative expenses for the three months ended March 31, 2023 were $1.3 million, as compared to $2.2 million for the three months ended March 31, 2022.

The decrease of $0.9 million was mainly attributable to a decrease of $0.6 million in employee compensation, including share-based compensation, a decrease of $0.2 million in professional fees and a decrease of $0.1 million in D&O insurance costs.

Financial Income, Net

Financial income, net for the three months ended March 31, 2023 and 2022 was $22,000 and $44,000, respectively.

Our financial income is composed mainly of exchange rate differences of certain currencies against our functional currency, which is the U.S.

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Since inception, we have incurred significant losses.

For the three months ended September 30, 2022 and 2021, our operating losses were $2.9 million and $3.2 million, respectively.

In addition, for the nine months ended September 30, 2022 and 2021, our operating losses were $9.9 and $8.1 million, respectively, and we expect to continue to incur significant expenses and losses for the foreseeable future.

As of September 30, 2022, we had an accumulated deficit of $92.5 million.

For the three months ended March 31, 2023 and 2022, our operating losses were $2.2 million and $3.8 million, respectively.

As of March 31, 2023, we had an accumulated deficit of $97.7 million.

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.

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See in “Item 1A-Risk Factors” in our 2022 Annual Report.

Since our inception, we have raised a total of $84.7 million, including $25.3 million through our Prior ATM Programs and our SVB ATM Program (each as defined below), 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.

In addition, through September 30, 2022, we had have received approximately $1.4 million under the Amgen Agreement.

As of September 30, 2022, we had cash and cash equivalents of $14.3 million.

Since our inception, we have raised a total of $84.7 million, including $25.3 million through completed or terminated at-the-market-offering (“ATM”) programs, $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.

In addition, as of March 31, 2023, we had received approximately $1.7 million under the Amgen Agreement.

As of March 31, 2023, we had cash and cash equivalents of $10.7 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.

In July 2020, we entered into an equity distribution agreement with Canaccord Genuity LLC, as sales agent, to implement an at-the-market offering program under which we, from time to time, were able to offer and sell our Ordinary Shares, having an aggregate offering amount of up to $13.9 million (the “Prior Canaccord ATM Program”).

Offers and sales under the Prior Canaccord ATM Program had been registered on a registration statement on From F-3 (the “Prior Registration Statement”).

The Prior Canaccord 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 had been able to offer and sell up to 5,000,000 Ordinary Shares (the “Prior B.

Riley ATM Program,” together with the Prior Canaccord ATM Program, the “Prior ATM Programs”).

The sales agent was 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 Canaccord ATM Program and 1,764,860 Ordinary Shares under the Prior B.

Riley ATM Program, the aggregate proceeds of which amounted to $21.8 million, net of issuance costs, in each case in offerings registered under the Prior Registration Statement.

Following our loss of foreign private issuer status on January 1, 2022, we were no longer able to effect offers and sales under our Prior Registration Statement;

therefore, we filed a new shelf registration statement on Form S-3 (file no.

333-365286) on May 27, 2022 to, among other things, facilitate our use of the Amended B.

Riley ATM Program and SVB ATM Program (each as defined below).

On May 27,2022 we entered into an Amended and Restated at Market Issuance Sales Agreement with B.

Riley Securities, Inc., as sales agent, which we, from time to time, were able to offer and sell up to 5,000,000 Ordinary Shares (the “Amended B.

Riley ATM Program”).

Effective August 30, 2022, we terminated the Amended B.

Riley ATM Program, and we had not sold any shares under such agreement.

On September 2, 2022, we entered into a Sales Agreement with SVB Securities LLC, as sales agent, to implement an at-the-market offering program, under which we may from time to time offer and sell up to 5,000,000 Ordinary Shares (the “SVB ATM Program”) under our currently effective Registration Statement on Form S-3 and a related prospectus supplement forming a part thereof.

The sales agent is entitled to a fixed commission of 3% of the aggregate gross proceeds as well as and reimbursement of expenses.

As of September 30, 2022, we had not sold any shares under the SVB ATM Program.

