Item 2. Management’s Discussion and Analysis
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, time-to-market and potential benefits from our products in regenerative medicine, biologics and food technology, or food tech, as well as potentially in other industries and verticals that have a need for our mass scale and cost-effective cell expansion platform;
●
our expectations of market and industry growth;
●
the prospects of entering into additional license agreements, or other forms of cooperation or strategic partnerships with other companies, research organizations and medical institutions, including, without limitation Tnuva (as defined below);
●
our pre-clinical and clinical study plans, including timing of initiation, scale, expansion, enrollment, results, and conclusion of trials;
●
achieving regulatory approvals;
●
receipt of future funding from the Israel Innovation Authority, or IIA, the European Union’s Horizon programs, the National Institutes of Health, or NIH, as well as grants from other independent third parties;
●
developing capabilities for new clinical indications of placenta expanded, or PLX, cells and new products;
●
our expectation to solve medicine’s unmet needs and demonstrate a real-world impact and value from our pipeline, technology platform and commercial-scale manufacturing capacity;
●
the possible impacts of cybersecurity incidents on our business and operations;
●
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;
●
changes to the Israel’s judicial system, which if pursued by the Israeli government, may negatively impact the business environment in Israel with reluctance for investments or transactions as well as lead to increased currency fluctuations, downgrades in credit rating and increased interest rates; and
●
general market, political and economic conditions in the countries in which we operate including those related to recent unrest in the Middle East and armed conflict between Israel and Hamas, Hezbollah and other terrorist organizations from the Gaza Strip and Lebanon.
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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 and development, clinical and preclinical trials do not guarantee that the conclusions of future research and development
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, development, 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, 2023, or the 2023 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 on Form 10-Q, the terms “we”, “us”, “our”, the “Company” and “Pluri”
mean Pluri Inc. and our wholly owned subsidiaries, Pluri Biotech Ltd. and Pluristem GmbH, and our subsidiary Ever After Foods Ltd., or
Ever After, unless otherwise indicated or as otherwise required by the context.
Overview
We are a biotechnology company
with an advanced cell-based technology platform. We have developed a unique three-dimensional, or 3D, technology platform for cell expansion
with an industrial scale in-house Good Manufacturing Practice, or GMP, cell manufacturing facility. We are utilizing our technology in
the field of regenerative medicine,food tech, Contract Development and Manufacturing Organization, or CDMO, and agtech and plan to utilize
it in industries and verticals that have a need for our mass scale and cost-effective cell expansion platform.
Our operations are focused
on the research, development and manufacturing of cells and cell-based products, and business development of cell therapeutics and cell-based
technologies and cell-based products.
Cell Therapy
We use our advanced cell-based
technology platform in the field of regenerative medicine to develop placenta-based cell therapy product candidates for the treatment
of inflammatory, muscle injuries and hematologic conditions. Our PLX cells are adherent stromal cells that are expanded using our 3D platform. 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.
In the pharmaceutical area,
we have focused on several indications utilizing our product candidates, including, but not limited to, muscle recovery following surgery
for hip fracture, incomplete recovery following bone marrow transplantation, critical limb ischemia, or CLI, Chronic Graft versus Host
Disease and a potential treatment for Hematopoietic Acute Radiation Syndrome, or H-ARS. Some of these studies have been completed while
others are still ongoing. We believe that each of these indications is a severe unmet medical need.
In July 2023, we announced
that we signed a three-year $4.2 million contract with the U.S. National Institute of Allergy and Infectious Diseases, or NIAID, which
is part of the NIH. Under such contract, we will collaborate with the U.S. Department of Defense’s Armed Forces Radiobiology Research
Institute, or AFRRI, and the Uniformed Services University of Health Sciences, or USUHS, in Maryland, U.S.A., to further advance the development
of our PLX-R18 cell therapy as a potential novel treatment for H-ARS, a deadly disease that can result from nuclear disasters and radiation
exposure.
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PluriCDMO™
On January 8, 2024, we
announced that we are launching a new business division offering cell therapy manufacturing services as a CDMO: PluriCDMO™. PluriCDMO™
offers services relating to early preclinical development, through late-stage clinical trials and commercialization, with a mission to
deliver high-quality, essential therapies to patients.
