BioLineRx(BLRX) - 2018 Q4 - Annual Report

PART I Key Information This section presents selected consolidated financial data for the past five years, highlighting consistent operating losses and an accumulated deficit, along with a comprehensive list of risk factors Selected Financial Data The company presents selected consolidated financial data for the five years ended December 31, 2018, showing consistent operating and net losses primarily driven by research and development expenses Selected Consolidated Financial Data (2014-2018) | Financial Metric | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | | Research and development expenses | ($11.2 million) | ($19.5 million) | ($19.8 million) | | Operating loss | ($16.5 million) | ($25.2 million) | ($25.6 million) | | Net loss | ($15.8 million) | ($24.4 million) | ($23.0 million) | | Total assets (at year-end) | $38.9 million | $61.0 million | $56.2 million | | Total shareholders' equity (at year-end) | $35.0 million | $52.9 million | $41.3 million | All figures in millions of U.S. dollars. Risk Factors The company identifies numerous material risks that could adversely affect its business, including financial, operational, and geopolitical factors - The company is a clinical-stage biopharmaceutical firm with a history of operating losses, recording net losses of $15.8 million in 2016, $24.4 million in 2017, and $23.0 million in 2018, with an accumulated deficit of $222.5 million as of December 31, 2018[41] - Existing cash balances, including proceeds from a February 2019 offering, are expected to be sufficient to meet capital requirements into 2021, excluding potential milestone payments[43] - The company received a deficiency letter from Nasdaq on December 3, 2018, for failing to meet the minimum bid price requirement of $1.00 per share, with a compliance deadline of June 3, 2019[146][147] - Operations are conducted in Israel, exposing the company to risks from political, economic, and military instability in the region[159][160] Information on the Company This section details the company's history, business overview, and strategic focus on oncology, including its clinical-stage therapeutic candidates and key collaboration agreements History and Development of the Company BioLineRx Ltd. was founded in Israel in 2003, with its shares listed on the TASE since 2007 and ADSs on Nasdaq since 2011, and it acquired Agalimmune Ltd. in 2017 - The company was founded in 2003, listed on the TASE in 2007 (BLRX), and listed ADSs on Nasdaq in 2011 (BLRX)[182] - In March 2017, BioLineRx acquired Agalimmune Ltd., a private UK-based company, expanding its pipeline[182] Business Overview BioLineRx is a clinical-stage biopharmaceutical company focused on oncology, with lead candidates BL-8040 and AGI-134, and strategic collaborations with MSD and Genentech - The company's strategic focus is on oncology, with two main clinical-stage candidates: BL-8040 and AGI-134[184] - BL-8040 is a CXCR4 antagonist being developed for solid tumors, AML, and stem cell mobilization, having received Orphan Drug Designation from the FDA for AML, stem cell mobilization, and pancreatic cancer[187][190] - AGI-134 is a synthetic alpha-Gal glycolipid immunotherapy for solid tumors, with a Phase 1/2a clinical study initiated in August 2018[204] - The company has active collaborations with MSD (Merck) and Genentech (Roche) to evaluate BL-8040 in combination with their respective checkpoint inhibitors, KEYTRUDA® and TECENTRIQ®[186] Operating and Financial Review and Prospects This section provides management's discussion and analysis of the company's financial condition and results of operations, highlighting significant losses, funding sources, and future capital requirements - The company has a history of significant losses, with an accumulated deficit of $222.5 million as of December 31, 2018, primarily funded through equity sales and collaboration payments[414][415] Comparison of Operating Expenses (in millions USD) | Expense Category | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | | Research & Development | $11.2 | $19.5 | $19.8 | | Sales & Marketing | $1.4 | $1.7 | $1.4 | | General & Administrative | $4.0 | $4.0 | $4.4 | - Net cash used in operating activities increased to $24.2 million in 2018, up from $20.5 million in 2017 and $14.5 million in 2016, primarily due to increased R&D activities[465] - The company believes its existing cash resources, including proceeds from a February 2019 public offering, are sufficient to fund operations into 2021, but substantial additional funds will be required thereafter[462][468] Directors, Senior Management and Employees This section provides information on the company's executive officers and directors, their compensation, board practices, and employee data Employee Headcount by Function | Function | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | | Management and administration | 11 | 11 | 10 | | Research and development | 28 | 36 | 34 | | Sales and marketing | 4 | 4 | 4 | | Total | 43 | 51 | 48 | - As of March 25, 2019, all directors and executive officers as a group (12 persons) beneficially owned 2.65 million ordinary shares, representing 1.8% of the class[604] - The Board of Directors consists of seven members, including two external directors as required by Israeli law, and has an Audit Committee, a Compensation Committee, and an Investment Monitoring Committee[504][525][543][560] 2018 Compensation for Top 5 Executive Officers (in thousands USD) | Name and Position | Salary | Social Benefits | Bonuses | Value of Options Granted | All Other Compensation | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Philip A. Serlin, CEO | $0.25 million | $0.07 million | $0.12 million | $0.38 million | $0.02 million | $0.85 million | | Mali Zeevi, CFO | $0.15 million | $0.04 million | $0.06 million | $0.19 million | $0.02 million | $0.45 million | | Hillit Mannor Shachar, VP Business Dev. | $0.13 million | $0.03 million | $0 | $0.09 million | $0.01 million | $0.26 million | | Abi Vainstein-Haras, VP Clinical Dev. | $0.17 million | $0.05 million | $0.04 million | $0.22 