As of March 31, 2023, we had not sold any shares under the SVB ATM Program.

Funding Requirements

We believe that our existing cash resources will be sufficient to meet our projected operating requirements through the second quarter of 2023.

This assumes ongoing R&D, the Hypo PK study and continued investments in production, analytics, and clinical research operations to enable initiation of EB613 phase 3 during the second half of 2023.

This does not include potential partnership payments.

We have based these estimates on assumptions that maybe the different from the actual results, and we may use our available capital resources sooner than we currently expect.

We believe that our existing capital resources will be sufficient to meet our projected operating requirements into the third quarter of 2024, which includes the capital required to fund our ongoing operations, including R&D and the completion of the Phase 1 PK study related to the new formulation EB612.

However, this does not include the capital required to fund our proposed Phase 3 pivotal study for EB613 in osteoporosis and comparative PK study of EB613 and Forteo®.

Our ability to commence such studies will depend on finalizing discussions with the FDA and will require additional funding, which may not be available on reasonable terms, or at all.

Any delay or our inability to secure such funding will delay or prevent the commencement of these studies.

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.

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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;

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, and 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.

Other than the SVB ATM Program, we do not have any committed external sources of funds.

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.

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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.

Our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022 included elsewhere in this Quarterly Report note that there is substantial doubt about our ability to continue as a going concern as of such date.

Our unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2023 included elsewhere in this Quarterly Report note that there is substantial doubt about our ability to continue as a going concern as of such date.

This means that our management has expressed substantial doubt about our ability to continue our operations without an additional infusion of capital from external sources.

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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.

Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021

Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022

The following table sets forth the primary sources and uses of cash for each of the periods set forth below:

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

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Net Cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Net Cash Used in Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2022 was $10.5 million, consisting primarily of our operating loss of $9.9 million and an increase of $2.4 million in our working capital, which was partially offset by approximately $1.8 million of share-based compensation expense.

Net cash used in operating activities for the nine months ended September 30, 2021 was $6.6 million consisting primarily of our operating loss of $8.1 million which was partially offset by $1.5 million of share-based compensation expense.

The increase of $3.9 million in cash used in operating activities for the nine months ended September 30, 2022 compared to the same period in 2021 was mainly attributed to an increase of $1.8 million in our operating loss, an increase of $2.4 million in working capital primarily due to payments to suppliers and services providers, which was partially offset by an increase of $0.3 million in share-based compensation expense.

Net cash used in operating activities for the three months ended March 31, 2023 was $1.6 million, consisting primarily of our operating loss of $2.2 million and a decrease of $0.1 million in our working capital, which was partially offset by approximately $0.5 million of share-based compensation and depreciation expenses.

Net cash used in operating activities for the three months ended March 31, 2022 was $4.8 million, consisting primarily of our operating loss of $3.8 million and an increase of $2.0 million in our working capital, which was partially offset by approximately $1.0 million of share-based compensation and depreciation expenses.

The decrease of $3.2 million in cash used in operating activities for the three months ended March 31, 2023 compared to the same period in 2022 was mainly attributed to a decrease of $1.6 million in our operating loss, a decrease of $2.1 in working capital mainly due to a decrease in payments to suppliers and services providers, which were partially offset by a decrease of $0.5 million in share-based compensation.

Net Cash Used in Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2022 consisted primarily of the purchase of property and equipment and withdrawal of funds in connection with terms of certain employees’ retirement.

Net cash used in investing activities for the nine months ended September 30, 2021 consisted purchase of property and equipment.

Net cash used in investing activities for the three months ended March 31, 2023 and 2022 consisted primarily of the purchase of property and equipment.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2022 consisted of net proceeds of $13 thousand from the exercise of options to purchase Ordinary Shares.

Net cash provided by financing activities for the nine months ended September 30, 2021 consisted primarily of the net proceeds of $21.8 million from the issuance of Ordinary shares under our Prior ATM Programs and $3.5 million from the exercise of options and warrants.

For the three months ended March 31, 2023 and 2022, no cash was used in or provided by financing activities.

Contractual Obligations

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis