Protalix BioTherapeutics(PLX) - 2023 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes providing context on accounting policies, revenue recognition, stock transactions, and tax implications for the periods ended June 30, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets | ASSETS (U.S. dollars in thousands) | June 30, 2023 | December 31, 2022 | | :--------------------------------- | :------------ | :------------------ | | Cash and cash equivalents | $48,184 | $17,111 | | Short-term bank deposits | — | $5,069 | | Accounts receivable – Trade | $4,049 | $4,586 | | Other assets | $1,708 | $1,310 | | Inventories | $19,635 | $16,804 | | Total current assets | $73,576 | $44,880 | | Funds in respect of employee rights upon retirement | $1,268 | $1,267 | | Property and equipment, net | $4,637 | $4,553 | | Deferred income tax asset | $3,130 | — | | Operating lease right of use assets| $5,806 | $5,087 | | Total assets | $88,417 | $55,787 | | LIABILITIES AND STOCKHOLDERS' EQUITY (NET OF CAPITAL DEFICIENCY) | | | | Accounts payable and accruals: | | | | Trade | $3,304 | $5,862 | | Other | $18,545 | $12,271 | | Operating lease liabilities | $1,260 | $1,118 | | Contracts liability | — | $13,178 | | Total current liabilities | $23,109 | $32,429 | | Convertible notes | $20,132 | $28,187 | | Liability for employee rights upon retirement | $1,598 | $1,642 | | Operating lease liabilities | $4,577 | $4,169 | | Total long term liabilities | $26,307 | $33,998 | | Total liabilities | $49,416 | $66,427 | | STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY) | $39,001 | $(10,640) | | Total liabilities and stockholders' equity (net of capital deficiency) | $88,417 | $55,787 | Condensed Consolidated Statements of Operations | (U.S. dollars in thousands, except share and per share data) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | REVENUES FROM SELLING GOODS | $15,075 | $3,382 | $20,141 | $12,410 | | REVENUES FROM LICENSE AND R&D SERVICES | $20,000 | $5,371 | $24,522 | $12,428 | | TOTAL REVENUE | $35,075 | $8,753 | $44,663 | $24,838 | | COST OF GOODS SOLD | $(6,148) | $(4,087) | $(9,233) | $(10,121) | | RESEARCH AND DEVELOPMENT EXPENSES | $(4,475) | $(7,579) | $(10,322) | $(16,346) | | SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | $(4,031) | $(2,611) | $(7,146) | $(5,765) | | OPERATING INCOME (LOSS) | $20,421 | $(5,524) | $17,962 | $(7,394) | | FINANCIAL EXPENSES | $(1,305) | $(623) | $(2,169) | $(1,242) | | FINANCIAL INCOME | $531 | $813 | $918 | $1,016 | | FINANCIAL INCOME (EXPENSES), NET | $(774) | $190 | $(1,251) | $(226) | | INCOME (LOSS) BEFORE TAXES ON INCOME | $19,647 | $(5,334) | $16,711 | $(7,620) | | TAXES ON INCOME | $(308) | — | $(503) | — | | NET INCOME (LOSS) FOR THE PERIOD | $19,339 | $(5,334) | $16,208 | $(7,620) | | EARNINGS (LOSS) PER SHARE OF COMMON STOCK: | | | | | | BASIC | $0.29 | $(0.11) | $0.26 | $(0.16) | | DILUTED | $0.21 | $(0.11) | $0.18 | $(0.16) | Condensed Consolidated Statements of Changes in Stockholders' Equity (Capital Deficiency) | (U.S. dollars in thousands, except share data) | Balance at January 1, 2023 | Changes during the six-month period ended June 30, 2023 | | :--------------------------------------------- | :------------------------- | :------------------------------------------------------ | | Common Stock (Number of Shares) | 53,790,167 | 12,560,150 (Issuance under Sales Agreement) | | | | 4,691,623 (Convertible notes conversions) | | | | 538,822 (Exercise of warrants) | | Common Stock (Amount) | $54 | $13 (Issuance under Sales Agreement) | | | | $5 (Convertible notes conversions) | | | | * (Exercise of warrants) | | Additional Paid-In Capital | $379,167 | $23,941 (Issuance under Sales Agreement) | | | | $7,778 (Convertible notes conversions) | | | | $812 (Share-based compensation related to stock options)| | | | $172 (Share-based compensation related to restricted stock awards) | | | | $712 (Exercise of warrants) | | Accumulated Deficit | $(389,861) | $16,208 (Net income for the period) | | Total | $(10,640) | $39,001 | - Total stockholders' equity shifted from a capital deficiency of $(10,640) thousand at January 1, 2023, to positive equity of $39,001 thousand at June 30, 2023, driven by common stock issuances, convertible note conversions, and net income[13] Condensed Consolidated Statements of Cash Flows | (U.S. dollars in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------- | :----------------------------- | :----------------------------- | | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | Net income (loss) | $16,208 | $(7,620) | | Net cash provided by (used in) operating activities | $1,975 | $(13,185) | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | Investment in bank deposits | — | $(16,000) | | Proceeds from sale of short-term deposits | $5,000 | — | | Purchase of property and equipment | $(452) | $(357) | | Net cash provided by (used in) investing activities | $4,510 | $(15,900) | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | Proceeds from issuance of common stock under the Sales Agreement, net | $23,954 | $2,641 | | Exercise of warrants | $712 | $2 | | Net cash provided by financing activities | $24,666 | $2,643 | | EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | $(78) | $(51) | | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | $31,073 | $(26,493) | | BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | $17,111 | $38,985 | | BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD | $48,184 | $12,492 | - Net cash provided by operating activities significantly improved to $1,975 thousand for the six months ended June 30, 2023, compared to net cash used of $(13,185) thousand in the prior year period[18] - Net cash provided by financing activities increased substantially to $24,666 thousand for the six months ended June 30, 2023, primarily due to proceeds from common stock issuance under the Sales Agreement[18] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, revenue, stock, and tax information NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES This note outlines the company's business, its proprietary ProCellEx® protein expression system, key product approvals (Elfabrio for Fabry disease, Elelyso for Gaucher disease), product pipeline, and revenue recognition policies, including agreements with Chiesi and Pfizer - Elfabrio® (pegunigalsidase alfa) received Marketing Authorization Application (MAA) approval from the European Commission (EC) on May 5, 2023, and Biologics License Application (BLA) approval from the U.S. Food and Drug Administration (FDA) on May 9, 2023, for adult patients with Fabry disease[23] - The company's proprietary ProCellEx® protein expression system is used to develop and commercialize recombinant therapeutic proteins, including two FDA-approved proteins: taliglucerase alfa (Elelyso®) for Gaucher disease and pegunigalsidase alfa (Elfabrio®) for Fabry disease[22][89] - The product pipeline includes PRX-115 for severe gout (Phase I clinical trial initiated March 21, 2023) and PRX-119 for NETs-related diseases[31][32] - Under the Chiesi Agreements, the company has received $50.0 million in upfront payments and $45.0 million in development cost reimbursements, with potential for approximately $1.0 billion in milestone payments and tiered royalties (15-35% ex-US, 15-40% US). A $20.0 million milestone payment was received following FDA approval of Elfabrio[38][155] NOTE 2 - INVENTORIES This note provides a detailed breakdown of the company's inventory components, including raw materials, work in progress, and finished goods, as of June 30, 2023, and December 31, 2022 | (U.S. dollars in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------------- | :------------ | :------------------ | | Raw materials | $4,352 | $3,508 | | Work in progress | $3,318 | $2,678 | | Finished goods | $11,965 | $10,618 | | Total inventory | $19,635 | $16,804 | NOTE 3 – FAIR VALUE MEASUREMENT This note explains the company's methodology for fair value measurement, categorizing inputs into a three-level hierarchy, and provides the estimated fair value of its outstanding 2024 Convertible Notes - As of June 30, 2023, the fair value of the $20.4 million aggregate principal amount of the company's outstanding 2024 Notes is approximately $28.1 million, estimated using a Level 3 binomial model[61] 2024 Notes Valuation Parameters (June 30, 2023) | Parameter | Value | | :-------------- | :------- | | Stock price | $2.00 | | Expected term | 1.18 | | Risk free rate | 5.14 % | | Volatility | 60.90 % | | Yield | 12.76 % | NOTE 4 – REVENUES This note disaggregates the company's revenues by customer (Pfizer, Brazil, Chiesi) and type (selling goods, license and R&D services) for the three and six months ended June 30, 2023, and 2022, highlighting significant growth from Chiesi | Revenue Source (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :---------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Pfizer | $3,402 | $3,382 | $5,668 | $6,738 | | Brazil | $0 | $0 | $2,800 | $5,454 | | Chiesi | $11,673 | $0 | $11,673 | $218 | | Total revenues from selling goods | $15,075 | $3,382 | $20,141 | $12,410 | | Revenues from license and R&D services | $20,000 | $5,371 | $24,522 | $12,428 | NOTE 5 – STOCK TRANSACTIONS This note details significant changes in the company's capital structure, including the increase in authorized common stock, shares issued through At-the-Market (ATM) offerings, warrant exercises, and conversions of 2024 Notes - Stockholders approved an amendment to increase the number of authorized common stock shares from 144,000,000 to 185,000,000 on July 13, 2023[63][86] - During the six months ended June 30, 2023, the company sold 12,560,150 shares of Common Stock under its 2023 Sales Agreement, generating approximately $24.9 million in gross proceeds[64] - The company issued 538,822 shares of Common Stock from warrant exercises, generating $0.7 million in net proceeds from cash exercises[65][66] - Conversions of 2024 Notes resulted in the issuance of 4,691,623 shares of Common Stock and a decrease of approximately $8.3 million in the principal amount of outstanding notes during the six months ended June 30, 2023[67] NOTE 6 – EARNINGS (LOSS) PER SHARE This note details the calculation of basic and diluted earnings per share, including the impact of potentially dilutive securities such as stock options, warrants, and convertible notes, and explains why certain securities were anti-dilutive in prior periods | EPS Metric (per share) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $0.29 | $(0.11) | $0.26 | $(0.16) | | Diluted EPS | $0.21 | $(0.11) | $0.18 | $(0.16) | - For the six months ended June 30, 2023, diluted EPS calculations included the dilutive effect of 2024 Notes, stock options, and warrants, whereas these were anti-dilutive in the corresponding 2022 period[10][71][72][73] NOTE 7 – TAXES ON INCOME This note summarizes the company's income tax expense, effective tax rate, and the impact of the U.S. Tax Cuts and Jobs Act (TCJA) and the release of a valuation allowance on deferred tax assets | Tax Item (in thousands) | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2023 | | :---------------------- | :--------------------------- | :--------------------------- | | Current taxes on income | $3,438 | $3,633 | | Deferred taxes on income| $(3,130) | $(3,130) | | Total taxes on income | $308 | $503 | - The effective tax rate for the six months ended June 30, 2023, was 3%, up from 0% in the prior year, primarily due to current taxes on GILTI income and Section 174 of the TCJA, partially offset by the release of a $3.1 million valuation allowance on U.S. deferred tax assets[74][75] NOTE 8 – SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION This note provides a detailed breakdown of the 'Accounts payable and accruals – other' line item from the condensed consolidated balance sheets | Account (U.S. dollars in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------------------- | :------------ | :---------------- | | Payroll and related expenses | $1,223 | $1,216 | | Interest Payable | $506 | $719 | | Provision for vacation | $1,526 | $1,404 | | Accrued expenses | $8,608 | $7,478 | | Royalties payable | $1,262 | $781 | | Income tax payable | $3,163 | $530 | | Reserve for deductions from revenue | $1,909 | — | | Property and equipment suppliers | $348 | $143 | | Total | $18,545 | $12,271 | NOTE 9 – SUBSEQUENT EVENTS This note discloses cash collections from Pfizer and Chiesi that occurred after the reporting period ended June 30, 2023 - Collected approximately $1.1 million from sales to Pfizer on July 14, 2023[77] - Collected approximately $1.0 million from Chiesi on July 7, 2023[77] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, operational results, and future outlook, covering recent corporate developments, product pipeline updates, detailed analysis of financial performance, and discussions on liquidity and capital resources Recent Company Developments This section highlights key corporate events, including regulatory approvals for Elfabrio and changes in authorized common stock - The European Commission granted marketing authorization for Elfabrio in the European Union on May 5, 2023[83] - The FDA approved Elfabrio (pegunigalsidase alfa-iwxj) in the United States on May 10, 2023, for the treatment of adult patients with Fabry disease[83] - Stockholders approved an amendment to increase the authorized common stock from 144,000,000 shares to 185,000,000 shares on July 13, 2023[86] ProCellEx: Our Proprietary Protein Expression System