AgTech
On
January 23, 2024, we announced that we are launching cell-based coffee business activity through a new business vertical, PluriAgtech.
PluriAgtech’s new cell-based coffee business activity is leveraged by Pluri’s 3D cell expansion and has been developed to
address the growing global demand for sustainable, high-quality coffee at mass scale production.
Food Tech
On January 5, 2022, we signed
definitive collaboration agreements with Tnuva Food Industries – Agricultural Cooperative in Israel Ltd., through its fully owned
subsidiary, Tnuva Food-Tech Incubator (2019), Limited Partnership, or Tnuva. Under the definitive collaboration agreements, or the Joint
Venture Agreement, we established a new company, Ever After, with the purpose of developing cultivated meat products of all types and
kinds. Ever After is engaged in the development, manufacturing and commercialization of technology, know-how and products that will be
based on licensed products relating to the field of cultivated meat.
Our joint venture successfully
completed proof of concept in its development of cultivated meat based on our cell-based technology platform. Ever After is also using
PluriMatrix for producing cultivated meat.
RESULTS OF OPERATIONS – THREE AND SIX
MONTHS ENDED DECEMBER 31, 2023 COMPARED TO THREE AND SIX MONTHS ENDED DECEMBER 31, 2022.
Revenues
Revenues for each of the six-month
and three-month periods ended December 31, 2023 were $159,000 and $105,000, respectively, as compared to $89,000 and $2,000, respectively,
during the six-month and three-month periods ended December 31, 2022. Revenues for the six-month and three-month periods ended December
31, 2023 were mainly related to services provided in the field of process and product development in the CDMO and agtech field. Revenues
for the six-month and three-month periods ended December 31, 2022 were mainly related to our collaboration in the biologic field. The
increase in revenues is mainly attributed to implementation of our new business strategy and collaboration in various industries, specifically
in the CDMO and agtech field.
Research and Development Expenses, Net
Research and development,
or R&D, expenses, net (costs less participation by the IIA, Horizon Europe and the NIAID) for the six-month period ended December
31, 2023 decreased by 26% from $8,056,000 for the six-month period ended December 31, 2022 to $5,957,000. The decrease is mainly attributed
to: (1) a decrease in clinical studies expenses following the completion of our CLI, COVID-19 and muscle regeneration following hip fracture
studies, and (2) a decrease in salaries and related expenses due to the exchange rate differences related to the strength of the U.S.
dollar against the NIS , reduction in head count of 8 R&D employees (100 R&D employees on December 31, 2023, compared to 108 R&D
employees on December 31, 2022) and as a result of our cost reduction and efficiency plans partially offset by (3) a decrease in grants
participation, specifically the completion of the Horizon 2020 program.
R&D expenses, net (costs
less participation by the IIA, Horizon Europe and the NIAID) for the three-month period ended December 31, 2023 decreased by 22% from
$3,785,000 for the three-month period ended December 31, 2022 to $2,964,000. The decrease is mainly attributed to the same reasons described
in the precedent paragraph.
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General and Administrative Expenses
General and administrative
expenses for the six-month period ended December 31, 2023 decreased by 15% from $5,635,000 for the six-month period ended December 31,
2022 to $4,792,000 mainly due to: (1) a decrease in salaries and related expenses due to the exchange rate differences relates to the
strength of the U.S. dollar against the NIS and as a result of our cost reduction and efficiency plan, (2) the reduction of our CEO’s
salary, whereby he waived 75% of his salary and converted it to restricted stock units, or RSUs, and options, (3) a decrease in costs
relates to our directors and officers insurance policy, and (4) a decrease in share-based compensation expenses related RSU expenses amortization
over time.
General and administrative
expenses for the three-month period ended December 31, 2023 decreased by 19% from $2,896,000 for the three-month period ended December
31, 2022 to $2,354,000 mainly due to: (1) a decrease in salaries and related expenses due to the exchange rate differences relates to
the strength of the U.S. dollar against the NIS and due to temporary reduction in employees’ regular working hours for a limited
period, (2) the reduction of our CEO’s salary, whereby he waived 75% of his salary and converted it to RSUs and options, and (3)
a decrease in share-based compensation expenses related to employee terminations and RSU expenses amortization over time.
