Pluri Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Forward-Looking Statements This quarterly report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws, and is subject to the safe-harbor created by such Act and laws. Forward-looking statements may include statements regarding our goals, beliefs, strategies, objectives, plans, including product and technology developments, future financial conditions, results or projections or current expectations. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms, or other variations thereon or comparable terminology. These statements are merely predictions and therefore inherently subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results, performance levels of activity, or our achievements, or industry results to be materially different from those contemplated by the forward-looking statements. Such forward-looking statements appear in this Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and may appear elsewhere in this Quarterly Report on Form 10-Q and include, but are not limited to, statements regarding the following: ● the expected development and potential benefits from our products in treating various medical conditions; ● our entering into certain contracts with third parties; ● the prospects of entering into additional license agreements, or other forms of cooperation with other companies, research organizations and medical institutions; ● our pre-clinical and clinical trials plans, including timing of initiation, expansion, enrollment and conclusion of trials; ● achieving regulatory approvals, including under accelerated paths; ● receipt of future funding from the Israel Innovation Authority, or IIA, the European Union’s Horizon 2020 program, as well as grants from other independent third parties; ● the receipt of funds pursuant to our finance agreement, or the EIB Finance Agreement, with the European Investment Bank, or the EIB, and whether we will achieve the milestones necessary to receive funds thereunder; ● developing capabilities for new clinical indications of placenta expanded, or PLX, cells and new products; ● the progress of our regulated clinical multinational trial program for the potential use of PLX cells in the treatment of patients suffering from ARDS associated with COVID-19; ● our expectation to demonstrate a real-world impact and value from our pipeline, technology platform and commercial-scale manufacturing capacity; ● our expectations regarding our short- and long-term capital requirements; ● our outlook for the coming months and future periods, including but not limited to our expectations regarding future revenue and expenses; ● information with respect to any other plans and strategies for our business; and ● our expectation regarding the impact of the COVID-19 pandemic, including on our clinical trials and operations. 15 Our business and operations are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report. In addition, historic results of scientific research, clinical and preclinical trials do not guarantee that the conclusions of future research or trials would not suggest different conclusions. Also, historic results referred to in this periodic report would be interpreted differently in light of additional research, clinical and preclinical trials results. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described under the heading “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, or the 2021 Annual Report, as well as Item 1A of this Quarterly Report. Readers are also urged to carefully review and consider the various disclosures we have made in that report. As used in this quarterly report, the terms “we”, “us”, “our”, the “Company” and “Pluristem” mean Pluristem Therapeutics Inc. and our wholly owned subsidiaries, Pluristem Ltd. and Pluristem GmbH, unless otherwise indicated or as otherwise required by the context. Overview We are a biotechnology company focused in the field of regenerative medicine, and a leading developer of placenta-based cell therapy product candidates for the treatment of multiple inflammatory, muscle injuries and hematologic conditions. Our operations are focused on the research, development, manufacturing, conducting clinical studies and business development of cell therapeutics and related technologies. We develop, and intend to commercialize, cell therapy production technologies and products that are derived from the human placenta after a full-term delivery of a healthy baby. Our placental expanded, or PLX, cells are adherent stromal cells that are expanded using a proprietary three-dimensional, or 3D, process. This system utilizes a synthetic scaffold to create an artificial 3D environment where placental-derived stromal cells can grow. Our PLX cells can be administered to patients off-the-shelf, without blood or tissue matching or additional manipulation prior to administration. PLX cells are believed to release a range of therapeutic proteins in response to the patient’s condition such as inflammation, muscle trauma, hematological disorders and radiation damage. We are conducting several multinational clinical studies which consist of a Phase III clinical study in muscle recovery following surgery for hip fracture and two Phase II clinical studies in Acute Respiratory Distress Syndrome, or ARDS, associated with COVID-19 in the United States, Europe and Israel. In addition, we are focusing on other clinical programs in the hematological field such as a Phase I clinical study for incomplete recovery following bone marrow transplantation in the United States and Israel, an investigator-led Phase I/II Chronic Graft versus Host Disease study in Israel, and Acute Radiation Syndrome, or ARS, under the U.S. Food and Drug Administration, or FDA, animal rule. We believe that each of these indications is a severe unmet medical need. On July 8, 2021, we announced that we are bringing our COVID-19 complicated by ARDS Phase II studies in the United States, Europe and Israel to clinical readout. The analysis will be based on 89 patients enrolled. We expect to announce the topline results of the readout during the fourth calendar quarter of 2021. Our Phase III clinical study in muscle recovery following surgery for hip fracture has enrolled more than 95 percent of its patients and is expected to complete enrollment in November 2021. We have completed enrollment in our first in human Phase I clinical study in incomplete hematopoietic recovery following hematopoietic cell transplantation, or HCT, in the United States and Israel. The