This section describes the company's unique plant cell-based protein expression system and its advantages in producing therapeutic proteins - ProCellEx is the company's proprietary plant cell-based protein expression system, enabling the production of complex, proprietary, and biologically equivalent recombinant proteins with advantages such as biologic optimization, flexible manufacturing, and elimination of viral contamination risk[87][88] - The company is the first and only to have two FDA-approved proteins (Elelyso and Elfabrio) produced through its plant cell-based expression platform[89] Products and Product Pipeline This section provides an overview of the company's commercial products and pipeline candidates, including their regulatory status and market potential Elfabrio (PRX-102) for the Treatment of Fabry Disease This section details the recent regulatory approvals for Elfabrio in the EU and US, its clinical trial results (BALANCE, BRIDGE, BRIGHT studies), and commercialization agreements with Chiesi, highlighting its market potential and safety profile - Elfabrio received EU marketing authorization (May 5, 2023) and FDA approval (May 9, 2023) for adult Fabry disease patients, with the FDA approval including a boxed warning for hypersensitivity reactions/anaphylaxis[95] - The global market for Fabry disease was approximately $2.0 billion in 2022 and is forecasted to grow at a CAGR of approximately 13% from 2022-2028[98] - The BALANCE study demonstrated comparable efficacy in eGFR slope between PRX-102 and agalsidase beta, with PRX-102 showing a potentially favorable safety profile including lower rates of infusion-related reactions and less premedication use[133][134] - Commercialization agreements with Chiesi include $50.0 million in upfront payments, $45.0 million in development cost reimbursements, and potential milestone payments of approximately $1.0 billion, plus tiered royalties of 15-35% (ex-US) and 15-40% (US)[155] Elelyso® for the Treatment of Gaucher Disease This section describes Elelyso (taliglucerase alfa), the company's first commercial product for Type 1 Gaucher disease, its regulatory approvals, market size, and commercialization agreements with Pfizer and Fiocruz (Brazil) - Elelyso (taliglucerase alfa) was approved by the FDA in 2012 for adult Type 1 Gaucher disease and in 2014 for pediatric patients, and is currently approved in over 20 markets[163] - The global market for Gaucher disease was $1.6 billion in 2022, with a forecasted CAGR of approximately 3.1% from 2022-2028[165] - The company has licensed global rights (excluding Brazil) to Pfizer, who retains 100% of revenue and reimburses 100% of direct costs, while maintaining distribution rights in Brazil through a supply and technology transfer agreement with Fiocruz[166][168] Uricase (PRX-115) This section introduces PRX-115, a plant cell-expressed recombinant PEGylated uricase under development for severe gout, highlighting its preclinical data and the initiation of its Phase I clinical trial - PRX-115 is a plant cell-expressed recombinant PEGylated uricase being developed for severe gout, designed to lower uric acid levels with low immunogenicity and increased half-life[169] - A Phase I First in Human (FIH) clinical trial for PRX-115 was initiated on March 21, 2023, with 16 patients dosed as of the report date, to evaluate safety, pharmacokinetics, pharmacodynamics, and immunogenicity[170] - Severe gout, affecting an estimated 2% of the gout patient population with chronic refractory disease, represents an unmet medical need for new effective and safe therapies[172][173] PRX-119 This section describes PRX-119, a product candidate for NETs-related diseases, designed as a plant cell-expressed PEGylated recombinant human DNase I to achieve an elongated half-life in circulation - PRX-119 is a plant cell-expressed PEGylated recombinant human DNase I product candidate designed to elongate half-life in circulation for the treatment of NETs-related diseases[174] - NETs (Neutrophil extracellular traps) formation is implicated in various autoimmune, inflammatory, fibrotic conditions, thrombosis, and cancer, with animal studies suggesting DNase treatment reduces NETs toxicity[174] Intellectual Property This section outlines the company's extensive patent portfolio protecting its proprietary technology and products - The company holds a broad portfolio of over 80 patents in Europe, the United States, Israel, and other countries, along with over 45 pending patent applications, to protect