Other Financial Income (expenses), net
Other financial income (expenses),
net, changed from $515,000 in financial expenses for the six-month period ended December 31, 2022 to $928,000 in financial income for
the six-month period ended December 31, 2023. This change is mainly attributed to exchange rate related to NIS deposits following the
strength of the U.S. dollar against the NIS, from increased income related to interest on deposits, due to an increase in interest rates
and income from hedging transactions.
Other financial income (expenses),
net, changed from $1,363,000 in financial expenses for the three-month period ended December 31, 2022 to $435,000 in financial income
for the three-month period ended December 31, 2023. This change is mainly attributable to a reduction in exchange rate differences expenses
related to the European Investment Bank (“EIB”) loan, a reduction in exchange rate differences expenses related to NIS deposits
following the strength of the U.S. dollar against the NIS and from increased income related to interest on deposits, due to an increase
in interest rates.
Interest Expenses
Interest expenses increased
by 6% from $406,000 for the six-month period ended December 31, 2022 to interest expenses of $430,000 for the six-month period ended December
31, 2023. This increase is attributable solely to exchange rate differences of Euro versus the U.S. dollar, which relates to the EIB loan
interest.
Interest expenses increased
by 2% from $212,000 for the three-month period ended December 31, 2022 to interest expenses of $216,000 for the three-month period ended
December 31, 2023. This increase is attributable solely to exchange rate differences of Euro versus the U.S. dollar, which relates to
the EIB loan interest.
Net Loss
Net loss for the six-month
and three-month periods ended December 31, 2023 were $10,092,000 and $4,994,000, respectively, as compared to net loss of $14,523,000
and $8,254,000 for the six-month and three-month periods ended December 31, 2022. The decrease was due to a decrease in general and administrative
expenses and research and development expenses, as part of our efforts to reduce costs pursuant to an efficiency plan, and due to an increase
in income due to additional collaborations signed. Net loss per share attributed to shareholders for the six-month and three-month periods
ended December 31, 2023 were $0.24 and $0.12, respectively, as compared to $0.44 and $0.24 for the six-month and three-month periods ended
December 31, 2022. We had net loss attributed to our non-controlling interest in Ever After for the six-month and three-month periods
ended December 31, 2023 of $226,000 and $89,000, respectively.
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For the six-month and three-month
periods ended December 31, 2023 and 2022, we had weighted average common shares outstanding of 41,526,817, 41,428,439 and 32,878,434,
33,194,622, respectively, which were used in the computations of net loss per share for the six-month and three-month periods.
The increase in weighted average
common shares outstanding reflects the issuance of additional shares pursuant to a private placement offering we conducted in December
2022, or the December 2022 Private Placement, and the issuance of additional shares upon the vesting of RSUs and RS issued to directors,
employees and consultants.
Liquidity and Capital Resources
As of December 31, 2023, our
total current assets were $32,252,000 and total current liabilities were $4,530,000. On December 31, 2023, we had a working capital surplus
of $27,722,000, total equity of $6,617,000, out of which $2,218,000 is attributed to the non-controlling interest in Ever After, and an
accumulated deficit of $409,450,000.
Our cash and cash equivalents
as of December 31, 2023 amounted to $5,468,000, compared to $8,818,000 as of December 31, 2022, and compared to $5,360,000 as of June
30, 2023. Cash balances changed in the six months ended December 31, 2023 compared to the six months ended December 2022 for the reasons
presented below.
Net cash used for operating
activities was $9,506,000 in the six months ended December 31, 2023, compared to $13,889,000 in the six months ended December 31, 2022.
The decrease is mainly attributed to a decrease in net loss following the completion of clinical trials and the implementation of our
cost reduction and efficiency plan, including a temporary reduction in the scope of roles and salaries of executive officers. Cash used
in operating activities in the six months ended December 31, 2023 and 2022 consisted primarily of payments to suppliers, subcontractors,
professional services providers and consultants, and payments of salaries to our employees, partially offset by grants from the IIA, the
Horizon Europe program, and funds received from the NIAID contract.