million | $0.02 million | $0.50 million | | Ella Sorani, VP R&D | $0.17 million | $0.05 million | $0.04 million | $0.16 million | $0.02 million | $0.45 million | Major Shareholders and Related Party Transactions This section identifies the company's major shareholders and describes related party transactions, primarily limited to employment and indemnification agreements Major Shareholders (as of March 25, 2019) | Shareholder | Percent of Class | | :--- | :--- | | BVF Partners L.P. | 21.2% | | Senvest Management, LLC | 5.1% | - Related party transactions consist of employment agreements and indemnification agreements with the company's directors and executive officers[630][631] Financial Information This section refers to the full consolidated financial statements in Item 18 and confirms the absence of material legal proceedings or cash dividend payments - The company is not involved in any material legal proceedings[632] - The company has never declared or paid cash dividends and does not intend to in the near future, planning to reinvest any future earnings[633] The Offer and Listing This section provides details on the trading markets for the company's securities, with ADSs on Nasdaq and ordinary shares on the TASE - The company's ADSs trade on Nasdaq and its ordinary shares trade on the TASE, both under the ticker symbol "BLRX"[636] Additional Information This section covers supplementary corporate information, including details from the Articles of Association, material contracts, and Israeli and U.S. federal income tax considerations - Material contracts include a clinical trial collaboration with MSD for a Phase 2 study of BL-8040 with KEYTRUDA®, a combination study agreement with Genentech for BL-8040 with TECENTRIQ®, and a $10 million loan agreement with Kreos Capital[679][682][684] - The company is subject to Israeli corporate tax but may be eligible for tax benefits as a "Benefited Enterprise" or "Preferred Enterprise" under Israeli law, which could significantly reduce its tax rate on future income[689][690] - The company believes it was a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes for several prior years, including 2014 through 2018, which has significant tax implications for U.S. investors[724] Quantitative and Qualitative Disclosure on Market Risk The company's primary market risks are interest rate fluctuations and foreign currency exchange risk, with the latter arising from expenses paid in NIS and euros - The company's main market risks are interest rate fluctuations on its cash and deposits, and foreign currency exchange risk[755] - Foreign currency risk stems from paying a significant portion of expenses in NIS and euros, while the functional currency is the U.S. dollar, and the company occasionally engages in currency hedging[757][758] Description of Securities Other Than Equity Securities This section describes the company's American Depositary Shares (ADSs), each representing one ordinary share, and outlines associated fees charged by the depositary - Each American Depositary Share (ADS) represents one ordinary share of the company[764] - The depositary, The Bank of New York Mellon, charges fees to ADS holders for various services, including a fee of $5.00 or less per 100 ADSs for issuance/surrender and a fee of $0.05 or less per ADS for cash distributions[766] PART II Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2018 - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[774] - Based on an evaluation using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2018[777] Corporate Governance and Other Information This section covers corporate governance topics, including the audit committee financial expert, the Code of Business Conduct and Ethics, principal accountant fees, and differences from Nasdaq listing standards - The Board of Directors has determined that Ms. Nurit Benjamini is the audit committee financial expert[780] Principal Accountant Fees (in thousands USD) | Fee Type | 2017 | 2018 | | :--- | :--- | :--- | | Audit Fees | $0.11 million | $0.11 million | | Audit-Related Fees | $0.03 million | $0 | | Tax Fees | $0.03 million | $0.01 million | | Total | $0.17 million | $0.13 million | - As a foreign private issuer, the company follows certain home country (Israeli) corporate governance practices in lieu of Nasdaq rules, particularly regarding quorum for shareholder meetings, director nominations, and shareholder approval requirements for equity compensation plans and related party transactions[790][792][795][798][799] PART III Financial Statements This section contains the company's audited consolidated financial statements for the fiscal year ended December 31, 2018, prepared under IFRS, including the independent auditor's report and detailed financial statements - The independent auditor, Kesselman & Kesselman (PwC), issued an unqualified opinion, stating that the financial statements present fairly the financial position and that the company maintained effective internal control over financial reporting as of December 31, 2018[824] Consolidated Statement of Financial Position Highlights (as of Dec 31, in thousands USD) | Account | 2017 | 2018 | | :--- | :--- | :--- | | Cash, cash equivalents, and short-term deposits | $49.5 million | $30.2 million | | Total Assets | $61.0 million | $56.2 million | | Total Liabilities | $8.1 million | $14.9 million | | Total Equity | $52.9 million | $41.3 million | Consolidated Statement of Comprehensive Loss (Year ended Dec 31, in thousands USD) | Account | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | | Operating Loss | ($16.5 million) | ($25.2 million) | ($25.6 million) | | Net Loss and Comprehensive Loss | ($15.8 million) | ($24.4 million) | ($23.0 million) | | Loss Per Share (Basic and Diluted) | ($0.28) | ($0.27) | ($0.21) | Exhibits This section lists all exhibits filed as part of the annual report, including corporate documents, material contracts, and executive certifications - The report includes a comprehensive list of exhibits, including foundational corporate documents, material contracts, and executive certifications[805]