its proprietary technology and products[176] Research & Development This section describes the company's ongoing efforts in advancing its ProCellEx technology and developing new product candidates - The company continuously works on developing its ProCellEx plant cell expression technology and bioreactor system, and on new product candidates for unmet medical needs, utilizing customized modification approaches[177] Critical Accounting Policies This section confirms no material changes to critical accounting policies and identifies key estimates and assumptions - There have been no material changes to the company's critical accounting policies since the Annual Report on Form 10-K for the year ended December 31, 2022[178] - The most significant estimates and assumptions in financial statement preparation relate to the assessment of sales reserves and valuation allowances[179] Results of Operations This section analyzes the company's financial performance for the three and six months ended June 30, 2023, compared to prior periods Three months ended June 30, 2023 compared to the three months ended June 30, 2022 This section analyzes the company's financial performance for the three months ended June 30, 2023, compared to the same period in 2022, highlighting significant revenue growth from Elfabrio approvals, decreased R&D expenses, and increased SG&A | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenues from Selling Goods | $15,075 | $3,382 | $11,693 | 345.7% | | Revenues from License and R&D Services | $20,000 | $5,371 | $14,629 | 272.4% | | Cost of Goods Sold | $6,148 | $4,087 | $2,061 | 50.4% | | Research and Development Expenses | $4,475 | $7,579 | $(3,104) | (41.0%) | | Selling, General and Administrative Expenses | $4,031 | $2,611 | $1,420 | 54.4% | | Financial Expenses, Net | $774 | $(190) (income) | $964 | 507.4% | - The increase in revenues from selling goods was primarily due to an $11.7 million increase in sales to Chiesi following the approvals of Elfabrio by the FDA and EMA[10][180][181][182][184][186][187] - Research and development expenses decreased by $3.1 million, or 41%, primarily due to the completion of the Fabry clinical program and regulatory processes for Elfabrio[184] Six months ended June 30, 2023 compared to the six months ended June 30, 2022 This section provides an analysis of the company's financial performance for the six months ended June 30, 2023, compared to the same period in 2022, detailing substantial increases in total revenue, driven by Elfabrio approvals and milestone payments, and a significant reduction in R&D expenses | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenues from Selling Goods | $20,141 | $12,410 | $7,731 | 62.3% | | Revenues from License and R&D Services | $24,522 | $12,428 | $12,094 | 97.3% | | Cost of Goods Sold | $9,233 | $10,121 | $(888) | (8.8%) | | Research and Development Expenses | $10,322 | $16,346 | $(6,024) | (36.9%) | | Selling, General and Administrative Expenses | $7,146 | $5,765 | $1,381 | 23.9% | | Financial Expenses, Net | $1,251 | $226 | $1,025 | 453.5% | - Total revenues from selling goods increased by $7.7 million, or 62%, primarily due to an $11.5 million increase in sales to Chiesi, partially offset by decreases in sales to Brazil ($2.7 million) and Pfizer ($1.0 million)[10][189][190][191][194][196][197] - Revenues from license and R&D services increased by $12.1 million, or 98%, driven by a $20.0 million regulatory milestone payment from Chiesi related to Elfabrio's FDA approval[190] - Research and development expenses decreased by $6.0 million, or 37%, mainly due to the completion of the Fabry clinical program and related regulatory processes[194] Liquidity and Capital Resources This section discusses the company's cash position, capital raising activities, and ability to meet its financial obligations - The company had $48.2 million in cash and cash equivalents as of June 30, 2023[199] - Approximately $24.9 million in gross proceeds were raised from the sale of 12,560,150 shares of common stock under the ATM program during the six months ended June 30, 2023[200] - The total principal amount of outstanding 2024 Notes decreased by approximately $8.3 million due to conversions, with $20.42 million remaining outstanding as of June 30, 2023[202][210] - The company believes its cash and cash equivalents are sufficient to satisfy capital needs for at least 12 months from the financial statements' issuance date and is in compliance with all covenants of its 2024 Notes, including