study has completed enrollment of 21 patients and is designed to assess the safety of PLX-R18. We completed one year follow up for all patients during September 2021. On April 2021, we announced positive topline results of this study as disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission, or the SEC. Our manufacturing facility complies with the European, Japanese, Israeli, South Korean and the FDA’s current Good Manufacturing Practice, or cGMP, requirements and has been inspected and approved by the European and Israeli regulators for production of PLX cells for late stage trials. We have also been granted manufacturer/importer authorization and cGMP Certification by the Israeli Ministry of Health. If we obtain FDA and other regulatory approvals to market PLX cells, we expect to have in-house production capacity to grow PLX cells in commercial quantities. Our goal is to make significant progress with our clinical pipeline and our clinical studies in order to ultimately bring innovative, potent therapies to patients who need new treatment options. We expect to demonstrate a real-world impact and value from our pipeline, technology platform and commercial-scale manufacturing capacity. Our business model for commercialization and revenue generation includes, but is not limited to, licensing deals, joint ventures with pharmaceutical companies, direct sale of our products, and partnerships. 16 RESULTS OF OPERATIONS – THREE MONTHS ENDED SEPTEMBER 30, 2021 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2020. Revenues We had no revenues during the three-month periods ended September 30, 2021 and September 30, 2020. Research and Development Expenses, Net Research and development expense, net (costs less participation and grants by the Horizon 2020 program, the IIA and other parties) for the three-month period ended September 30, 2021 increased by 7% from $5,938,000 for the three-month period ended September 30, 2020 to $6,353,000. The increase is mainly attributed to: (1) an increase in payroll expenses related to payroll adjustments and the strength of the New Israel Shekel, or NIS, against the U.S. dollar and (2) a decrease in participation by the EU with respect to the Horizon 2020 program, as a result of our utilizing the entirety of the grant under such program during the three month period ended September 30, 2020. The increase was partially offset by lower clinical trial subcontractor expenses associated with our CLI clinical trial that was terminated and a decrease in materials expenses. General and Administrative Expenses General and administrative expenses for the three-month period ended September 30, 2021 increased by 82% from $2,799,000 for the three-month period ended September 30, 2020 to $5,088,000. The increase is mainly attributed to: (1) an increase in share-based compensation expenses related to the restricted stock units, or RSUs, granted, as a result of the fair value of such grants at the time they were made and the expected vesting periods, including the RSU grants to our Chief Executive Officer and Executive Chairman, and (2) an increase in directors and officers insurance premium expenses. The increase was partially offset by a decrease in payroll expenses related to the entitlement of Mr. Aberman, our Executive Chairman, to certain adjustment fees pursuant to his amended consulting agreement recorded in the three months ended September 30, 2020. Financial Income Financial income decreased from a financial income of $301,000 for the three-month period ended September 30, 2020 to a financial income of $263,000 for the three-month period ended September 30, 2021. This decrease is mainly attributable to decrease in income from exchange rate differences, partially offset by an increase in interest income as a result of an increase in deposits. Financial Expenses Financial expenses increased from a financial expense of $53,000 for the three-month period ended September 30, 2020 to a financial expense of $254,000 for the three-month period ended September 30, 2021. This increase is mainly attributable to interest expenses related to the EIB loan provided to us pursuant to the EIB Finance Agreement. Net Loss Net loss for the three-month period ended September 30, 2021 was $11,432,000 as compared to net loss of $8,489,000 for the three-month period ended September 30, 2020. The increases in net loss were mainly due to increases in research and development expenses and general and administrative expenses, as described above. Net loss per share for the three-month period ended September 30, 2021 was $0.36 as compared to $0.33 for the three-month period ended September 30, 2020. 17 For the three-month periods ended September 30, 2021 and September 30, 2020, we had weighted average common shares outstanding of 32,000,789 and 25,535,593, respectively, which were used in the computations of net loss per share for the three-month periods. The increase in weighted average common shares outstanding reflects the issuance of additional shares mainly related to the issuances of shares pursuant to a securities purchase agreement with certain institutional investors in February 2021, issuances of shares pursuant to our Open Market Sale Agreement TM , or the ATM Agreement, that we entered into with Jefferies LLC, or Jefferies, on July 16, 2020, issuances of additional shares upon the settlement of RSUs issued to directors, employees and consultants , and shares issued as a result of exercises of outstanding warrants and options. Liquidity and Capital Resources As of September 30, 2021, our total current assets were $62,826,000 and total current liabilities were $10,365,000. On September 30, 2021, we had a working capital surplus of $52,461,000, shareholders’ equity of $48,907,000 and an accumulated deficit of $341,453,000. Our cash and cash equivalents as of September 30, 2021 amounted to $14,611,000, compared to $6,625,000 as of September 30, 2020, and compared to $31,241,000 as of June 30, 2021. Cash balances changed in the three months ended September 30, 2021 and 2020 for the reasons presented below. Operating activities used cash of $8,789,000 in the three months ended September 30, 2021, compared to $6,141,000 in the three months ended September 30, 2020. Cash used in operating activities in the three months ended September 30, 2021 and 2020 consisted primarily of payments of fees to our suppliers, subcontractors, professional services providers and consultants, including the costs of our clinical studies, and payments of salaries