Investing activities provided
cash of $9,721,000 in the six months ended December 31, 2023, compared to cash provided of $7,062,000 for the six months ended December
31, 2022. The investing activities in the six-month period ended December 31, 2023 and December 31, 2022 consisted primarily of the withdrawal
of short-term deposits, net of $10,013,000 and $7,203,000, respectively.
We had no financing activities
in the six months ended December 31, 2023. The cash provided in the six months ended December 31, 2022 by financing activities was related
to net proceeds of $5,693,000 related to issuances of common shares and warrants, net of issuance cost that were paid in cash, in the
December 2022 Private Placement.
Between December 13, 2022
and December 27, 2022, we entered into a series of securities purchase agreements with several purchasers for an aggregate of 8,155,900
common shares and warrants, or the Warrants, to purchase up to 8,155,900 common shares. On December 13, 2022, we executed securities purchase
agreements to sell, at a purchase price of $1.03 per share, up to 5,579,883 common shares and Warrants to purchase up to 5,579,833 common
shares, with an exercise price of $1.03 per share and a term of three years. On December 14, 2022, we executed securities purchase agreements
to sell, at a purchase price of $1.05 per share, up to 2,068,517 common shares and Warrants to purchase up to 2,068,517 common shares,
with an exercise price of $1.05 per share and a term of three years. On December 15, 2022, we executed securities purchase agreements
to sell, at a purchase price of $1.06 per share, up to 237,500 common shares and Warrants to purchase up to 237,500 common shares, with
an exercise price of $1.06 per share and a term of three years. On December 19, 2022, we executed a securities purchase agreement to sell,
at a purchase price of $1.09 per share, up to 135,000 common shares and Warrants to purchase up to 135,000 common shares, with an exercise
price of $1.09 per share and a term of three years. On December 27, 2022, we executed a securities purchase agreement to sell, at a purchase
price of $1.12 per share, up to 135,000 common shares and Warrants to purchase up to 135,000 common shares, with an exercise price of
$1.12 per share and a term of three years. The Warrants sold in the December 2022 Private Placement will be exercisable upon the later
of six months from their issuance date, or from the date the authorized shares increased. The Company issued 8,155,900 common shares and
warrants that relate to the December 2022 Private Placement and received $8,024,000 as of that date net of $445,000 from issuance expenses.
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On April 27, 2023, our shareholders
approved an amendment to our articles of incorporation of to increase the number of authorized common shares from 60,000,000 shares to
300,000,000 shares and such increase was effectuated on May 1, 2023 when the Company filed its amendment to its articles of incorporation
reflecting such increase. As such, the Warrants became exercisable on May 1, 2023.
On December 14, 2022, Yaky
Yanay, our Chief Executive Officer, agreed to forgo, starting January 1, 2023, $375,000 of his annual cash salary for the next twelve
months in return for equity grants, issuable under our existing equity compensation plans. In that regard, we granted Mr. Yanay (i) 334,821
RSUs, vesting ratably each month, and (ii) options to purchase 334,821 common shares, vesting ratably each month, with a term of 3 years,
at an exercise price of $1.12 per share. In addition, the Board of Directors also agreed to grant Mr. Yanay options to purchase 1,500,000
common shares, with a term of 3 years, with the following terms: (i) options to purchase 500,000 common shares at an exercise price of
$1.56 per share, 50% vesting on June 30, 2023 and 50% vesting on December 31, 2023, (ii) options to purchase 500,000 common shares at
an exercise price of $2.08 per share, 50% vesting on June 30, 2023 and 50% vesting on December 31, 2023, and (iii) options to purchase
500,000 common shares at an exercise price of $2.60 per share, 50% vesting on June 30, 2023 and 50% vesting on December 31, 2023. All
options were granted in January 2023 and will expire three years from the later of the vesting date or the date which the Company increased
its authorized share capital.
On
December 25, 2023, Yaky Yanay, our Chief Executive Officer, agreed to a reduction in the scope of his role and to a 20% reduction of his
salary in the amount of 39,600 NIS for the months of January 2024 and February 2024.
On
January 12, 2024, Chen Franco-Yehuda, our Chief Financial Officer, agreed to a reduction in the scope of her role and to a 20% reduction
of her salary in the amount of 39,000 NIS for the months of December 2023, January 2024 and February 2024.