maintaining a minimum cash balance of $7.5 million[203][204][207][211] - Net cash generated from operations was $2.0 million for the six months ended June 30, 2023, a significant improvement from $13.2 million used in the prior year period[205][206] Effects of Currency Fluctuations This section addresses the company's exposure to foreign currency exchange rate risks, particularly concerning the New Israeli Shekel - Approximately 43% of the company's costs, including salaries and office expenses, are incurred in New Israeli Shekels (NIS)[216] - A 1% revaluation of the NIS would affect the company's loss before tax by less than 1%[216] - The company has not engaged in hedging transactions to date but may consider them in the future to mitigate financial exposure from exchange rate fluctuations[216] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements for the reported periods - The company had no off-balance sheet arrangements as of June 30, 2023, and December 31, 2022[214] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily focusing on currency exchange risk due to a significant portion of its expenses being incurred in New Israeli Shekels (NIS) while its functional currency is the U.S. dollar - The company's primary market risk is currency exchange risk, as approximately 43% of its costs are incurred in NIS, while the U.S. dollar is its functional currency[215][216] - The company has not engaged in hedging transactions to date but may do so in the future to mitigate the risk of financial exposure from fluctuations in the exchange rate of the U.S. dollar against the NIS[216] Item 4. Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting, concluding their effectiveness while acknowledging inherent limitations - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[218] - There were no material changes in the company's internal control over financial reporting during the quarter ended June 30, 2023[220] - Management acknowledges the inherent limitations of all control systems, which can provide only reasonable, not absolute, assurance against error and fraud[219] PART II – OTHER INFORMATION This part covers additional disclosures including legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings This section states that the company is not currently involved in any material legal proceedings - The company is not involved in any material legal proceedings[221] Item 1A. Risk Factors This section updates the risk factors, emphasizing potential serious adverse events, undesirable side effects, and post-marketing regulatory requirements for approved products like Elfabrio, which could impact commercial potential - There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022, except as set forth[222] - A new risk factor highlights that current or future product candidates may cause serious adverse events (SAEs), undesirable side effects, or have other properties that could halt clinical development, prevent/delay regulatory approval, limit commercial potential, or result in negative consequences[223] - Elfabrio's FDA approval includes a boxed warning for hypersensitivity reactions/anaphylaxis and postmarketing requirements, such as a worldwide descriptive study for pregnancy and lactation exposure[223] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section indicates that there were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds to report[224] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities to report[224] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[224] Item 5. Other Information This section states that there is no other information to report - No other information to report[225] Item 6. Exhibits This section lists all exhibits filed as part of the 10-Q report, including corporate governance documents, stock-related agreements, debt instruments, and certifications - Exhibits include various corporate documents (e.g., Certificate of Incorporation amendments, Bylaws), stock-related forms (e.g., Restricted Stock Agreement, Stock Option Agreement, Form of Warrant), the Indenture for the 2024 Notes, and certifications from the Chief Executive Officer and Chief Financial Officer[226] Signatures This section contains the required signatures of the company's principal executive and financial officers, certifying the accuracy of the report - The report is signed by Dror Bashan, President and Chief Executive Officer, and Eyal Rubin, Senior Vice President and Chief Financial Officer, Treasurer and Secretary, on August 7, 2023[233]