to our employees, partially offset by grants from the IIA, the EU’s Horizon 2020 program, Israel’s Ministry of Economy and other research grants. Investing activities used cash of $7,240,000 in the three months ended September 30, 2021, compared to cash provided of $4,199,000 for the three months ended September 30, 2020. The investing activities in the three-month period ended September 30, 2021 consisted primarily of the investment of $12,084,000 in short-term deposits and payments of $15,000 related to investment in property and equipment, partially offset by the withdrawal of $4,859,000 of long-term deposits. The investing activities in the three-month period ended September 30, 2020 consisted primarily of the withdrawal of $3,754,000 of short-term deposits and the withdrawal of $522,000 of long-term deposits, partially offset by payments of $77,000 related to investment in property and equipment. Financing activities did not generate cash during the three months ended September 30, 2021, compared to $300,000 for the three months ended September 30, 2020. The cash generated in the three months ended September 30, 2020 from financing activities was related to net proceeds of $300,000 from the exercise of warrants. On July 16, 2020, we entered into the ATM Agreement with Jefferies, pursuant to which we may issue and sell our common shares having an aggregate offering price of up to $75,000,000 from time to time through Jefferies. Upon entering into the ATM Agreement, we filed a new shelf registration statement on Form S-3, which was declared effective by the SEC on July 23, 2020. During the year ended June 30, 2021, we sold 1,045,097 of our common shares under the ATM Agreement at an average price of $8.50 per share for aggregate net proceeds of approximately $8,506,000. During the three-months ended September 30, 2021, we did not sell any of our common shares under the ATM Agreement. In April 2020, we and our subsidiaries, Pluristem Ltd. and Pluristem GmbH, executed the EIB Finance Agreement for funding of up to €50 million in the aggregate, payable in three tranches. The proceeds from the EIB Finance Agreement are intended to support our research and development in the European Union to further advance our regenerative cell therapy platform, and to bring the products in our pipeline to market. The proceeds from the EIB Finance Agreement are expected to be deployed in three tranches, subject to the achievement of certain clinical, regulatory and scaling up milestones. 18 During June 2021, we received the first tranche in the amount of $24,449,000 (€20 million) pursuant to the EIB Finance Agreement. The amount received is due to be repaid on June 1, 2026 and bears annual interest of 4% to be paid together with the principal of the loan. As of September 30, 2021, the interest accrued was in the amount of $304,000 (€263,000). According to the IIA grant terms, we are required to pay royalties at a rate of 3% on sales of products and services derived from technology developed using this and other IIA grants until 100% of the dollar-linked grants amount plus interest are repaid. In the absence of such sales, no payment is required. Through September 30, 2021, total grants obtained from the IIA aggregated to approximately $27,743,000 and total royalties paid and accrued amounted to $169,000. In June 2020, we announced that we were selected as a member of the CRISPR-IL consortium, a group funded by the IIA. CRISPR-IL brings together the leading experts in life science and computer science from academia, medicine, and industry, to develop Artificial Intelligence, or AI, based end-to-end genome-editing solutions. These next-generation, multi-species genome editing products for human, plant, and animal DNA, have applications in the pharma, agriculture, and aquaculture industries. CRISPR-IL is funded by the IIA with a total budget of approximately $10,000,000 of which, an amount of approximately $480,000 is a direct grant allocated to us, for the initial period of 18 months. Through September 30, 2021, we received total grants of approximately $443,000 in cash from the IIA pursuant to the CRISPR-IL consortium program, out of which an amount of $42,000 was received during the three-months ended September 30, 2021.During October 2021, we received an approval for an additional grant of approximately $583,000 from the IIA pursuant to the CRISPR-IL consortium program, for an additional period of 18 months. The currency of our financial portfolio is mainly in U.S. dollars and we use options contracts in order to hedge our exposures to currencies other than the U.S. dollar. For more information, please see Item 7A. - “Quantitative and Qualitative Disclosures about Market Risk” in the 2021 Annual Report on form 10-K for the fiscal year ended June 30, 2021. We have an effective Form S-3 registration statement (File No. 333-239890), filed under the Securities Act of 1933, as amended, with the SEC using a “shelf” registration process. Under this shelf registration process, we may, from time to time, sell our common shares, preferred shares and warrants to purchase common shares, and units of two or more of such securities in one or more offerings up to a total dollar amount of $250,000,000. As of November 4, 2021, other than the $75,000,000 of common shares we are eligible to sell pursuant to the ATM Agreement, and the $30,000,000 of common shares we sold in the registered direct offering in February 2021, no securities have been sold pursuant to our effective Form S-3 registration statement. Outlook We have accumulated a deficit of $341,453,000 since our inception in May 2001. We do not expect to generate any significant revenues from sales of products in the next twelve months. Our cash needs may increase in the foreseeable future. We expect to generate revenues, from the sale of licenses to use our technology or products, but in the short and medium terms will unlikely exceed our costs of operations. We may be required to obtain additional liquidity resources in order to support the commercialization of our products and maintain our research and development and clinical trials activities. We are continually looking for sources of funding, including non-diluting sources such as the EIB Finance Agreement, grants from the IIA, EU’s Horizon 2020 program, Israel’s Ministry of Economy and other research grants, collaboration with other companies and sales of our common shares. We believe that we have sufficient cash to fund our operations for at least the next 12 months.