In April 2020, we and
our subsidiaries, Pluri Biotech Ltd. and Pluristem GmbH, executed the EIB Finance Agreement for non–dilutive funding of up to €50
million in the aggregate, payable in three tranches. The proceeds from the EIB Finance Agreement were 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 term of the project was three years commencing on January 1, 2020.
During June 2021, we received
the first tranche in the amount of €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 December 31, 2023, the interest
accrued was in the amount of €2,062,000. In addition to the interest payable, the EIB is also entitled to royalty payments, pro-rated
to the amount disbursed from the EIB loan, on the Company’s consolidated revenues beginning in the fiscal year 2024 up to and including
its fiscal year 2030, in an amount equal to up to 2.3% of the Company’s consolidated revenues below $350 million, 1.2% of the Company’s
consolidated revenues between $350 million and $500 million and 0.2% of the Company’s consolidated revenues exceeding $500 million.
As the project term ended on December 31, 2022, we do not expect to receive additional funds pursuant to the EIB Finance Agreement.
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 December 31, 2023, total grants obtained from the IIA aggregated to approximately $27,848,000 and total royalties
paid and accrued amounted to $179,000.
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 was a direct grant allocated to us, for the initial period of 18 months. 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 eighteen months. During January 2023, we received approval for an extension of an additional 2 months
to finish the program until June 30, 2023. The CRISPR-IL consortium program does not include any obligation to pay royalties.
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Through
December 31, 2023, we received total grants of approximately $774,000 in cash from the IIA pursuant to the CRISPR-IL consortium program;
no amount was received during the three months ended December 31, 2023.
On
September 6, 2022, we announced that a €7.5 million non-dilutive grant from the European Union’s Horizon program was awarded
to Advanced PeRsOnalized Therapies for Osteoarthritis (PROTO), an international collaboration led by Charité Berlin Institute of
Health Center for Regenerative Therapies. The goal of the PROTO project is to utilize our PLX-PAD cells in a Phase I/IIa study for the
treatment of mild to moderate knee osteoarthritis. Final approval of the grant is subject to completion of the consortium agreement. An
amount of approximately Euro 500,000 (approximately $533,745) will be a direct grant that will be allocated to us. Through December 31,
2023, we received a payment of approximately $185,000 in cash, which relates to the PROTO program.
The
Phase I/II study will be carried out by Charité, together with us and other members of the international consortium under the leadership
of Professor Tobias Winkler, Principal Investigator, at the Berlin Institute of Health Center of Regenerative Therapies, Julius Wolff
Institute and Center for Musculoskeletal Surgery.
On
July 11, 2023, we signed a three-year $4,200,000 contract with the NIAID, which is part of the NIH. We will collaborate with the U.S.
Department of Defense’s, or DoD’s, AFRRI and USUHS to further advance the development of our PLX-R18 cell therapy as a potential
novel treatment for H-ARS. H-ARS is a deadly disease that can result from nuclear disasters and radiation exposure. The period of performance
of this contract will be from July 1, 2023 through June 30, 2024, which may be extended for an additional two-year period. As of December
31, 2023, we have received from the NIAID approximately $382,000 and we expect to receive an additional amount of approximately $343,000.
The currency of our financial
portfolio is mainly in U.S. dollars and we use options contracts and other financial instruments 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 2023 Annual Report.
We have an effective Form
S-3 registration statement (File No. 333-273347), 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 stock and warrants
to purchase common shares, and of two or more of such securities, in one or more offerings for an aggregate initial offering price of
$200,000,000. As of February 12, 2024, no securities have been sold pursuant to our effective Form S-3 registration statement.
Outlook
We have accumulated a deficit
of $409,450,000 since our inception in May 2001. We do not expect to generate any significant revenues from sales of products in the next
twelve months. We expect to generate revenues, from collaborations and sales of licenses to use our technology or products, but in the
short and medium terms these 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 technology and maintain our research and
development activities.
We are continually looking
for sources of funding, including non-diluting sources such as collaboration with other companies via licensing agreements, service agreements
under our CDMO business, joint venture and partnerships, R&D contracts such as our agreement with the NIAID, research grants such
as the IIA grants and the European Union grant, and sales of our common shares.
We believe that we have sufficient
cash to fund our operations for at least the next twelve months.
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